(by Larry F. Hill)
Every summer HR and benefits execs start playing the annual “I Wonder How Much Our Employer-Funded Healthcare Plan Will Cost Next Year?” guessing game. And this year, there’s heightened attention on where employer-funded healthcare costs are headed in the coming post-pandemic environment.
Bad news (but no surprise): They’re increasing.
Good news: They’re not increasing as much as in 2021. More good news: The amount spent on healthcare should return to pre-pandemic levels, with some adjustments for the “long tail” of the pandemic’s effects.
According to an annual report on healthcare costs, the U.S. medical cost trend (the projected increase in how much it costs to treat patients) will be about 6.5% in 2022. That’s down slightly from the 7% trend in 2021, but higher than it was from 2016 through 2020. (Of course, the cost of treatment is just one of a variety of factors that determines changes to your specific employer-funded healthcare insurance premiums, deductibles, copayments, coinsurance, etc.)
What are some causes of rising post-pandemic healthcare costs?
- Deferred utilization — A lot of people put off going to the doctor during the pandemic, especially preventive care. (Employer spending on healthcare actually dropped in 2020.) But as the pandemic fades, more and more people will seek the care they deferred in addition to care for new issues.
- The persistent costs of COVID-19 — Testing and vaccinations will likely continue well into 2022. A recent survey by Arizona State University and the Rockefeller Foundation found that almost 90% of U.S. employers plan to encourage or require employee vaccinations and almost 70% are already doing COVID-19 testing for their employees. In addition, booster vaccinations may be needed as variants emerge, and testing for SARS-CoV-2 (the virus that causes COVID-19) may become an annual cost each winter.
- Overall health concerns, mental health issues, and substance use — All of these ticked up during the pandemic. Isolation, anxiety, poor nutrition, lack of exercise and other factors may contribute to an overall unhealthier population and increased costs for employer-funded healthcare insurance.
- We’re already preparing for the next pandemic — We’ve seen what happens when we aren’t ready, and it’s not pretty. The health system is planning and already acting on improving processes, technology, staffing, and safety. It’s also investing in ways to address the inequities in healthcare, which may increase short-term costs but could result in significant long-term savings.
- Investments in “digital care” — The pandemic saw a huge increase in “telemedicine” and other digital applications that streamline and improve the connection between patient and provider. Those technologies proved themselves invaluable (79% of those with employer-based insurance said they were open to using digital care options) and continued investments to provide access will likely increase utilization in 2022 and beyond.
What’s helping to hold the line on costs?
- Sometimes it takes a pandemic to make a point. For years employers (with mixed success) have encouraged consumerism thinking with features and tools like centers of excellence, low-cost access to retail clinics, plan design innovations, navigation applications, etc.
Then, during the pandemic, out of necessity millions experienced care that they discovered was effective, but more convenient and less expensive. Now, more people are shopping around for care, often choosing alternatives to the doctor’s office or hospital when appropriate.
- Emergency Departments (EDs) have become a lot less popular. Utilization of the ED, especially for non-emergency care, plummeted during the pandemic as patients became more aware of what truly constitutes an emergency. It seems unlikely that unnecessary ED visits will return to their pre-pandemic levels.
- Health systems are finding new ways to provide quality care for less. Remote work, decentralizing processes, reexamining investments in real estate for administrative work, and increased reliance on automation and cloud technology are all ways that health systems are extending pandemic-driven changes to help control costs in a post-pandemic world.
As companies work to finalize their 2022 health insurance plans, it’s clear that 2022’s higher medical cost trend will likely result in some combination of increased premiums and/or adjustments to deductibles or other plan design parameters, but likely not massive hikes for either employers or members.
The U.S. healthcare system has presented a challenge to employer-funded healthcare plans for a while now. The pandemic—and now as it winds down—has taken that challenge to a completely new level. But it also has resulted in some innovative solutions, technologies and alternatives that may very well become part of the answer to holding the line on increasing healthcare costs post-pandemic—in 2022 and beyond.