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The ongoing impact of COVID-19 on employer healthcare budgeting

Executive summary

Three months ago, we looked at data to get an idea of the potential cost trajectories COVID-19 could create for future healthcare budgets. At the time, we questioned how long the pandemic would last, how severely it would hit and what the aftereffects would be. Now that we have seen things unfold, the situation remains powerfully obtrusive as surging coronavirus cases force states to reinstate shutdowns and shift timelines for reopening businesses and institutions. The initial decrease in people avoiding preventative care and treatments out of fear was a cost that had to be made up immediately — something that did not and will continue to not happen as more reopenings are halted or even reversed.

After monopolizing the lives of millions for over six months, COVID-19 continues to alter the extent to which Americans are able to receive the care they need, has impacted their ability to access and pay for prescriptions and will drive patients into more expensive care settings as care becomes available.

These realities will significantly impact 2021 budgets and the savings from 2020 will not be enough to offset these upcoming cost increases. For 2021 and 2022, the healthcare trend will likely reset at a higher level with higher slope for the foreseeable future. Employers must consider strategies to directly address impacts on healthcare cost and access to care to mitigate long-term effects of the pandemic.

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