Return to Business During a Pandemic: Market Collaboration and Health Benefit Trends

As we begin to turn quickly toward reopening the US economy during the COVID-19 pandemic, many questions and observations are being discussed regarding potential future business or healthcare trends. The rapid pace of change, along with the blunt shutdown of a robust economy, has now led to government and employer concerns regarding the health of the workforce and local communities where employees live.

This may be the first time, however, that healthcare has truly taken on such a prominent business role that has been defining every decision made about the economy, along with political moves by federal and/or state officials.

A fast-track study by Bartsch and colleagues recently published in Health Affairs recapped the societal changes implemented across the country and provided a simulation model that addresses the care and financial impacts of the COVID-19 pandemic throughout the healthcare system.¹ The direct costs of COVID-19 infection in 20% of the US population could cost more than $163 billion, without taking into account the follow-up care costs.¹

The study authors raised a question about herd immunity to include the potential magnitude of resources and cost for strategies related to herd immunity. The ripple effects on healthcare, business, and government will likely alter or accelerate trends that were underway before the pandemic.¹

Many of the trends discussed here briefly are not new and have been the subject of various government, academic, or health systems tabletop exercises, but were never truly expected to happen. The pandemic has shaken healthcare to its core, along with government agencies, and, most important, businesses that collectively represent the largest purchaser of healthcare behind the government itself. The majority of reports from various news outlets are predicting that we will never be the same in healthcare or business, including when we get to a “new normal.”

The following article focuses on some of the key current trends affected by the pandemic or those that are expected when considering the 2021 benefit plan year, primarily in the commercial insurance market.

COVID-19 and Healthcare

Market pressures that can influence healthcare systems and healthcare workers include culture change, resource utilization efficiency for clinical and financial outcomes, healthcare costs and billing for reimbursement, and the adequacy of the workforce to meet emergent and future demands.

What we have been witnessing through real-time news reporting or the Presidential Coronavirus Task Force briefings is a suffocating of our healthcare system by extreme emergent demand that is stressing traditional supply chains for urgent resources, along with staffing shortages. The system was near collapse in some areas of the country, which grabbed employer plan sponsors’ attention as well as the adoption of a laser focus on all aspects and impacts of the coronavirus pandemic on businesses in general.

Legal exposures are becoming apparent with the shelter-in-place environment we have been in by the middle of May. Already, COVID-19–related class actions have been filed throughout the country, including in consumer, mass tort, securities, labor and employment, and banking and privacy, as reported by legal firms such as McGuireWoods.²

The extent to which who will be sued about what and by whom will be seen, and the cost damage has already been done to the general economy. Lessons have been learned, and avoiding future risks will become more prominent for employers and for employees of all types, as well as for industries and their many absent workers.³

Landlords and small businesses will have to work out new business terms of economic engagement.⁴ At the same time, preventive and restorative healthcare costs need to be factored into the new business landscape as part of a broader holistic enterprise risk-management commitment throughout 2020 and into 2021.⁵

The hospital-driven intensive care unit–focused resource surge aftereffects leads us into a likely primary care services surge later this year, with potentially damaging delayed care impacts that could cost the economy further financial pain through the end of 2020. Specifically, employers may face a second wave of health-related workplace absences or claim costs that result from uncontrolled long-term care, mental health, or elective care delays from the COVID-19 pandemic.

Nonetheless, how these dual COVID-19–related surge events will influence 2021 health plan underwriting and benefit design choices remains to be seen, but these events will likely lead to higher, potentially double-digit higher, premium costs for employers and employees, greater out-of-pocket risk for health plan enrollees, and lost momentum that was started in early 2020 toward more balance in terms of value-based care.⁶

Innovation and Collaboration

One of the successful achievements from the pandemic has been multiple public and private partnerships, with planned expansion into 2021. The COVID-19 pandemic has required public and private partnerships to form in unique ways that were never conceived before or that have not been attempted since World War II. Hospitals from the nonprofit and for-profit sides of the fence are now collaborating, automobile manufacturers are working with start-up medical device firms, Silicon Valley companies are joining forces with public health agencies, and so on across the previously siloed and static economic sectors. Even supply chains that had become complex are innovating their relationships with a different fervor and collaboration.⁷

Advances in new testing solutions came rapidly to the market, along with their swift and robust distribution, after equally quick US Food and Drug Administration approvals. New drug and vaccine studies similarly have moved forward in weeks, not years. Drugs or vaccines for COVID-19 and devices of all kinds for the coronavirus or antibodies to the coronavirus are proliferating rapidly; how they progress through 2021, and whether such rapid discovery to marketing will continue, remain to be seen, but market speed is on a steadier path as a result of marshalling forces to defeat the novel virus.⁸

Technology resources applied to healthcare and expanding capital into opportunity zones are creating new business opportunities around the country, where none had been seen before.⁹ Supporting new or existing cross-sector business growth will likely be important going into 2021 in the healthcare sector, as well as in all industrial sectors as a result of the need for a healthy and productive workforce throughout the US economy.

Health Benefits Coverage

As alluded to earlier, status quo health benefits coverage is likely to continue into 2021 plan years for Medicare and for commercial health plans. Basic coverage with high deductibles will continue, because more attention to routine operational personnel management and optional voluntary benefits offerings are likely to be commonplace in commercial plans. Coverage will likely tend to be more regressive and require more out-of-pocket or shared patient costs in 2021 than in 2020 as a result of competing plan pricing pressures to keep premium increases more manageable, according to what the market will bear for employer and employee costs.

Lower employer cost voluntary benefit offerings will likely be promoted more by employers and will grow in 2021 as a consumer-friendly portfolio of optional coverage that can be chosen by employees as needed. These offerings may include dental, veterinary, legal, group-based life or long-term care insurance, vision, and noncovered out-of-work costs, among others, that can be made available as an employee benefit.¹⁰

Similarly, expanding medical benefit coverage for telehealth or telemedicine in medical care, second opinions, or pharmacy will likely grow and be refined and improved in consumer-facing delivery or access.

Insurance Premium Costs

Insurance is a risk-management tool that necessarily focuses on economic issues, which, overall, will result in higher premium costs for employer plan sponsors and member employees or family members, and increase deductibles, coinsurance, and copayment designs. In 2020, employer plan sponsors are likely to receive an Affordable Care Act medical loss ratio–driven rebate of premium dollars similar to the rebate in 2019 that resulted from market shifts.¹¹ As mentioned earlier, 2021 premiums for new or renewed insurance are anticipated to rise by double digits.

Another example of the worldwide capital drought is secondary or reinsurance policies that are designed to mitigate higher-cost claims for medical services or high-cost biologic and gene-based drugs. As a result, access to capital or economic back-stopping with reinsurance will become more limited, and costs will likely rise for plan sponsors when they can access these risk-mitigation solutions.¹² These rises in cost would adversely affect drug manufacturers, employees as patients, and employers as plan sponsors directly into 2021.

Conclusion

On February 28, 2020, a conference titled “WellSpent: Linking Business and Healthcare” was convened by the Employer Provider Interface Council (EPIC), a subgroup of the nonprofit Hospital Quality Foundation.¹³ Many of the core ideas, issues, or concerns contained in the trends discussed here were meant to identify areas to move forward strategically, with the purpose of expanding or maintaining businesses. The purpose of the EPIC meeting was specifically “to highlight the importance of health care for new or existing economic development.”¹³

By March 10, 2020, the shutdown began to address immediately the rapidly growing spread of the novel coronavirus, which did not yet blossom into a pandemic. In hindsight, had most of those key areas already been addressed years ago, the infection rates, illness durations, hospitalizations, and deaths might have occurred at much lower numbers. Hindsight is always brilliant, but allocating and addressing how best to spend funds rarely allows for brilliance.

References

1. Bartsch SM, Ferguson MC, McKinnell JA, et al. The potential health care costs and resource use associated with COVID-19 in the United States. Health Aff (Millwood). 2020;39:927-935.
2. McGuireWoods. www.classactioncountermeasures.com/articles/in-the-news/. Accessed April 17, 2020.
3. Whoriskey P, Stein J, Jones N. Thousands of OSHA complaints filed against companies for virus workplace safety concerns: the complaints offer a snapshot of the fear experienced by the slice of working Americans compelled to be at work even as the majority have been urged to stay at home. Portland Press Herald. April 16, 2020. www.pressherald.com/2020/04/16/thousands-of-osha-complaints-filed-against-companies-for-virus-workplace-safety-concerns/. Accessed April 17, 2020.
4. Dykema Gossett. Leasing considerations during COVID-19 pandemic. March 26, 2020. www.dykema.com/resources-alerts-leasing_considerations_during_covid_19_pandemic.html. Accessed April 17, 2020.
5. Shaw G, O’Reilly M. Insurers adapt to bolster recovery from pandemic: as shock absorbers for risk, insurers are expected to remain financially stable despite significant economic turbulence. Wall Street Journal. April 14, 2020. https://deloitte.wsj.com/riskandcompliance/2020/04/14/insurers-adapt-to-bolster-recovery-from-pandemic/. Accessed April 17, 2020.
6. AEPC. How will COVID-19 impact health insurance premiums? April 16, 2020. https://aepc.us/how-will-covid-19-impact-health-insurance-premiums/. Accessed April 17, 2020.
7. National Institutes of Health. NIH to launch public-private partnership to speed COVID-19 vaccine and treatment options. April 17, 2020. www.nih.gov/news-events/news-releases/nih-launch-public-private-partnership-speed-covid-19-vaccine-treatment-options. Accessed April 17, 2020.
8. Hahn SM. FDA statement: FDA’s actions in response to 2019 novel coronavirus at home and abroad. February 14, 2020. www.fda.gov/news-events/press-announcements/fdas-actions-response-2019-novel-coronavirus-home-and-abroad. Accessed April 17, 2020.
9. Scott T. Sen. Tim Scott: opportunity zones are really working. Washington Examiner. October 18, 2019. www.washingtonexaminer.com/opinion/op-eds/sen-tim-scott-opportunity-zones-are-really-working. Accessed April 17, 2020.
10. Colonial Life. Voluntary benefits – a simple guide. www.coloniallife.com/employer-resource-center/voluntary-benefits. Accessed April 17, 2020.
11. Norris L. Billions in ACA rebates show 80/20 Rule’s impact: medical loss ratio forced carriers to devote more premium dollars to care, and record-high rebates were issued in 2019 following premium spikes in 2018. Healthinsurance.org. October 10, 2019. www.healthinsurance.org/obamacare/billions-in-aca-rebates-show-80-20-rules-impact/. Accessed April 17, 2020.
12. Evans S. Reinsurance rates set to rise 50% in Japan, 20% in Florida: analysts. Artemis. March 6, 2020. www.artemis.bm/news/reinsurance-rates-set-to-rise-50-in-japan-20-in-florida-analysts/. Accessed April 17, 2020.
13. Smith EP. The key ingredient for economic development? Health care. Upstate Business J. March 14, 2020. https://upstatebusinessjournal.com/business-news/wellspent-conference-2. Accessed April 17, 2020.