Pandemic to drive up employer health costs next year

Deferred healthcare this year will fuel increases in employer costs for healthcare benefits in 2021.
By: | September 28, 2020 • 2 min read

(Photo by David Ramos/Getty Images)

Although the pandemic drove a significant decrease in the use of healthcare services—and associated employer costs—in 2020, employer healthcare benefit costs in 2021 are likely to increase “above and beyond non-pandemic projections” as care deferred in 2020 is pushed into the future, according to new data.

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A new Willis Towers Watson analysis found employer healthcare costs in 2020 will likely come in between 3.3% and 8.8% lower than originally expected, as system capacity shifts and fear of contracting the virus in medical settings continues to drive a significant volume of canceled and deferred care.

But that relief will be temporary. In 2021, costs are expected to rise again, between 0.5% and 5% above non-pandemic projections, due to continued care for COVID-19 patients and delivery of previously deferred non-COVID-19 care. When 2020 and 2021 are combined, the consulting firm’s analysis—which studied four potential future patterns of COVID-19 infection and the subsequent impact on the level of care delivered to COVID-19 and non-COVID-19 patients—shows cost reductions of between 2.8% and 3.8% from non-pandemic levels across the four patterns.

“COVID-19 has played havoc with all previous projections of health care utilization levels,” says Trevis Parson, chief actuary at Willis Towers Watson. “In 2020, we may see a reduction in national healthcare expenditures on a per capita basis for the first time since 1960. However, this reversal in trend is highly likely to be only temporary, despite the continued uncertainty about the virus, as previously deferred care returns in 2021.”

“COVID-19 has played havoc with all previous projections of health care utilization levels,” Trevis Parson, chief actuary Willis Towers Watson

Willis Towers Watson’s analysis is the latest to warn about the effect of deferred care because of the pandemic. The Integrated Benefits Institute finds that proper screening for depression, as well as some cancers and chronic conditions such as hypertension, diabetes and obesity, is lagging among employees—and it’s getting worse due to patients avoiding screenings and appointments during COVID-19. Not only is that dangerous, but lack of preventive care also is driving up healthcare and productivity costs for employers.

“The complexity [COVID-19] added with canceled care and delayed care, it’s kind of mindboggling to think of where we might be [in the future],” Kelly McDevitt, president of Integrated Benefits Institute, said during a recent webinar.

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Related: These are the two health issues employers should target now

Although many preventive services are important, employers should focus on urging their employees to partake in two right now: mental health help and colorectal cancer screenings, said Kathleen Herath, retired Nationwide associate vice president of wellbeing and safety.

“We are going to see an ongoing increase in depression and suicide,” Herath said during the webinar. “And [we’ll see] people [with] much later diagnosed cancers with much poorer outcomes. If you don’t know where to start, start with those two things.”

Kathryn Mayer is HRE’s benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver. She can be reached at kmayer@lrp.com.