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Pandemic may fuel higher employer health care cost increases in 2021, Willis Towers Watson analysis finds

Willis Towers Watson Public Limited Company
·3 min read

ARLINGTON, Va., Sept. 29, 2020 (GLOBE NEWSWIRE) -- While the pandemic drove a significant decrease in the use of health care services in 2020, employer health care 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 a new Willis Towers Watson analysis of medical claims and the potential impact of COVID-19 on care utilization and costs.

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

In 2021, however, costs are expected to rise again, between 0.5% and 5.0% 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 study 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,” said Trevis Parson, chief actuary, Willis Towers Watson. “In 2020, we may see a reduction in national health care 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.”

The analysis found the following cost changes under the four utilization patterns:

Scenario

2020

2021

Two-year
net impact

Early control

–3.3%

+0.5%

–2.8%

Variable hot spots

–3.8%

+1.2%

–2.7%

Widespread new infections

–5.8%

+2.7%

–3.1%

Widespread new infections with multiple peaks

–8.8%

+5.0%

–3.8%

“The infection scenarios illustrate the uncertain nature of the virus and our ability to contain it,” said Jeff Levin-Scherz, M.D., North American co-leader, Health Management practice, Willis Towers Watson. “While there are several vaccines in development, their testing and broad distribution will take time and make it difficult to ascertain the most likely scenario.”

The analysis noted that the impact of COVID-19 on specific employer plans will differ based on a variety of factors that are geographically sensitive.

“Employers need to pay special attention to the impact of COVID-19 on their health care spend,” says Parson. “The pandemic is driving significant volatility, which demands effective measurement. Broader changes to the health care system are likely to result, which will challenge employers as they look to drive value to employees through their health care plans. Employers will need to understand the rapidly changing health care market landscape and the shifting needs and risk profiles of their workforce.”

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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