COVID-19’s effect on employer-sponsored health care costs is not what you might think

Depending on whom you ask, “go with your gut” is either a maxim to trust your instincts when making decisions or an utterance as precursor to doing something rash. For those whose job it is to mitigate risk, there’s a sizable chance they’d fall into the latter category. That is not to say our gut feelings can’t be correct, but insightful decision makers rely on experts, data, and analysis to guide them in their process — a strategy that is often diametrically opposed with the concept of a “gut feeling.”

For instance, if you were asked to project your employer-sponsored health care costs over the course of a global pandemic, you’d probably assume they’d be significantly higher, right? This, of course, makes sense. You don’t have to be savvy to health insurance trends to come to this seemingly logical conclusion.

However, as with many things in this often-unpredictable world, the expectation ends up being different from the outcome. Surprisingly enough, in the early months of the pandemic, health care costs trended dramatically downward. While the cost trend has rebounded slightly in the latter half of the year, it’s still well below pre-pandemic levels. While this may seem entirely paradoxical, it’s actually far more sensible than you might think.

Effectively, it’s a matter of one trend relative to another: the dramatic decrease in non-emergent medical utilization far outweighed the increased COVID-19 treatment and testing. Outpatient visits to general practitioners, specialists, emergency rooms, urgent care units, and elective surgeries all saw sharp reductions. Inpatient and pharmacy utilization remained consistent with pre-pandemic levels, though it was not enough to offset the other non-COVID-19-related medical cost trend. 

Why this happened is difficult to say definitively, but several reasons are readily apparent. For one, as hospitals became overwhelmed with COVID-19 response, many elective procedures and other non-COVID-19-related visits were rescheduled to allow health care workers to better utilize protective gear and other hospital resources. Additionally, many simply chose to stay away from health care centers in an effort to avoid contracting the virus and to keep beds open for those with COVID-19 who required extensive care.

As we’ve seen in the already-rebounding cost trend, this won’t be the case forever, though, and an employers’ hasty response could spell long-term disaster. Before you make any major decisions about your health and benefits plans, be sure to read our latest white paper, The MMA COVID-19 Paradox, and learn how you can maximize health plan value, improve employee health and well-being, and mitigate risk by focusing on five key themes in 2021.

As evidenced by the trend of employer-sponsored health care costs during this pandemic, trusting your gut isn’t always the way to go. MMA is here to help make sure you’re always in the know so you can make the right decisions for your business.