Many health-plan sponsors have been seeing expenses drop amid the coronavirus pandemic, but employers should be girding for billing events to surge back over the next few years.
That means that the conventional modeling that many plans use to project future expenses — drawing on expenditures of the recent past — may not work anymore, according to Vickie Rice, vice president of strategic analytics with CareATC, a Tulsa, Okla.-based firm that partners with employers to keep health care costs down.
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"Trending has been rendered unreliable," Rice said during a recent online presentation hosted by the International Foundation of Employee Benefit Plans.
Like so many other aspects of life during the pandemic,
Many health care providers limited services, and 41% of patients
"The unfortunate truth really just is that millions of Americans put off vital treatment and care during 2020," Rice said.
That translated into lower costs for health plans, but that bill is going to come due, Rice warns.
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"It's this delayed and deferred care and even missed routine services that really do have a potential to drive health plan costs higher, not just this year but potentially for many years to come," she said. "The real long-term impact is around the damage that these missed services might cause many people in our populations."
Her firm estimates that a health plan that covers 1,000 employees could spend an additional $300,000 in 2021 simply due to patients who didn't manage
Rice urges plans to consider the potential impact of all of that delayed care and screenings when forecasting expenses for the coming year, arguing that 2020 was such an anomaly that simply using a basic trending model based on last year's utilization will likely vastly undercount what the next year will look like.
"If we're projecting our future cost off of that trend, we're likely to forecast a lower-than-average projection, when in reality ... those unmanaged conditions are actually probably going to drive our costs higher, definitely in the next 12 months, probably in the next 24 months, and potentially even longer than that due to the exacerbations and complications," she said.
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Instead, her firm advocates a risk-based forecasting model that looks at each individual's utilization and health-care conditions, analyzing the services they used—or didn't use—in the past year, and formulating a predictive model that weighs the likelihood that someone will have a hospital stay, a surgery or a ramp-up in treatment for a chronic condition like rheumatoid arthritis or multiple sclerosis, for example.
"With all of these facts lined out, what we can do is combine the information we know about the average cost per member historically with the likelihood of each member on our health plan increasing their utilization cost in the coming 12 months to actually then establish a projected cost per member," Rice said. "And then we take the information we have about each of the members' individual risk and their projected costs, and that becomes a part of the greater whole. So then when we summarize this we have a good look at what our plan's expenses are likely to be in the coming year."
