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What Factors Will Be Influential to Employer Health Benefit Cost in 2021?


As employers seek to gain a pulse of what the health care benefit cost trend will be for the coming year, the Business Group on Health will be monitoring several factors, including the impact of the pandemic, efficacy of virtual care, and deferral in care delivery.

As employers seek to gain a pulse of what the health care benefit cost trend will be for the coming year, the Business Group on Health will be monitoring several factors, including the impact of the pandemic, efficacy of virtual care, and deferral in care delivery, said Ellen Kelsay, president and CEO of the Business Group on Health.


AJMC®: Based on the Business Group on Health’s 2021 Large Employers' Health Care Strategy and Plan Design Survey, the total cost of health benefits is expected to rise 5.3% in 2021, which is slightly higher than initial projections. What contributes to this projection, and how can employers leverage this information to better enhance their health benefit design?

Kelsay: It's been an interesting question, and that is one that we survey on every year. This year is really an interesting year for many, many reasons, but when it comes to health care costs, we really do say that they are a bit of a moving target, and it is a challenge for employers to really put their finger on exactly what they predict their cost to look like for the coming year and that's for a number of reasons.

It is because that in this past year, largely due in part to the pandemic, many preventive or elective procedures were deferred. People did not necessarily see their primary care physician or get those elective procedures done, and so that deferral of care might have a little bit of a compression on overall costs; but then on the flip side, we're not quite sure how that deferred care might rebound—will it come back in full? Will it come back in part?

Then, also the impact of coronavirus disease 2019 (COVID-19) itself, and really trying to get our arms around truly the cost impacts of COVID-19, both treatment of the virus itself, but then also what are the long-term impacts of COVID-19 on health and other issues within the population. We know that there are vascular issues, cardiovascular issues, respiratory issues, and so for how long do those become issues within the population that's been impacted by COVID-19 is, again, something that we've yet to see and will take months and perhaps years to fully manifest itself.

So, for that reason, it’s really putting the finger on the pulse of what the cost trend might be for the coming year–it’s that moving target for employers, which does make near term budgeting and rate setting a bit of a challenge for them. Strategically, there are many things that they're doing, and many employers do invest in programs for the long-term. So, they're not necessarily swayed from their strategic directions because of this, but it does make near term budgeting a challenge.

AJMC®: Speaking more on this moving target, as the pandemic continues to play an influential role on health benefit costs, what factors will you and the Business Group on Health be monitoring?

Kelsay: There are so many! I would say certainly, relative to a couple of things that we talked about earlier, the virtual space. Certainly, virtual has been terrific, it's done all that we just talked about in terms of making care more accessible, convenient, and meeting the consumers where they would like to be met in many instances. I think the piece around virtual though that we are still going to keep an eye on is, do virtual health care services truly result in better outcomes? Do virtual services help optimize cost overall? Or is it additive to an already very costly health care delivery system. So, keeping a watchful eye on virtual both from an overall quality outcome and cost perspective is certainly something we'll be doing.

Also looking at delivery system transformation, and the movement away from fee-for-service to value-based models, to alternative payment models. We have certainly seen that the pandemic has had quite a significant financial impact on many health systems and provider groups, and we want to make sure that coming out of this, that we don't snap back to a fee-for-service environment where some of those groups might be trying to recoup losses, but rather that we move more aggressively towards alternative delivery models and alternative forms of payments. So, certainly, that is another area that we'll be keeping a watchful eye on.

Also, looking at, again, the impact of the pent up demand and the long-term impact of COVID-19 on overall health will certainly be something that we and many others across the industry will be eager to learn in the months and years ahead. Then, also, I think that the impact of COVID-19, as I mentioned, financially on provider groups, but what does that mean in terms of financial provider viability, and do some of these provider groups or health systems look for ways to consolidate? And do we see more of that happening? Then, what does that then therefore mean in terms of cost quality and outcomes for patients and consumers?

I think the other thing I would mention that we've not yet talked about, but that is certainly something top of mind for our employer members and has been for a number of years, is overall pharmaceutical costs. The trends that we've seen there are certainly not sustainable. When you think about a lot of the new high cost therapies that have come to market in recent years, many of them at an eye popping cost of over a million dollars each, that is certainly something that is a bit concerning to our employer members.

They certainly, from a clinical perspective, want patients to seek the drug and be able to obtain the drug that they need for their treatment, and many of these for those patient populations are critically important that they do have access to the drug. It's really the underlying pricing of the drug, and making sure that it is sustainable and affordable, both to the consumer, as well as to the employer's plan overall.

So, a number of things that we'll be watching, not all of them are new this past year, but certainly underscored and magnified exponentially because of the pandemic this year.

AJMC®: To learn more, visit our website at ajmc.com. I’m Matthew Gavidia, thanks for joining us!

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