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Analysis

Employer-sponsored Healthcare Benefit Costs Expected to Rise 8% in 2021

By Jack O'Brien  
   October 06, 2020

By region, Europe is expected to see the smallest increase at 5.8% while Latin America is expected to experience the largest increase at 13.6%.

Global employer-sponsored healthcare benefits are expected to increase more than 8% in 2021, according to a Willis Towers Watson (WTW) survey released Tuesday.

Despite the significant impact of the COVID-19 pandemic, healthcare benefit cost increases are expected to remain "stable" in the United States, with a projected 7.3% increase in 2021, according to the survey.

By region, Europe is expected to see the smallest increase at 5.8% while Latin America is expected to experience the largest increase at 13.6%.

Two-thirds of respondents said they expect healthcare benefit costs to accelerate over the next three years. 

The top three medical conditions affecting medical costs, according to survey respondents, are cancer, cardiovascular diseases, and conditions "affecting musculoskeletal and connective tissue."

However, nearly 40% stated that mental health conditions are likely to join the top three most common and expensive conditions within the next 18 months.

Just over one-third of respondents said that global pandemics are the most significant cost-driving factor outside of employer control, while 36% pointed to profit motives for providers and over half said the high cost of medical technology.

A WTW analysis released in May estimated that the pandemic might reduce healthcare costs for employers by as much as 4%.

Related: COVID-19 Could Reduce Employer Healthcare Costs by 4%

"The pandemic undoubtedly had a major impact on slowing trend increases this year as it sparked a sharp decline in non-urgent surgeries and elective care," Francis Coleman, a managing director at WTW, said in a statement. "While most, but not all, countries experienced a decrease in trend this year, that is expected to be short-lived. In fact, we expect to see significant volatility in 2021 results, which are dependent on the impact of COVID-19 and whether a vaccine becomes available early in the year, who pays for it and the extent of its availability."

This was an update to an earlier WTW analysis released in late March that estimated employers could see healthcare benefit costs rise by 7% due to the pandemic.

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

The survey results were released one week after a WTW analysis projected that employer healthcare costs are expected to rise between 0.5% and 5% next year due to continued care for patients infected with COVID-19 and non-infected patients who deferred care earlier in the crisis.

Related: Coronavirus Backlog Could Fuel Higher Employer Healthcare Costs in 2021

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


KEY TAKEAWAYS

"The pandemic undoubtedly had a major impact on slowing trend increases this year as it sparked a sharp decline in non-urgent surgeries and elective care," Francis Coleman, a managing director at WTW, said in a statement.

Two-thirds of respondents said they expect healthcare benefit costs to accelerate over the next three years. 

A WTW analysis released in May estimated that the pandemic might reduce healthcare costs for employers by as much as 4%.


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