What Will Employer Healthcare Costs Look Like in 2021?

If there’s one thing that we can all agree on, it’s that 2020 has been an unusual year, especially when it comes to healthcare. We’ve seen a once-in-a-lifetime pandemic, and we still don’t know what all the effects of it will be. Take, for example, costs for employer-based healthcare. If you’re an employer, you’re right to be wondering where your health costs are headed in 2021 – will they skyrocket? Level off? Maybe even go down? Unfortunately, the answers to these questions are not as clear-cut this year as they have been in previous years, but we can take a look at what some experts are projecting, as well as what you can do to help keep costs down.

This Year’s Cost of Care

piles of hundred dollar bills strapped together by a band laying on top of each other
Healthcare costs have surprisingly been down this year; spending anywhere from $75 billion to $575 billion less than expected.

To get a better idea of why predicting healthcare costs for 2021 has been so difficult, we need to take a look at what healthcare costs have been like this year. As you might expect, dealing with the coronavirus is expensive: California’s state ACA Marketplace, Covered California, estimated that the costs to test, treat, and care for coronavirus patients this year will be between $34 billion and $251 billion; America’s Health Insurance Plans predicts the cost will total $56 billion to $556 billion over a two-year period.

Even with those astronomical numbers, we can’t simply jump to the conclusion that insurance costs are going to skyrocket next year. It looks like the total costs of healthcare in the U.S. are actually down this year; in fact, one estimate is projecting that we will have spent anywhere from $75 billion to $575 billion less than expected on healthcare by year’s end. One actuarial firm is even saying that some self-insured employers could see a 4% drop in healthcare costs in 2021. How can that be? While the coronavirus has been an unexpected expense, in some cases, it has been balanced out – or even cancelled out – by the fact that many people are postponing or cancelling regular clinical care and elective treatments due to coronavirus. 

But before we get too excited about a possible drop in healthcare costs, we need to look at what the experts are predicting. And, like everything else this year, it’s unusual: there are multiple possible scenarios for how much employer healthcare costs will rise.

Multiple Scenarios

3 arrows pointing in different directions
So far, there are 3 possible scenarios as to how much healthcare costs will be next year.

Medical costs are one of the most vital bits of information for insurance companies as they figure out plan costs for the coming year. With this year being so much in flux, it is unclear what insurers are going to do; in fact, business advisory giant PricewaterhouseCoopers (PwC) has taken the unusual step of offering multiple scenarios for what could happen to employer healthcare costs in 2021. “This is an unprecedented report for us,” said Ben Isgur, leader of PwC’s Health Research Institute. “In the 13 years we have been doing this, we made a projection of the coming year and never felt the need to do scenarios.” Their 3 scenarios for 2021 are as follows:

  • Medical spending continues to stay low, with people opting out of non-coronavirus related care. In this scenario, costs would only rise by about 4%, which would be one-third lower than the average growth over the last five years.  
  • Medical spending could be “medium,” and costs would rise at the same rate as they did from 2014 – 2020: around 6%.
  • Spending could be very high and result in a 10% increase in costs.

These numbers might not be across the board for all businesses in all areas: it might depend on where they are located and how much the coronavirus has affected their area. For example, businesses in an area that has been relatively unaffected by coronavirus will most likely see the usual increase of about 6%, while those with a surge in the virus, but a drop in people seeking care for other things, could see a rise closer to 4%. But if all of this other medical care gets pushed into next year? Then we could see a rise in healthcare costs of around 10%, which would mean the highest rate of medical-cost inflation since 2007. 

For now, it does look as if some insurers are raising rates, and these increases seem to vary by plan type. For example, recent filings with the District of Columbia’s Department of Insurance, Securities and Banking related to small groups for 2021 show that Aetna filed for an average increase of 7.4% for health maintenance organization (HMO) plans and 38% for preferred provider organization (PPO) plans, while UnitedHealth proposed an average increase of 17.4% for its two HMOs and 11.4% for its PPO plans. They may be anticipating a surge in claims as 2021 gets underway. 

A Surge Next Year?

graph of money bars going up with a red line moving upwards across the top of each bar
Insurance costs could skyrocket next year due to people not getting treatment.

What many employers are concerned about now is that final, high-spending scenario. With so many people putting off necessary treatments, insurance claims could skyrocket in 2021 as people get sicker. Skipping out on preventive care could also present a large problem, as people may miss out on being diagnosed with underlying issues. “[Employers are] worried that some of these elective procedures will simply be bunched up next year and some people will be sicker next year … because certain things weren’t detected earlier,” said James Klein, American Benefits Council president.

Other things that could drive up costs? Increased coronavirus testing as employees return to work, prescription drug cost increases as pharmaceutical companies work on coronavirus treatments, and higher operating costs for hospitals and physicians as they try to keep up with the need for protective gear. Finally, let’s not forget that, as people struggle with isolation and anxiety, mental health costs will probably continue to rise – and now is certainly not the time to skimp on mental health care benefits for your employees. 

What You Can Do

If costs do end up rising significantly, it might seem like the best thing to do would be to choose plans with higher deductibles or contribute less to employees’ premiums, which would pass some of the costs onto them. This may help to reduce your spending in the short-term, but it’s probably not the best long-term strategy. Studies show that putting more of the cost of healthcare onto your employees actually discourages them from seeking preventive care: for example, families with a higher deductible are less likely to take their children to see the doctor, even if the visit is free. In the long run, this could mean that your employees and their families will be less healthy, which could mean higher healthcare costs.

So what should you be doing to help manage healthcare costs and keep your employees healthy? Here are a few strategies:person holding a cell phone with a caucasian male doctor on the screen

  • Probably the best thing that you can do right now – and continue to do in the future – is to offer telemedicine as an option to your employees. Virtual healthcare exploded in popularity during the pandemic, and many patients love its convenience, while many employers love how cost-effective it is. Speak with your insurance company and make sure that they will continue to cover it – and encourage your employees to take full advantage of it.
  • Healthcare technology doesn’t have to end with telemedicine. You can offer “virtual chronic care solutions,” which can reduce the need for regular doctor visits. This could include things like Bluetooth-enabled glucose monitors that link with smartphone apps. 
  • Instead of raising costs for your employees, try narrowing the network included in your plan. If your employees are already happy with their covered doctors, it may not be necessary to include a wider range of providers.
  • Speak to your insurance company, or one of our knowledgeable agents, and have them help you examine your employees’ healthcare costs. For example, are their providers jumping right to expensive tests and surgeries, or are they more likely to start with effective preventive measures?

The only thing we know right now about 2021 healthcare costs for employers is that we don’t know a whole lot. Right now all you can do is move forward on the assumption that costs will go up, as they do every year, and try to find ways to keep costs down. The best way to do that? Contact EZ, and speak with one of our agents. They can give you cost-saving tips, and can also  find you a great plan at a great price – and they’ll do it all for free. To get started, enter your zip code in the bar above, or to speak with an agent directly, call 888-350-1890.

Out-Of-Pocket Costs Result In Fewer People Visiting Primary Doctors

The cost of health care continues to rise every year, making it harder for many people to afford their medical bills. Data collected over the years shows that doctor visits for people under 65 years of age have dropped over 25%. In the years 2008 to 2016, up to 46% of the adults went at least a year without visiting their primary care doctor. Why? Well due to the rising health care costs, people are opting out of going to see their primary care doctor. 

The majority of people just cannot afford the out-of-pocket expenses that accompany a visit to the doctor. Costs for things such as copays or lab work can become prohibitively high for many people to afford. However, primary care is effective in prevention of disease, and going without seeing your doctor can exacerbate an existing health condition. 

stacks of money in a silver suitcase.
“There is a lot of data showing that when you raise health care costs, people will receive less care.”

More Money, More Problems

When things go up in price, people tend to shy away from spending the extra money. This does not exclude health care costs. The more money people have to pay, the less likely they are going to go to seek medical attention. 

“There is a lot of data showing that when you raise health care costs, people will receive less care,” Dr. Kimberly Rask, chief data officer at Alliant Health Solutions, wrote in an editorial accompanying the study. “But it doesn’t mean that they only stop unnecessary care. They will reduce both necessary and unnecessary care.”

“When patients have to pay more, they may pause, and they may not go in if they don’t think it’s that urgent,” says Nadereh Pourat, a professor of health policy and management at UCLA’s Fielding School of Public Health. But health problems can worsen, she adds. “You don’t want them to wait til things get really bad.”

The Benefits of Primary Doctor Visits

caucasian doctor checking a mans blood pressure.
Going to your primary doctor has many health benefits. They keep your health on the right track and help manage conditions.

A primary care doctor may be able to pick up on, and test for, an underlying problem that a person is unaware of. It can be harmful for people not to see their doctors at least one a year, especially if they have a chronic condition that needs to be managed, such as high blood pressure.

During your annual physical, your doctor will also go over your current medications. This is to determine whether they are working or whether changes need to be made to them. Doctors will also keep you from making the mistake of taking two medications together, which could cause a dangerous drug interaction.

“Primary care has all kinds of benefits,” says Dr. Ishani Ganguli, Harvard assistant professor of medicine and physician in general internal medicine and primary care at Brigham and Women’s Hospital. “Both for patients but also for populations,” Ganguli says. The research shows that people are more healthy when they see a primary care doctor for routine care. Where there are more primary care providers per capita, death rates drop for heart disease, cancer, stroke, and other illnesses. Not only do the death rates decrease, but life expectancy goes up.

Although health care costs are on the rise, it is still very important to visit your primary care doctor at least once a year. It is necessary to stay on top of your health, and live a longer life. At the very least, an annual visit will bring you peace of mind. In the most extreme cases, it could save your life.

Healthcare Mergers Continue, What This Means For Consumers

Healthcare boundaries have recently begun to blur, starting with CVS and Aetna merging, and continue to blur. Insurance companies, doctors, and hospitals have teamed up in order to cut costs due to the Republicans halting subsidy payments. The halt will cut some federal programs funding. Now, UnitedHealth has plans to buy a large physician group, DaVita. These mergers are an attempt to provide quality care for consumers at affordable lower costs.

Because Republicans halted subsidy payments, companies are beginning to merge.
Because Republicans halted subsidy payments, companies are beginning to merge in order to save and provide quality care.

First CVS and Aetna have plans to create “hubs” for customers to come in and receive care, which will result in better care at a lower cost. Now, joining the bandwagon, UnitedHealth’s Optum unit plans to merge with DaVita to do the same.

The Plan

UnitedHealth Optum manages pharmacy benefits and provides health services. The merge will now add more doctors to UnitedHealth’s existing 30,000 doctors, giving people more variety within their network.

DaVita is a for-profit organization that has chains of dialysis centers. They operate nearly 300 clinics that serve 1.7 million patients across six different states. The states are California, Florida, Colorado, Washington, New Mexico, and Nevada. They will add to UnitedHealth’s 250 Med Express urgent care centers and 200 surgical centers.

“I am so proud of the DaVita Medical Group accomplishments, including our excellent clinical outcomes,” said Kent Thiry, DaVita chairman and CEO. “The combination of DaVita Medical Group and Optum should lead to even higher levels of performance.”

In a statement, Larry C. Renfo, Optum’s chief executive said “Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways.”

The merge between UnitedHealth and DaVita is hopeful for the future of healthcare costs and care.
The merge between UnitedHealth and DaVita is hopeful for the future of healthcare costs and care.

When This Will Happen

The $49 billion merge is expected to close next year.  The goal is to offer clinics that give a lot of the same care an emergency room at much lower rates. They will offer nearly 50 percent cheaper costs for procedures such as outpatient surgery.

Other industries are taking note of UnitedHealth Optum’s move, making it appealing for them to create a design of their own possible merge. As insurance companies, doctors, hospitals, and pharmacies begin to unite, it seems that not only will they benefit, but consumers as well. Healthcare lines continue to blue with these mergers. If all goes accordingly, then consumers will be offered a large range of doctors, and quality care at almost half the costs.