When the COVID-19 pandemic first hit the U.S. in early March, healthcare services were impacted almost immediately. While cities went on lockdown, businesses shut their doors, and people stayed home, hospitals became the center of the crisis. Almost all nonemergency services were put on hold as healthcare providers struggled to manage the care of those infected. While healthcare systems tried to keep up, health insurance providers saw their costs increase dramatically due to coronavirus testing and treatment.
Now, almost eight months since the virus first took hold, the true costs of the coronavirus and its impact on health insurance and the healthcare system are just beginning to be realized. How will COVID-19 impact upcoming healthcare renewals and planning for 2021? We’re breaking down the costs of COVID-19, changing healthcare trends related to the pandemic, and what to expect from healthcare insurance in the future.
The Costs of COVID-19
COVID-19 testing and treatment including the use of expensive experimental drugs and waived cost-sharing for patients contributed to sharp increases in spending for insurers nationwide. While some of this cost increase is likely to be offset by the postponement of elective surgeries due to the pandemic, experts predict that the long-term costs of COVID-19 will still be high. In many cases, the elective surgeries being delayed or cancelled are often procedures related to medical conditions and postponing necessary care does not make these underlying issues go away. In fact, costs may increase in the long run as medical conditions worsen over time and issues that could cause future problems go undetected.
In addition to costs related to healthcare, there are also the economic consequences of the pandemic to consider. Millions of workers lost their jobs or were furloughed when the pandemic shut down the economy. As a result, some people could no longer afford their premiums while others lost insurance coverage all together. Looking ahead to the coming year, proposed insurance rates should reflect expected costs. For example, in the Hudson Valley, small group market rates are increasing about 6 percent in 2021. Still, with all the ongoing uncertainty, costs can be difficult to predict. When will a COVID-19 vaccine be available and how quickly can it be widely distributed? Will new waves of cases continue throughout the fall and winter and into the new year? Will Congress act to help insurers and healthcare systems absorb losses? The answers to these questions will be crucial to assessing the true costs of COVID-19 and its impact on health insurance renewals.
Changing Healthcare Trends
COVID-19 is changing not only the way we live and work, but also how we care for our health. These two trends are likely to have an impact on healthcare systems and costs in the years to come.
Increase in Mental Health Utilization
While employers and health insurance providers were already beginning to recognize the need for increased access to mental health care, demand for mental health services is likely to grow even more as a result of the pandemic. When the coronavirus outbreak triggered stay-at-home orders and layoffs began, surveys conducted found adults reporting increased anxiety and negative effects on their mental health. As the pandemic has continued, more and more people report mental health impacts such as depression due to isolation and social distancing, and more people have begun to seek care, including virtual services. Overall, increases in mental health utilization are expected to inflate healthcare costs in the long term as health insurance providers add mental health services to their offerings and work to integrate them with primary care.
Telehealth Goes Mainstream
Telehealth services have grown slowly over the past decade as technology improvements made virtual visits and care easier. However, widespread adoption remained elusive until the start of the pandemic when social distancing requirements and stay-at-home orders cut off access to in-person services. Suddenly, telehealth offerings skyrocketed, with many adults using telehealth services such as video conferencing for the first time during the pandemic. While questions remain as to what healthcare will look like post-pandemic, most experts recognized that telehealth is here to stay. Virtual care could even decrease costs usually associated with in-person visits and help lower spending on testing services and diagnostics.
Health Insurance Costs for 2021 and Beyond
Thanks to these changing healthcare trends and the ongoing unpredictability surrounding COVID-19, experts note that it’s hard to predict whether medical-cost trends will increase or decrease in 2021. According to PwC’s Health Research Institute, a second wave of coronavirus cases this fall could continue to push out elective care causing costs to surge in 2021. Even without a second wave of cases, employers are likely to see continued costs due to the need for regular testing to contain the COVID-19 virus among the workforce.
On the other hand, some experts believe that projections of huge increases in employer premiums have been overblown. This is because, for most employers, health insurance costs for 2021 will not be considering claims expenses for the entire pandemic, only for expenses through the end of June. While early COVID costs were substantial, they are likely to have been somewhat offset by lowered claims related to office visits, lab testing, outpatient treatment, and inpatient stays. Experts have also noted that costs related to the care of seniors and the poor, two groups most affected by the coronavirus, are covered by federal programs like Medicare and Medicaid and will not impact employer costs.
Ultimately, we don’t know what our healthcare systems will look like after this crisis. While there is little doubt health insurance renewals will be impacted by COVID-19, the real costs of the pandemic won’t be known for years. In the meantime, healthcare systems and providers are adapting to changing trends and costs to serve patients now and in the future.
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