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How Non–COVID-19 Care Deferral May Reduce Employer Health Care Costs

Matthew Gavidia
Uncertainty remains surrounding the overall cost of care for employers, as subsequent waves of coronavirus disease 2019 (COVID-19)–related care may occur. Current projections suggest a lower health care spend due to deferral of nonrelated care, said Trevis Parson, chief actuary of Health & Benefits North America at Willis Towers Watson.

In initial estimates from an actuarial analysis of self-funded employers by Willis Towers Watson, health care benefits were projected to potentially rise by as much as 7% this year from testing and treatment costs related to coronavirus disease 2019 (COVID-19). However, as non–COVID-19-related care continues to be deferred or cancelled, researchers report in an updated analysis that the pandemic could reduce employer health care costs by as much as 4%.

As indicated in a separate survey by Willis Towers Watson, 24% of employers expect no increase or decrease to their health care benefit costs, yet 64% note that COVID-19 will have a moderate to large impact on employee well-being. Notably, the eventual return of care being postponed may cause a subsequent wave of health care costs that can still result in an eventual increase of overall cost of care by 3%.

We spoke with Trevis Parson, chief actuary of Health & Benefits North America at Willis Towers Watson, on what implications the new study findings may have for employers and how the uncertainty surrounding the pandemic may still alter current projections.


AJMC®: Hello, I'm Matthew Gavidia. Today on MJH Life Sciences News Network, The American Journal of Managed Care® is pleased to welcome Trevis Parson, chief actuary of Health & Benefits North America at Willis Towers Watson. Can you introduce yourself and tell us a little bit about your work?

Parson: Sure thing. Thanks for having me, Matt! My name is Trevis Parson, as you mentioned. I work for Willis Towers Watson. I've been with the company for going on 20 years now and have the privilege to work with some 300 health care actuaries within the company here in North America. I've been in the chief actuary role for the last 5 years and have had the opportunity to work on some pretty interesting assignments, not the least of which is trying to estimate the impact of COVID-19 on employer health plans.

AJMC®: In the study conducted by Willis Towers Watson last month, projected findings indicated that employer costs could rise by as much as 7% due to COVID-19–related costs. Can you explain how much of an impact care deferral played in initial estimates and what other factors may impact costs for employers?

Parson: In our early study—we've since updated it—but in our early study, we were projecting an increase from 1% to about 7% to self-funded employer health care plan spending in 2020. At the time we did that, Matt, we were working with some of the early data, and we looked at showing scenarios basically reflecting 2 sensitive assumptions. One was the ultimate infection level, how many people would become infected and how sick would they get when they became infected. So we had basically low, medium, and high levels of morbidity [of] how sick people became. And then we assumed ultimate infection rates anywhere from 10% all the way up to 50%.

When we did that, we got the high of 7% and the low of 1% increase. We didn't assume a significant amount of care deferral at that time for that initial study, and so when we went back and updated, we updated for 2 things. One was, we weren't seeing the expected ultimate infection levels emerge that we originally thought might come to pass, and so we reduced our ultimate infection level. We showed results between say 1% and up to 20%, and we did that because we knew that the geographic impact of COVID-19 infections was very uneven. So, New York City, for example, has, as a hotspot, significantly more infections than say Little Rock, Arkansas.

So, we wanted to continue to show that wide range of infection to reflect that geographic unevenness. But we also saw, as data emerged, a significant volume of care deferral, and basically, care deferral as we've defined it is healthy patients, non–COVID-19 infected patients not going to the hospital, not going to [the] doctor's office because either the care isn't available to be provided because providers have been redirected or patients simply don't want to go to the system for care for fear that they will become sick if they do so. When we did that, we said, if care ... we again, similar to the morbidity assumption in our prior study, we did a low, medium, and high scenario for level of care deferral, and our new estimates are now showing anywhere from a 4% increase at the high ultimate infection level of 20% and low care deferral to about a negative 4% change for low infection rates and high care deferral.

When you add all that together, care deferral all on its own might be worth in that 5% to 6% range. If care were eliminated for 3 months this year, which it's not, but if it were eliminated, that would be a 25% reduction right there. If you assume, say half of it was reduced and not all of it, now you're down to about 12%, and if you assume half of that comes back before the end of the year, now you're down to about 6%. So, that was sort of our top-end estimate of care deferral. We did it a little bit more scientifically than that, but that's sort of the high-level math that helps get to the reasonableness of our answer.

AJMC®:  Can you discuss how the current analysis, “Beyond the Wave: Potential Impact of COVID-19 On Deferral of Healthcare,” was conducted? And what was the most surprising finding for you?

Parson: Well, we essentially did the ups and downs that I mentioned before, where we put the ultimate infection levels, how sick people became and how fast infection spread, and then made sure that we also did some of the downs, which were also supply limits. You can't necessarily supply all the care that may be demanded in a time when everybody's infected with a virus, right? There are only so many beds, for example. We also know, we've talked about care deferral before, so our study included all of those variables, and then some. Notably, for any particular population, as I mentioned to you a minute ago, where employees happen to be located might significantly impact the cost to your plan. If everybody's in New York City, as opposed to Bismarck, you might have a different answer. So that was essentially the methodological underpinnings of our analysis, and we mirrored that in the Beyond the Wave component where we tested lower ultimate infection levels and then a higher level of care deferral.

The most surprising result really has been the variability. Actuary would prefer to put a far tighter range around their estimates of costs, and in normal times, you can do that. But in times like this, where you have very, very little history—and no history that really compares to a situation like this upon which to study and draw conclusion—you get forced to putting wide ranges around things. So, we've ended up with an answer here, in our second paper, basically saying it might be up a little, it might be down a little, and depending upon where you happen to be and the nature of your demographic profile, you could find yourself on either side of the line. So, it's not where we typically like to draw answers, but that's where we've had to land given the massive amount of uncertainty related to the impact of COVID-19.

AJMC®: As medical care for non–COVID-19 infected patients has declined during the pandemic, do you see a potential increase in use as social distancing measures ease nationwide?

Parson: Well, whether distancing measures ease or not, there is a certain amount of care in this initial way that simply hasn't hit the system. As you and I talked a moment ago, there is a significant volume of care, maybe 30%, 40%, 50% here in these most recent months, say March, April, maybe May here, that isn't hitting the system. Some of that care is going to return at some point in time, not all of it. For example, if you think about a dental cleaning, you might go get your teeth cleaned every 6 months. If you miss one of those, you're not going to go twice the next time; you'll just skip that one and move on. There will be some care like that that simply will get skipped and never return.

There will be other types of care where if you skip it now, you might be able to get by for a little while. Maybe it's a joint replacement, for example. You might be able to continue to limp along on that knee, but eventually, you're going to need to get that knee replaced and so that care is going to come back. There are other types of care like that that one of my clinical friends could opine further on, but certain cancer treatments, for example, maybe you postpone a cancer treatment this time—that's going to have to come back at a future date.

So, you'll want to be able to effectively monitor that and make sure that the ultimate level of care that returns is known and baked into your budget as best you can. It will vary depending upon the type of care, and so it'll be good for employers to understand what type of utilization patterns their populations are exhibiting, particularly self-funded employers, so that they can keep a good eye on that and understand, "Hey, if this care comes back, how much do we think that's going to be worth?" and be able to say, "If at the time it comes back, we're in an environment of perhaps a subsequent wave, how will the system be able to handle all that?" So, there are lots of unknowns, which simply require employers to pay really careful attention.

AJMC®: Has the transition to telehealth assisted in reducing the potential reduction in employer health care costs?

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