COVID-19’s Impact on Self-Insured Employers

Every American business has been touched by the COVID-19 pandemic. If you’re feeling anxious and uncertain about how this unprecedented experience will affect your business’s healthcare spending, you’re in good company. This is an issue that all self-insured employers are grappling with right now. While there’s still plenty that none of us know about the road ahead, we do already know so much more than we did just last month about how COVID-19 will affect self-insured employers.

COVID’s Effect on Claims

Both self-insured and fully-insured employers can expect higher-than-average claims this year due to COVID-19. In March, Willis Towers Watson released projections made using an actuarial analysis of self-insured employers. Its projections estimate that employers will see claims rise by 7 percent this year as a direct result of COVID testing and treatment. That 7 percent increase is on top of the original 5 percent increase in claims that was already projected for 2020.

It’s important to note that, because this analysis was done near the beginning of the pandemic, its accuracy is far from guaranteed. How much claims actually rise this year will depend on how much of the population is infected and how ill they become. (For reference, Willis Towers Watson estimated a 1 to 3 percent increase in claims if the infection rate was 10 percent, and a 5 to 7 percent increase in claims costs if the infection rate was 50 percent.)

The takeaway here is that employers can expect higher-than-average claims this year and increases to their 2021 premiums, though it’s far too early for anyone to make accurate dollar-figure projections. Because the virus spreads indiscriminately, it’s impossible to predict how much of your workforce – if any – will become sick enough to need treatment. Keep in mind that, because the infection rate has so far varied by geographical area, that’s a factor here too. A self-insured employer whose plan members are located in a relatively low-risk area may see very different COVID-related costs than an employer whose workforce is in New York City.

Non-Essential Care Delayed

As COVID-related claims go up, self-insured employers may see a temporary dip in other claims this spring. ERs and health care providers around the country have reported dramatic decreases in the number of patients coming through their doors. Visits to New York City ERs are down about 50 percent over normal rates, according to CNBC, and other cities are reporting similar drops. This is partially due to recommendations established by the Centers for Medicare & Medicaid Services last month, which urged Americans to temporarily delay non-essential procedures while the pandemic was at its peak. 

But the drop in patient numbers is a reflection of more than just the CMS guidelines at work. Some of this phenomenon can be attributed to social distancing; there are fewer traffic accidents when people are stuck at home, for example. However, many Americans who do need treatment are putting off medical appointments out of fear of contracting the virus by going out in public or walking into a medical practice. A patient who has chest pains may avoid the ER and make a telehealth appointment, visit a clinic or not seek any treatment at all – not realizing that what they experienced was in fact a minor heart attack.

In the short term, this change in patient behavior could mean that self-insured employers see lower-than-average claims for preventative care, non-essential procedures and things like vision and dental care. These delays in routine care could contribute to a surge in claims later on, when those individuals seek out the treatment they put off earlier.

Testing and Treatment Costs

How much can self-insured employers expect to pay for testing and treating cases of COVID-19? Employers with their own group plans are expected to cover testing costs without requiring employees to share the cost, per the Families First Coronavirus Response Act that was enacted in March.

As for what those costs will be? Again, it’s hard to say definitively at this point because there’s a lot of variation in testing costs. The Medicare pricing list quotes prices of $36 and $51 for two different types of COVID-19 tests, but healthcare providers have the discretion to charge significantly more. The USC-Brookings Schaeffer Initiative for Health Policy found that several hospitals were charging around three times the Medicare rate for these tests, in the range of $150 to $200 per patient.

There’s a much wider range of costs associated with treating COVID-19, since cases vary so much in severity. In its analysis, Willis Towers Watson projected that treatment costs would be around “$250 for mild cases, $2,500 for moderate cases, $30,000 for severe cases requiring an inpatient stay, and close to $100,000 for catastrophic cases requiring intensive care.”

As a self-insured employer, what questions and concerns do you have around healthcare costs and COVID-19? Stop Loss Insurance, Inc. is here to help you navigate what’s happening now and prepare for what might come next. At a time when a lot seems uncertain, we know how reassuring it is to have as much information as possible. Reach out to Stop Loss Insurance, Inc. today if we can help.