Human Capital

Health Benefit Costs Seen Rising 8.1% in 2021

The coronavirus had "a major impact" on slowing medical cost growth this year but the trend "is expected to be short-lived," a survey finds.
Matthew HellerOctober 6, 2020

Employer-sponsored health care benefit costs are expected to increase more than 8% globally next year as workers get treatment they had deferred due to the coronavirus pandemic, according to a Willis Towers Watson report.

Amid the pandemic, the consulting firm’s 2021 Global Medical Trends Survey found medical insurers project growth in benefit costs will slow this year to 5.9% after a 7.2% gain in 2019.

But for 2021, they forecast 8.1% growth, with North America gaining 7.1% after a 2.8% increase in 2020.

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The study also found that 67% of respondents expect medical costs will continue to accelerate over the next three years.

“The pandemic undoubtedly had a major impact on slowing trend increases this year as it sparked a sharp decline in non-urgent surgeries and elective care,” Francis Coleman, a managing director at Willis Towers, said in a news release. “While most, but not all, countries experienced a decrease in trend this year, that is expected to be short-lived.”

He added that Willis Towers expects to see “significant volatility in 2021 results, which are dependent on the impact of COVID-19 and whether a vaccine becomes available early in the year, who pays for it and the extent of its availability.”

According to the survey, cancer (80%), cardiovascular diseases (56%), and conditions affecting musculoskeletal and connective tissue (41%) are the top three conditions currently affecting medical costs.

But four in 10 respondents also predicted mental health conditions will be among the three most common conditions affecting costs within the next 18 months.

Regionally, Latin America, excluding Venezuela, is expected to see the biggest gain in costs next year (13.6%).

“Further uncertainty around medical trend lies ahead as we start to see the true impact of delayed treatment in 2020 and the long-term effects on those who contracted COVID-19,” said Emma Tekstra, another Willis Towers managing director.

She noted that COVID-19 “has greatly accelerated the adoption and use of telehealth, which could help to offset those potential higher costs and provide a more efficient way for insureds to access and use health care in the future.”