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PwC: Employer Health-Care Costs Could Fall in 2020, Rise in 2021

June 24, 2020, 10:01 AM

Employers will face an increase in medical costs of between 4% and 10% for their employees in 2021, PricewaterhouseCoopers predicts.

Employer health-care spending could fall in 2020 compared with 2019 and then rebound in 2021, PwC’s Health Research Institute said in its annual report released Wednesday. The report is based on 23 interviews from February through May with health industry executives, health benefits experts, and health plan actuaries whose companies cover more than 90 million employer-sponsored large group members.

Medical costs borne by employers for their employees’ health plans are expected to go up 6% this year, PwC said.

Health insurers use medical cost forecasts to help set premiums, and employers use the information to make adjustments in benefit plan designs to help offset increases, PwC said.

Pandemic ‘Reshapes’ Industry

The report also identifies trends.

“The COVID-19 pandemic has reshaped US healthcare,” it said. “Virtual care has skyrocketed. People are largely avoiding in-person visits and procedures. Providers across the nation are facing a liquidity crisis as non-Covid-19 patient volumes plummeted starting in late March and only started to slowly rebound in mid-May.”

Nearly 20 million people could lose their employer-sponsored health insurance, the report said. Employees who can work from home have been doing so, and nearly half the chief financial officers surveyed by PwC said their companies plan to make remote work a permanent option for some jobs.

“As the unemployment rate rises, the number of individuals with employer-sponsored insurance will decrease while the number of people who are uninsured or on Medicaid will increase—putting the brakes on revenue across the healthcare industry and the need for payers, providers, and pharmaceutical and life sciences companies to rethink their revenue mix and cost structure,” the report said.

‘Narrow Networks’ Gain Appeal

Mental health, telehealth, new specialty drugs, and narrow networks are expected to have a big impact on 2021 medical costs, the report said.

Telehealth, which has gained ground slowly for years, will go mainstream, it said.

Nearly a quarter of employers have been considering narrow networks for the past few years, and some of them may move to those plans in 2021 out of necessity, the report said.

Narrow networks limit providers that enrollees can use to get the highest level of coverage, and they typically cost less than broader network plans. That’s because network providers give price concessions or take on more risk for covering patients in exchange for predictable cash flows and more patients.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com

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