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How COVID-19 Treatment Costs will Impact Health Insurance Pricing

In the battle to defeat COVID-19, much of our collective focus has been on healthcare services, supplies and treatments. The heroes on the front line are waging war, and we all are supportive of their great efforts. With all of the necessary support comes unforeseen costs leaving many employers wondering how this might impact their future renewals.

ONEDIGITAL INSIGHT ▼

Employee benefits costs are qualified as “payroll costs” under the Paycheck Protection Program (PPP) and changes made to benefits plan design may impact the amount of relief an employer might receive. Consult with your OneDigital advisor to determine the best course of action for your business.

ONEDIGITAL INSIGHT ▼

Employee benefits costs are qualified as “payroll costs” under the Paycheck Protection Program (PPP) and changes made to benefits plan design may impact the amount of relief an employer might receive. Consult with your OneDigital advisor to determine the best course of action for your business.

ONEDIGITAL INSIGHT ▼

Employee benefits costs are qualified as “payroll costs” under the Paycheck Protection Program (PPP) and changes made to benefits plan design may impact the amount of relief an employer might receive. Consult with your OneDigital advisor to determine the best course of action for your business.

The cost impacts of COVID-19 on health plans are expected to be significant and have been challenging to quantify. The projected costs of treating COVID-19 within hospital settings vary across sources. Currently, the projected cost range nationally is from $362 billion to as high as $1.45 trillion, according to a report published by not-for-profit Fair Health. Their projections are based on historical charges from influenza and pneumonia treatments, as well as estimates from public health experts regarding what percentage of the U.S. population is expected to be hospitalized due to the virus. Currently, the CDC estimates that the infection rate of the COVID-19 virus is 2.5%. For comparison, the seasonal flu has an infection rate of 1.3%. Harvard epidemiologist Marc Lipsitch estimates that 20 to 60 percent of the adult global population will become infected with the novel coronavirus. It should be noted that infected does not mean sick. Approximately 50% of those infected do not even have symptoms. And around 80% of those infected with symptoms do not require hospitalization.

On a per-occurrence basis, the total average cost per COVID-19 patient requiring an inpatient stay is approximately $18,000-$30,000 per non-critical hospitalization and $45,000-$68,000 per critical hospitalization. The figures include all estimated costs in areas such as pharmacy, imaging, labs, inpatient and outpatient costs and is a national average. Charges may adjust regionally based on cost differentials by market. In understanding Critical Hospitalization costs, a recent Health System Tracker article estimates the average length of stay for a COVID-19 patient with a ventilator is 22.6 days, while the average hospital stay overall is projected at 12 days.

Based on the anticipated level of total claims per individual, even for Critical Hospitalizations, most plans will not see individual COVID-19 patients satisfy specific stop-loss or insured pooling levels. This means that these claims will impact the aggregate attachment for self-funded plans. For insured plans, these un-pooled claims could have a significant impact on loss ratios and future renewals.

While no one can predict the cost impacts with certainty, we can expect some future effect on the price we pay for health insurance. We applaud the insurance companies who have taken steps to ease the burden of cost shares for individuals by waiving copayments and deductibles for COVID-19 related services. However, those costs will be added to paid claims impacting future renewals.

To help our customers plan for the potential impact of COVID on their organization, OneDigital developed the COVID-19 Health Plan Cost Impact Tool. This modeling tool allows OneDigital consultants to create a customized risk profile for an organization based on geography, demographics, industry, funding type and virus risk mitigation strategies already in place.

Risks that impact the projected cost of COVID-19 include:

  • Age 

    Emerging COVID-19 and historically pneumonia statistics both show that the individuals 50 years of age or older are more apt to be diagnosed with pneumonia and COVID-19 than individuals under 50 years of age.  When diagnosed, there is also a higher likelihood that those individuals will end up in critical care.  

  • Gender

    Emerging COVID-19 and historical pneumonia statistics show that males are more apt to be diagnosed with pneumonia and COVID-19 than women.

  • Industry

    The industry risk is specific to COVID-19 and is built around whether the industries are essential and non-essential (per the Office of the Homeland Security). Exposure is based on whether they can work from home and on whether their work requires them to interface with the public as part of the job (such as healthcare workers and law enforcement).

  • Geography

    Risk information by county and state relative to their overall infection rate.

The data supporting the modeling tool is updated daily, incorporating the latest information to help customers plan for potential impacts. We suggest that customer analysis is updated frequently as the data is continuously changing due to the ever-changing COVID-19 infection rates. As we are all managing the many impacts of the COVID-19 virus, having access to current and credible information is paramount. The OneDigital COVID-19 Health Plan Cost Impact Tool is the latest product within our expansive suite of coronavirus employer support.

For additional insights, guidance and employer resources, visit the OneDigital Coronavirus Advisory Hub, or reach out to your local advisory team.

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