Willis Towers Watson projects cost of health plans to be slightly higher in 2021
Because of COVID, however, it's possible that 2020 will be the first time that the national health care expenditure will be lower than the preceding year.
Employers trying to project the cost of health-care plans in 2021 may have their work cut out for them. The future course of the pandemic, the availability of effective vaccines and treatments, and changes in the health-care delivery system all could affect costs, according to Willis Towers Watson.
Despite the uncertainty, however, the organization has evaluated a set of potential future care utilization scenarios contemplating a variety of patterns of infection and care return in a new white paper titled, “The Up and Down Impact of the Pandemic on Health-Care Costs.” Across all scenarios, 2021 costs to employer plans are expected to be slightly higher than the non-pandemic baseline projection.
Related: Controlling rising employee health benefit costs in the age of COVID
“When 2020 and 2021 are combined, all scenarios show cost reductions relative to the non-pandemic baseline,” according to the paper. “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.”
Because of COVID-19, it is possible that 2020 will be the first time that the national health-care expenditure will be lower than the preceding year.
“So far, the additional medical costs associated with the testing and treatment of COVID-19 have been more than offset by significant reductions in utilization across many service categories,” the report said. “Because of uneven rates of infection, the exact impact on utilization and total costs varies geographically. Early on, specific areas, like New York City, saw so many cases that some hospitals breached capacity limits. In contrast, health-care systems across the country saw significant utilization declines as care was forgone or deferred in anticipation of an infection surge that did not materialize.”
Now, as some procedures that were deferred in the early months of the pandemic are rescheduled, infections are rising in different geographies. As the infection travels, patients and providers must decide whether to postpone non-COVID-19 care again or move ahead despite substantial community transmission.
The report noted that current cost reductions are being driven by factors other than improved system efficiency or health outcomes. Economic pressures challenge employers to demand performance and value from their health plans, even in a low or negative cost trend environment.
“It will not be sufficient for employers simply to ignore 2020 and wait to ‘return to normal,’” the white paper concluded. “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.”
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