This article was authored by Anna Quady, Consulting Actuary for USI Insurance Services
As COVID-19 continues to impact U.S. communities, healthcare expenditures may increase for employer-sponsored health plans. While we are still in the early stages of data reporting of the pandemic, we are starting to see initial forecasts related to overall changes in healthcare spending as well as changes in the utilization pattern.
Over the past few weeks, health insurance carriers have started to release estimates on the cost impact to health insurance plans from COVID-19. Formal and informal projections from our carriers have been in the range of 0-10%.
While these numbers can provide a starting point for discussion and planning, they are very early projections, and are intended to be applied across a large population. The financial impact to a single group health plan will depend on how many of their members require medical care for COVID-19. This will be influenced by the membership age and gender demographics, location, industry, underlying health conditions and prevalence of chronic conditions that can increase the likelihood of hospitalization.
Small employers will also have a wider variance of cost impact than larger employers, as a small group with an unusually high number of members that require hospitalizations due to COVID-19 may generate a much larger impact than estimates.
COVID-19 is projected to be far-reaching in its spread; however, areas with higher-density populations are more at risk for an outbreak than rural communities. This could create greater risk for employers with footprints in major metropolitan areas nationally as well as the larger cities in the Midwest such as Chicago, Milwaukee and Minneapolis.
While fatalaties from COVID-19 are skewed to the elderly, hospitalizaiton for COVID-19 is still very much relevant to the commercially insured population, which primarily includes members ages 64 and under. The CDC has reported in Severe Outcomes Among Patients with Coronavirus Disease 2019 (COVID-19) that between February 12 and March 16, 2020, 55% of hospitalizations and 47% of intensive care unit (ICU) admissions were from persons aged 0-64. For this same age group, approximately 20% of the hospitalizations required ICU admission1. New York City, which has both a high prevalence of COVID-19 and robust daily reporting statistics, reports on hospital admissions per 100,000 by age group. By overlaying the NYC population by age group, it can be seen that these statistics of 55% of hospitalizations are under age 65 continue to be true, even several weeks further into the pandemic than the CDC report. Furthermore, with this data we can break out the percent of hosptializations by age group.
New York City COVID-19 Hospitalization by Age Group
Hospitalizations per 100,000*
**NYC Population Distribution
Distribution of Hospitalization by Age Group***
75 years and older
*New York City Department of Health April 8, 2020; https://www1.nyc.gov/site/doh/covid/covid-19-data.page
**US Census Bureau; 2018 Age and Sex Distribution for New York City, NY
***Calculated by Age Group as Hospitalization per 100,000 * NYC Population Distribution/Citywide Total Hospitalizations per 100,000.
Data continues to emerge on what can be expected for severe cases. A Chinese study showed COVID-19 patients admitted to the ICU stayed for an average of 10-12 days. A study from Italy of 1,600 patients admitted to the ICU, most of whom required ventillator support, noted a median length of stay in the ICU of 9 days.
One of the effects on healthcare utilization due to the pandemic is the deferred treatment for elective or non-critical services. This is an important phenomena for self-funded medical plans to be aware of and plan for. This deferred care may result in a short-term drop in claims for many group health plans, followed by a corresponding increase to overall claims above expected levels for a period of time after the pandemic has subsided. Because of this potential fluctuation in monthly claims, it will be critical for self-funded medical plans to budget accordingly and reserve for future claim increases.
The graph below illustrates the pattern that would be expected from deferred and non-critical care. It is representative of a large population; a single group’s experience may differ.
This model assumes a significant initial drop in non-critical care, which then gradually reduces over the duration of the COVID-19 pandemic. It then assumes a rebound period that starts when we see a stabilization and continues for a period of time after the pandemic subsides.
The time span of this illustration, and the magnitude of the initial drop and subsequent rebound will depend on the duration and severity of the pandemic, the actual reduction from deferred care, the capacity of healthcare system to handle a higher volume of non-critical services after the pandemic, and the percent of deferred care that is ultimately not performed.
Changes in behavior and utilization indirectly related to COVID-19 are inevitable. Some of these will be short-term, like possible increases in mental health treatment as people cope with stress and social isolation, and decreases in regular cold and flu treatment, as the spread of these may also be reduced from social distancing. Additionally, some carriers have relaxed or waived limitations on filling prescriptions to allow members to stock up for quarantine periods.
There will likely also be long-term changes. Telemedicine has become relevant during this pandemic in a way it never has before, and pharmacy benefit managers (PBMs) have been encouraging members to switch to filling prescriptions by mail-order. Many health plan participants may continue to utilize these alternative delivery methods long after the pandemic subsides.
As the pandemic progresses, we anticipate more data to be available that will allow more accurate estimates of cost increases, and the effect of deferred care.
Visit our COVID-19 Resources page for articles and other resources.
1Calculated from the data in the CDC’s Severe Outcomes Among Patients with Coronavirus Disease 2019 (COVID-19) — United States, February 12–March 16, 2020 report using the number of total hospital and ICU admissions, and the percent of hospital and ICU admissions by age group.
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