As the pandemic contributed to a significant decrease in the use of health care services in 2020, an analysis finds that employer health care benefit costs will likely increase in 2021 to address this deferral in care.
As the pandemic contributed to a significant decrease in the use of health care services in 2020, an analysis by Willis Towers Watson finds that employer health care benefit costs will likely increase in 2021 to address this deferral in care.
At the onset of the pandemic, the uncertainty surrounding the coronavirus disease 2019 (COVID-19) led to a substantial decrease in elective procedures and non–COVID-19–related care. These factors were at the forefront of a prior analysis by Willis Towers Watson, which had developed 3 scenarios (low, medium, and high) to project the level of care deferral, with current estimates suggesting a 3.3% to 8.8% lower national health care spend for 2020. This would mark the first time health care costs did not increase year-over-year since 1960.
Shifting focus to 2021, researchers similarly constructed 4 scenarios to estimate potential future patterns of COVID-19 infection and the subsequent impact on the level of care delivered to patients with and without COVID-19:
Entering the new year, researchers find that health care costs are expected to rise again. Accounting for continued care of patients with COVID-19 and delivery of previously deferred non–COVID-19 care, the analysis estimates an increase ranging from 0.5% to 5.0% above non-pandemic projections. Moreover, when combining 2020 and 2021, the analysis exhibited cost reductions of between 2.8% and 3.8% from non-pandemic levels across the 4 scenarios.
In a prior interview with The American Journal of Managed Care® (AJMC®), Trevis Parson, chief actuary of Health & Benefits North America at Willis Towers Watson, previewed the current analysis saying that these figures would assist employers in setting budgets, designs, and contributions for employees in 2021.
Speaking on these newfound projections, Parson spoke with AJMC® again to discuss how geographical location will ultimately influence health care costs for employers due to the pandemic, and what factors will continue to be monitored by Willis Towers Watson as the year comes to a close.
AJMC®: Can you discuss how the deferral in care precipitated by the COVID-19 pandemic contributed to projections of this latest report?
Parson: Health care plan sponsors may see an unprecedented decrease in year-over-year medical costs in 2020, as system capacity shifts and fear of contracting COVID-19 in medical settings drives a significant volume of foregone and deferred care. Significant uncertainties remain however, including the course of the pandemic, the availability of effective vaccines and treatments, and changes in the health care delivery system that could impact future health care costs.
Willis Towers Watson has evaluated a set of potential future care utilization scenarios contemplating a variety of patterns of infection and care return. Across our scenarios, 2021 costs to employer plans are expected to be slightly higher (0.5% to 5.0%) than the non-pandemic baseline projection. Nevertheless, when 2020 and 2021 are combined, all scenarios show cost reductions (–2.8% to –3.8%) relative to the non-pandemic baseline.
The baseline comparison from which these estimates were developed reflects projected costs for 2020 and 2021 assuming the pandemic never occurred. Employers should consider these scenarios as they budget for and measure the performance of their health care plans in the upcoming year.
AJMC®: As the uncertainty of the pandemic continues to impact the health industry and subsequent health care costs, what factors will Willis Towers Watson keep an eye on as the year comes to a close?
Parson: The impact of COVID-19 will differ based on geography and industry. Willis Towers Watson will be helping employers gain a deeper understanding of their demographics and claims and implement an analytic strategy to identify problems and monitor the effectiveness of solutions. In the absence of reliable macro-market trends, employers will need to rely increasingly on more detailed analyses of their own data and benchmarks customized to their profile. A comprehensive analytic approach from data input, through an analytic framework, to actionable output will reveal opportunities for employers to drive value to participants.
It will not be sufficient for employers simply to ignore 2020 and wait to “return to normal.” COVID-19 is driving broad change and volatility, which demands effective measurement. During this period of transition there will be many changes to the way business, health care and employee benefits function.
Some of these (mask wearing, temperature checks, provider closures) will cease when the pandemic is over, while others (telehealth, remote working, provider restructuring) might endure. Employers will need to understand the rapidly changing health care market landscape as well as the shifting needs and risk profiles of their workforces.
Willis Towers Watson will help employers monitor emerging experience to identify changes in the utilization curve in terms of service mix, patient health, and service volume.