Cost Savings Post Covid-19

Over the last few months, most organizations have been focused on supporting it’s employees, the clients they serve and responding to changes forced by COVID-19. As states begin to move out of the red phase and businesses look to get back on track, they need to consider how COVID-19 has impacted the health insurance marketplace and how these changes will affect their employee benefit plans going forward. We have summarized our findings and recommendations below and in this recorded webinar so you’ll know what your organization needs to consider in 2020 and beyond. 

Fully-Insured Cost Implications: 

Decreased Utilization – There’s been a reduction in claims due to deferred or eliminated services, like elective surgeries and primary care visits. Employees are hesitant to seek treatment and many providers are pausing services altogether. 

Insurance Market Response – Insurance carriers will need to spread their losses out over their entire book of business. Certain areas have been more impacted than others (eg. NYC, New Orleans). National carriers can spread these losses over their national book of business, but regional carriers don’t have this luxury. These carriers could potentially price higher than others in 2021 to offset their losses. 

Carrier Responses – An increase in unemployment this year means carriers have fewer members on the plan, resulting in less premium. Most fully insured carriers have waived all costs associated with the testing and treatment of COVID-19, with almost 100% of the costs claim being assumed by the plan (no cost–sharing with the member).  Since carriers will not be receiving as much premium as they initially planned, they will potentially begin 2021 at a loss.

Unknown Circumstances 

1. Rating Adjustments – Certain factors can impact costs, such as smoker status, industry of employment and geographic footprint. 
2. Job Market Recovery – No one knows for sure what the economic impact and the rate of employees returning to work is, making predicting cost nearly impossible. 
3. Potential Vaccine – As most carriers have covered COVID-19 costs, what will happen when a vaccine is released? Can they afford to cover both treatments and vaccinations? 

Self-Funded Cost Implications: 

Decreased Utilization – As previously mentioned, there has been a dramatic reduction in claims.

More Access to Data – Self-funded groups have more transparency in their data, are better able to identify exposed patients and predict future costs. This means they can more easily institute programs, like chronic condition management, to directly benefit their population. 

Flexibility – Self–funded plans allow for greater control over what can be covered and how to best direct care. 

Unknown Circumstances 

1. National Infection Rate – according to a study done by actuarial specialists, Wakely, the cost of testing and treatment can be easily identified but the (unknown) infection rate is necessary to determine deferment costs. Below are the ranges they identified – if there is an increase in infections/a second wave, it will likely be towards the higher end: 
   1. 5-20% of healthcare costs deferred 
   2. 35-55% of those costs eliminated  
   3. 20-50% of costs made up in the second half of 2020 
   4. 15-25% of costs made up in 2021 
2. Stop Loss Market – Will the stop–loss market put individual lasers on groups that have a higher number of COVID-19 cases? Additionally, stop-loss carriers may increase the Aggregate corridor to be more appropriately funded for large swings in outcomes. An increase in their margins will result in more expensive premiums. 
3. Carrier and TPA Restrictions – Pharmacy carve-outs have been in the spotlight for being a good way for groups to save money. While most carriers already place a size limit on these, they may restrict these even further to keep the savings- resulting in higher costs for plan sponsors.

Other Considerations 

Uncertainty – Generally, the more uncertainty that exists, the more risk there is. This means more margin (cushion) built into pricing methodologies to account for many potential outcomes. 

Membership Changes – As spouses and children under 26 are laid off and are forced to join other health insurance plans, costs will likely increase to account for unexpected new members. 

Mental Health Costs – The last three months, and the last two weeks especially, have put immense stress on the entire country. How are employees handling this? If they’re seeking treatment, what will costs look like if this continues? 

Telemedicine Benefits – During this pandemic, telemedicine has seen a surge in popularity. It’s cost–effective and allows individuals to seek treatment from the comfort of home. This also prevents potential exposure by visiting an in-person healthcare facility, lowering risk overall. 

Solutions 

Deferred and Eliminated Care – Cost savings from deferred and eliminated and care in 2020 will likely be short-lived for plan sponsors. As the healthcare market rebounds in cost, employers need to prepare for increases in cost, demand and regulation. Employers need to be more proactive than ever directing employees to the appropriate centers for care. As regulations change how employers navigate options for benefit advisors with strong compliance and communication resources will be crucial. 

Misleading Renewal Savings – Carriers in the fully-insured, mid to large group marketplace are limited on how much they can increase costs for the upcoming year. Look for large increases in the latter half of 2020 and the start of 2021. Talk with your benefits advisor about alternative funding solutions that may provide increased flexibility and enhanced data and reporting capabilities. Make sure these programs have the necessary built-in safeguards to protect you financially. 

For more information about how your organization can save money post-COVID-19, contact Exude for a consultation.