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COVID-19 could reduce employer health care costs due to care deferral, Willis Towers Watson analysis finds

Health and Benefits
COVID 19 Coronavirus

May 1, 2020

ARLINGTON, VA, May 1, 2020 — COVID-19 could reduce employer health care costs by as much as 4% in 2020, as medical care for noninfected patients has declined during the pandemic, according to a new Willis Towers Watson analysis of large, self-funded employers. The analysis updates a similar study conducted last month that projected employer costs could rise by as much as 7% due to COVID-19-related costs.

“With treatment for COVID-19 top of mind, people have been putting off nonemergency medical care, including routine office visits and elective procedures at hospitals,” said Trevis Parson, chief actuary, Willis Towers Watson. “Given this reduction in use of medical services, we expect cost reductions due to care deferral to more than offset projected cost increases associated with COVID-19 infections.”

The updated study utilizes recent estimates of infection levels in the U.S., which vary significantly by geography and reflect the latest projections of Americans expected to be hit with the first wave of COVID-19. According to the analysis, at a 1% infection level (e.g., rural areas) employer costs could decline between 1% and 4%, depending on how much medical care is deferred. At a 15% infection level (e.g., metro areas), employer costs could rise or fall by roughly 1% depending on care deferral. In the most severe scenario — a 20% infection level — costs could rise between 1% and 3%, still below projections from the earlier analysis.

“While continued adherence to social distancing and other public mitigation efforts are likely to reduce costs associated with COVID-19, these initiatives may also help to reduce exposure to other communicable diseases, such as the flu, and significantly lower the rate of certain injuries, such as those caused by sports accidents,” said Parson. “The ultimate financial impact of COVID-19 on employer health care plan costs in 2020 will depend on other factors, including the rate at which the virus spreads and the severity of illness of those infected.”

The estimates in the analysis reflect increases to 2020 employer medical and pharmacy claim costs only. Other health care plan costs, such as dental and vision, will likely see lower costs in 2020, as employees will likely eliminate some discretionary care. The analysis also does not consider other impacts, including non-health benefit costs (e.g., disability and life insurance), increased mortality and broad negative economic impact.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.

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