Dive Brief:

• U.S. employers could see their healthcare costs increase between 4% and 7% in 2020 due to COVID-19 treatment and testing costs, according to the results of a Willis Towers Watson actuarial analysis of self-funded employers released March 26.
• The results assume a 30% infection level of COVID-19, but Willis Towers Watson noted that the actual cost increase depends on how sick those infected with the disease become. Costs may increase further should the pandemic's U.S. impact be more severe: a 50% infection rate would translate to a cost-increase range of 5% to 7%, the firm said.
• Costs per infected person were estimated at $250 for mild cases, $2,500 for moderate cases, $30,000 for severe cases and close to $100,000 for catastrophic cases (including those requiring intensive care). Those costs include claims for medical and prescription drugs only, Willis Towers Watson said. The firm added, however, that employers' other healthcare costs, like dental and vision care, may actually decline this year because employees will likely eliminate some discretionary care.

Dive Insight:

The costs for COVID-19 care and testing are in addition to existing cost-increase predictions for 2020, Willis Towers Watson said. Prior to the start of the epidemic, industry observers like Mercer had already projected cost increases of about 4% for 2020.

Some employers that remain open due to their essential status have looked to their benefits offerings to protect employees. Walmart, for example, began offering emergency leave for workers who are either unable to come to work or who don't feel comfortable doing so. Grocer Lidl said last week it would make new hires immediately eligible for no-cost medical benefits that cover testing and treatment related to COVID-19.

Another potential response could be increased access to telehealth services. Steering plan members to telehealth and virtual care options could reduce strain on the healthcare system as well as manage employees' non-COVID-19 health concerns, sources previously told HR Dive. Though not widely adopted prior to the pandemic, telehealth benefits were seen as a way to reduce costs among employers surveyed by the Society for Human Resource Management last year.

"Despite employers and employees taking the right precautions at this perilous time, the coronavirus continues to spread and place enormous pressure on our nation's health care system," Trevis Parson, chief actuary at Willis Towers Watson, said in the statement. "The effectiveness of our containment strategy will determine what portion of the U.S. population will become infected. And that will have an impact on additional costs, which employers will need to consider as they design and finalize their benefit strategy and plan for 2021."

While some employers offered expanded benefits to cover workers affected by the pandemic, others have decided that layoffs, reduced hours and similar actions are the only way to move forward. The pandemic has led to a skyrocketing level of unemployment claims in the U.S., and one estimate by the Federal Reserve Bank of St. Louis puts the nation's unemployment rate as high as 32% for the second quarter of 2020.

Furthermore, this trend has led to criticism of employer-sponsored healthcare by some observers, who point to rising numbers of uninsured persons as a result of the pandemic, particularly among low-wage workers.

Federal lawmakers passed three separate emergency bills aimed at addressing aspects of the pandemic with more than a few provisions that impact employers directly. The Families First Coronavirus Response Act (FFCRA) established federally mandated paid leave for private sector workers in the U.S. for the first time ever, but only among employers with fewer than 500 employees and only for limited circumstances related to COVID-19's impact.

Subsequent updates by the U.S. Department of Labor and the IRS spelled out both enforcement of the FFCRA as well as tax credits available to employers that provide the law's emergency leave. Self-funded employers tend to be larger in size, although some small businesses impacted by the FFCRA are self-funded, according to 2018 data from the U.S. Department of Health and Human Services.

Finally, the third emergency bill passed by Congress allows for high-deductible health plans (HDHPs) with a health savings account to cover telehealth services prior to a patient reaching the deductible. Prior to the bill's passage, the IRS informed employers that HSA-eligible HDHPs could be used to pay for COVID-related testing and treatment "without jeopardizing their status."