Moderate cost increase expected for employer-based medical benefits in 2021

Liz Freeman
Naples Daily News

U.S. companies expect costs for health care to increase 4.4% next year but most say they are not raising employee co-pays or deductibles.

That's according to Mercer, the health and benefits firm. Another projection from PwC, previously known as PricewaterhouseCoopers, says medical costs will go up 4% to 10% next year.

A third forecast pins the jump in health care costs at 5.3%, according to the nonprofit Business Group on Health based in Washington D.C., which surveyed 122 large employers.

The percentage increase is the cost to treat patients from one year to the next with the premise that benefits stay the same.

Florida Blue spokeswoman Christie DeNave said in Southwest Florida with mid-sized companies of 51 to 250 employees, the trend is not toward a big change in costs.

“Most employers are not seeing radical hikes in their plan premiums that they need to adjust for,” DeNave said.

Despite the forecasting, what’s unclear is how the COVID-19 pandemic will impact health care costs for the remainder of this year and for 2021.

Adding to that is how the virus permanently alters the way Americans get medical care, experts say.

“How exactly will COVID-19 affect employer healthcare spending in 2020 and 2021 remains unknown,” the PwC report said.

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 “Whether the changes in consumer health care behavior resulting from the pandemic, including decreased use of the emergency room and increased use of telehealth are here to stay and what impact that will have on employer spending are also unknown,” according to PwC.

Roughly 180 million Americans get their health benefits from employer-sponsored plans and face open enrollment in the coming weeks, according to America’s Health Insurance Plans, the national industry association.

Florida-based Publix, one of the largest employer's in the state, is not passing on cost increases expected next year to its workforce, according to spokeswoman Maria Brous.

"We expect health care costs to significantly increase in 2021 as the impact from the pandemic continues and health plan members begin fully seeking care again from doctors, hospitals and other providers," Brous said in an email.

"Despite the anticipated increase, Publix has chosen to absorb the cost and not increase our associates' premiums for health coverage in 2021," Brous said.

Publix is also paying for care costs for health plan members who have been diagnosed with COVID-19, she said.

Out-of-pocket estimates

That’s when they will see how their premiums, co-pays and deductibles will change next year.

This year an employee’s average total out of pocket spending is $4,430, according to the Business Group on Health. That includes premiums and deductibles.

The figure is based on an employee covering 30% of his or her health care spending of $14,769 this year with the employee’s company covering 70% of the cost.

The estimate is for large employers surveyed; 77% of them have more than 10,000 employees.

For 2021, employees are estimated to pay $4,650, based on total spending increasing to $15,500 and the employer picking up the difference, according to the Business Group on Health.

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The Mercer survey of 1,113 employers found that 57% will not be passing on cost increases next year to their workers by raising deductibles and co-pays.

Another 18% said they would be passing the costs on; details for how the remaining 25% of employers will be acting was not available.


Another uncertainty in health care spending next year is the effect of the vast number of employees who delayed medical care this year out of fear of being exposed to the virus.

The question is whether they will rush to doctors, surgery centers and hospitals next year and cause a flurry of health care spending.

“Different assumptions about the cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variation in cost projections for next year,” Tracy Watts, a senior consultant with Mercer, said in a news release.

Pandemic problems

What the projections don’t show is the impact of the millions of job losses due to workplace shutdowns this year because of the pandemic and how that will translate into savings for employers.

In Florida, an estimated 811,000 people lost health benefits this year, according to Betsy Jaffe, spokeswoman for the Employee Benefits Research Institute, a private non-partisan organization based in Washington, D.C.

The figure is based on 452,000 workers in Florida who became unemployed and 359,000 of their dependents were on their coverage, she said.

Nationally, an estimated 14.6 million Americans lost their employer-sponsored insurance, according to the institute. That’s based on 7.7 million Americans who became unemployed and 6.9 million of their dependents on their plans, according to the benefits research institute.

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Health care spending overall this year could fall compared to 2019 yet rebound in 2021 because of the pandemic, according to PwC.

Other factors that will impact spending involve the expansion of virtual care, or telemedicine visits, and expansion of mental health services, the experts say.

Growth in those two areas of health care benefits were occurring prior to the pandemic yet accelerated when the virus struck and uprooted daily lives.

Telehealth savior?

“Telehealth has been gaining ground slowly for years,” according to PwC's forecast for 2021. “COVID-19 forced its rapid adoption by both consumers and clinicians, many of whom had never used it before.”

PwC next year expects telehealth to “settle in as a viable and desirable alternative to in-person care, saving employers and health plans on the episodic cost of care delivered virtually.”

The Mercer survey found virtual care and behavioral health care are the top two areas where employers will be expanding services for their workers.

“The pandemic has proven not only that we need virtual care, but that providers and patients will embrace it once they try it,” Watts, with Mercer, said.

About 37% of large employers with 5,000 or more employees will be expanding telemedicine services next year and 27% of all employers said they intend to beef up telemedicine services in 2021, according to Mercer.

For behavioral health services, 20% of employers are adding or improving the benefits, Mercer found.

The survey by Business Group on Health of 122 large employers who cover nine million people, found that 53% of employees said more virtual care offerings will be important for next year.

That was followed by 36% who said expanded mental health care services will be important.