Coronavirus Backlog Could Fuel Higher Employer Healthcare Costs in 2021

The pandemic virtually shut down elective procedures for much of 2020, but that may not be the case in 2021.

Thanks to the coronavirus pandemic, the use of healthcare services took a nosedive in 2020. But a new analysis suggests that the lull may be over in 2021.

A new analysis from consultants Willis Towers Watson projects that the costs of healthcare benefits in 2021 are likely to increase above and beyond non-pandemic projections as care deferred in 2020 is pushed into the future.

"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 healthcare expenditures on a per capita basis for the first time since 1960," Parson said. "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.”

Examining medical claims, Willis Towers Watson looked at four potential future patterns of COVID-19 infection and their impact on the care delivered to COVID-19 and non-COVID-19 patients.

The analysis found employer healthcare costs in 2020 will likely come in between 3.3% and 8.8% lower than originally expected because of the pandemic, as system capacity shifts and a fear of contracting the virus in medical settings continue to depress volumes.

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, Willis Tower Watson said.

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.

Parson said the impact of COVID-19 on employer plans will differ based on geographic factors.

"Employers need to pay special attention to the impact of COVID-19 on their healthcare spend," he said. "The pandemic is driving significant volatility, which demands effective measurement."

Parson said broader changes to the healthcare 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," he said.