Employer healthcare spend to decrease in 2020, but may rise in 2021, Aon says

Dive Brief:

Projected increases in healthcare costs for employers are expected to be lower in 2020 because of COVID-19, according to the Mid-Year Carrier Trend Report, conducted by Aon PLC. Medical claims for 2020 are projected to see an increase that is, on average, 5% lower than initially projected by U.S.-based insurance carriers due to the coronavirus. Forty-four national and regional insurance carriers participated in the survey.
If an employer initially budgeted $12,500 per employee on medical costs in 2020 before the global pandemic, then expectations are that the employer will see claim reductions averaging $500 per employee because of the net impact of COVID-19, researchers said as example. The impact for 2020 dental and vision benefit claims is also expected to decrease, but the pandemic is not expected to materially impact 2020 prescription costs.
However, carriers forecast COVID-19 will increase U.S. employer medical claims by an additional 2%, on average, above normal trends in 2021. This will include costs for care that was postponed or skipped in 2020 as well as COVID-19 prevention and treatment that will be delivered in 2021.

Dive Insight:

Various observers have predicted a decrease in healthcare spending in 2020; Willis Towers Watson forecast back in May that the COVID-19 pandemic may reduce healthcare costs for self-funded employers by as much as 4% due to deferred medical care. Management consulting company Milliman predicted in an April report that 2020 health insurance payers would see a net reduction of between $140 and $375 billion in costs nationally through the end of June. But Milliman also said payers could see a significant increase in costs after the pandemic because of deferred care and pent-up demand.

Employers don't expect cost increases even as they increase offerings under their health and wellness programs in response to the pandemic, according to May 7 Willis Towers Watson survey results. Nearly half of respondents said they are enhancing healthcare benefits, and a similar amount are broadening well-being programs — but 57% of respondents only anticipated a small to moderate increase in costs and 24% expected no increase or decrease.

Even as employers report a boost in some of the benefits they offer, a usage gap remains, according to Bank of America's 2019 Workplace Benefits Report. Employees were not aware of and did not understand certain benefits such as healthcare savings and caregiving support. According to the study, 88% of the employers reported offering caregiver benefits, but 71% of workers were not aware of what was available.

Telehealth, however, has shown increased use by employees. In a report issued in May 2020, use of virtual medicine grew 1.6 times since last summer, Blue Cross Blue Shield noted. More than half of that growth has occurred since the onset of the coronavirus pandemic.