The ongoing COVID-19 pandemic has created a new dynamic within the US healthcare system, leading to increased healthcare costs being passed onto employers. During this economically challenging time, it’s more important than ever before that employers are strategically managing and addressing rising healthcare costs.
There are three variable factors directly impacting healthcare costs: unit price of healthcare services, the number of services required, and the number of patients requiring service. In order to impact this equation, there are three strategies employers can deploy.
- Change the unit cost of healthcare.
Even prior to COVID, ineffective and uninformed healthcare decisions were already a leading cause of rising healthcare costs. Now, in a post-COVID world, the impact of poor healthcare decisions is having an even more significant impact on employers. This issue typically arises when employees lack the guidance, resources, and other information they need to make smart healthcare choices. This results in employees incurring higher costs of care and leveraging lower quality providers. These costs are then passed onto their employer. In order to combat this, employers must work with a hands-on broker that provides their employees with guidance during the benefits selection process. Additionally, the correct broker should provide employees support in selecting the best healthcare providers for their unique situation and life stage. By making more informed decisions, patients receive better healthcare outcomes and less costs are passed onto the employer.
- Impact the number of services used.
As the demand for routine and preventive healthcare services skyrockets in a post-COVID world, the ability for patients to receive the care they need, how and where they need it, has become increasingly important. Employees are more commonly demanding personalized guidance in managing their health. As an employer, implementing solutions that cater to employees’ unique situations or communication preferences can ensure they receive correct, accurate information that is relevant to them. Providing personalized content in easy-to-access channels helps employees proactively find care and identify other programs offered to them, such as telemedicine. As an employer, consider solutions that remove barriers to care as an important component of your overall cost-control strategy.
- Manage the demand for care.
The last recommended strategy is to proactively manage the number of people on your employer-sponsored healthcare plans. Each year, employers unknowingly spend millions on dependents that do not meet eligibility requirements for the benefits the company offers. By leveraging effective processes and strategies to eliminate ineligible users from their plans, companies can reduce healthcare costs. A key recommendation is to conduct a regular ineligibility audit to ensure your employee population and plans are managed in a consistent and fair manner to ensure equal treatment of employees to manage employer costs.
Are you interested in implementing these strategies at your business? Launchways can help, get in touch with us today.
This post continues our ongoing series of articles on how COVID will impact employer healthcare costs. In today’s blog, we’ll discuss four ways that COVID will likely lead to increased costs for employers.
- As healthcare providers begin to reopen and quarantines are lifted, routine treatments will be significantly more expensive in a post-COVID world. During the COVID pandemic, hundreds of thousands of routine visits and procedures were delayed. As healthcare providers reopen, there will be a large surge in demand for simple procedures and medical imaging. Under normal circumstances, dedicated imaging centers and surgery centers would be the most cost-effective locations for individuals to receive the care they need. However, the large surge in demand will push many people into hospital settings to receive the testing and treatment they need. Unfortunately, in hospital settings, healthcare costs can double, triple, or even potential quadruple depending on the nature of the procedures.
- During COVID, access to prescriptions has impacted the healthcare outcomes of those with chronic conditions. Under normal circumstances, individuals on long-term maintenance medications typically have access to 30-day supplies. During the COVID outbreak, many individuals with pre-existing conditions felt uncomfortable leaving their homes to refill prescriptions, leading to lower adherence rates to prescription regimens. In fact, recent research indicates that as much as one third of Americans avoided receiving necessary care due to fear of contracting COVID. When individuals with chronic conditions aren’t connected to care, this can mean substantial costs being passed onto employers. Non-adhering diabetics can cost an extra $5,000 per year. And individuals who forego mental health medications can cost an extra $10,000-$15,000.
- Delays in treatments for those with chronic pain may lead to substantial treatment costs for opioid addictions. Every day, thousands of individuals undergo musculoskeletal treatments for elective procedures to reduce or eliminate chronic pain. However, due to COVID, all of those procedures were delayed. In non-COVID times, these individuals would be able to seek other forms of care, such as physical therapy, to help manage that pain while waiting for corrective surgery. However, during COVID individuals were also unable to access these treatment options. Many frustrated patients turned to their doctors for pain medication to help manage pain during surgery delays. These unfortunate circumstances may very well likely lead to future costs due to opioid dependency. Generally speaking, the ongoing opioid crisis costs the U.S. roughly $78.5 billion each year. And research estimates that opioid addiction costs $14,000 in direct claims costs per patient per year.
- Delayed preventative care creates future risks for more serious conditions and costly treatment plans. In many cases, preventative screenings and treatments are crucial for limiting the amount of critical care individuals need. During non-COVID times, cancer screenings were rising in frequency and are generally recommended by providers. In the case of most treatable cancers, such as breast cancer or colon cancer, early detection is the best strategy to limit complications and ensure positive patient outcomes. Unfortunately, during COVID-19, preventative care and screenings were halted for several months. These delays are likely to lead to substantially more serious diagnoses that are harder to treat and more expensive to provide care for.
Prior to the COVID-19 crisis unfolding, most US employers were anticipating healthcare cost increases in the range of 4-7%, based on trends in 2018 and 2019. However, COVID-19 has drastically altered the healthcare space and thus dismantled most employers’ previous predictions. While some are now anticipating decreased healthcare costs for 2020, this does not mean good news for employers. In fact, the monumental impact COVID-19 has had on the healthcare space could mean employers will be facing unprecedented cost increases in 2021 and 2022. These impacts are something employers must be preparing for now, rather than later.
In this post, we’ll explore the major ways COVID-19 has impacted the healthcare landscape. We’ll delve into what this means for businesses in the near-term (the duration of 2020), as well as crucial action steps employers must be taking now to prepare their businesses for 2021 and beyond.
How has COVID impacted healthcare costs?
Due to the COVID crisis, by late March 2020, many American businesses had temporarily ceased operations and closed their physical offices. The immediate impact of the virus was a significant surge in the demand for hospital space in markets with significant virus spread, such as New York. However, the most significant shift across the country was a stark decline in elective care.
For the most part, over the past few months no procedures or surgeries deemed as “nonessential” have been conducted, in order to preserve hospital space and supplies for those with COVID. The shutdown of nonessential medical services and procedures lead to the furloughs of tens of thousands of healthcare workers.
As a result of all these challenges, in the second financial quarter, Americans are receiving substantially less care than anyone could have ever predicted. This impact will result in an unprecedented $140B to $375B decrease in care costs (and this figure includes the costs of COVID-19 treatments).
However, this short-term cost decrease will do little to offset substantial future increases. Models predict that in 2021 and 2022, the trend of rising healthcare costs will reset at a higher lever with a higher slope indefinitely. Employers must be planning and preparing for these changes now by working hand-in-hand with their benefits broker to enact effective cost-control strategies.
What’s the bottom-line?
As an employer, it’s important to realize that COVID-19 has substantially altered the extent to which employees have been able to receive the care they need. Although this shift will result in short-term healthcare cost decreases, the long-term impact is grim. Employees will be driven to more expensive care settings as healthcare becomes available again, resulting in substantial costs increases in 2021 and 2022. Employers must begin preparing for these costs now, by working proactively with their broker on impactful cost-control methods.