A report by PricewaterhouseCoopers said employer spending on healthcare could increase anywhere from 4% to 10% next year. The report highlighted three potential scenarios depending on what happens with the Covid-19 pandemic.
As the Covid-19 pandemic and resulting economic slowdown strain company budgets, employers are trying to calculate how much they will spend on healthcare next year. Soon, they will be picking health plans for 2021, and the pandemic will certainly go into that calculus.
A new report by PricewaterhouseCoopers attempts to forecast healthcare costs for next year. But there are still lots of unknowns. According to the report, the medical cost trend could increase between 4% and 10% in 2021.
Researchers with PwC’s Health Research Institute interviewed health plan actuaries from 12 national and regional payers over the past three months. The consensus? They were still unsure about the pandemic’s effect on spending now and what it will mean for 2021.
PwC considered three potential scenarios:
- If healthcare spending remains down in 2021, PwC expects a 4% medical cost trend
- If spending continues to grow at the same rate that it has from 2014 to 2019, PwC forecasts a 6% medical cost trend
- If spending increases significantly next year in part due to pent-up demand from delayed care during the pandemic, PwC forecasts a 10% medical cost trend.
Employers are already considering measures to reduce their costs next year. For instance, a growing number are looking at narrow-network plans as a way of negotiating down prices.
“As the pandemic continues and the economic pressures increase, the shift towards narrow network will likely continue and accelerate,” PwC Health Research Institute Leader Ben Isgur wrote in an email.
In particular, large companies with more than 5,000 employees are more likely to consider this strategy, with 25% offering narrow-network plans, according to a 2019 survey by PwC.
Walmart is a recent example. The company began offering “curated physician networks” in Arkansas, Florida and Texas in 2020. In March, the company indicated it would expand on its network strategies.
More companies are also expanding their telehealth services, in part a direct result of the pandemic. While this may not save them money in the short-term — most insurers are currently reimbursing the same for telehealth visits as in-office visits — in the long term, it is expected to reduce costs.
“Employers understand the benefits of telehealth including lower costs, easier access, less time away from work and a good consumer experience,” Isgur wrote. “89 percent of employers surveyed by PwC in spring 2019 offered telemedicine either through their medical vendor or a carve-out vendor, up from 56 percent in 2016. Over the past few months, we have seen telehealth accelerate even faster.”
A couple of ongoing factors could increase spending next year. Employers are adding mental health services to their health plans, and have seen increased demand for those services, especially in light of the pandemic. According to a recent survey by the Health Research Institute, 12% of individuals on employer plans said they had sought mental health services, and another 18% planned to do so.
Specialty drug spending is also expected to drive up costs, as the majority of pharmaceuticals planned for release next year are specialty drugs. This is not a new trend; of companies’ total drug spending, specialty drugs grew from 21% of the total in 2010 to 58% in 2017.
Many patients have delayed care as a result of the pandemic. Even as medical offices begin to offer in-person visits again, volumes are still down. It’s still too early to tell whether that will lead to a surge in spending next year due to postponed — but needed — procedures.
According to PwC, 22% of patients with employer-sponsored insurance have delayed care since March.
“We could see the population risk increase for 2021 if members with chronic conditions are not able to manage their health as effectively in 2020 due to Covid-19,” Amy Yao, senior vice president and chief actuary at Blue Shield of California, told PwC’s Health Research Institute.