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Analysis

Healthcare Benefit Costs Could Rise by 7% Because of COVID-19

By Jack O'Brien  
   March 26, 2020

Any increase related to the coronavirus outbreak will be on top of the 5% cost increase projected by employers for 2020.

Employers could see healthcare benefit costs rise by 7% due to the coronavirus disease 2019 (COVID-19) outbreak, according to a Willis Towers Watson (WTW) analysis released Thursday morning.

The study attributes the rise in costs to testing and treatment expenses related to COVID-19, which has been declared a pandemic by the World Health Organization and affected all 50 states along with the District of Columbia.

WTW estimated that at a 10% infection level, benefit costs could rise by 1% to 3%, while a 30% infection level could see costs rise by 4% to 7%. At the highest rate included in the analysis, a 50% infection level, costs could rise between 5% to 7%.

Notably, the analysis found that any increase related to the coronavirus outbreak will be on top of the 5% cost increase previously projected by employers for 2020.

Related: COVID-19 Outbreak Threatens Health Systems With New Financial Challenges

The analysis estimated costs in four categories: $250 for mild cases, $2,500 for moderate cases, $30,000 for serve cases, and $100,000 catastrophic cases.

WTW also noted that these costs account for medical claims and prescription drug prices, while other benefit costs such as dental and vision care could decline as a result of the outbreak.

Related: Employer Medical Costs Forecast to Rise at More Than Double the Inflation Rate

One factor that could reduce costs for employers in the short-term, according to WTW, is if non-COVID-19 patients defer care or are "redirected to alternative settings."

"Despite employers and employees taking the right precautions at this perilous time, the coronavirus continues to spread and place enormous pressure on our nation’s healthcare system," Trevis Parson, chief actuary at WTW, said in a statement. "This spike in the demand for care is likely to lead to a significant jump in employer healthcare costs beyond previous expectations. However, the ultimate financial impact will depend on many factors, including the portion of the population infected and the severity of their illness."

Related: Despite Federal COVID-19 Stimulus, Many Hospitals Could Face Layoffs Within Two Months

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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