Mercer Offers Cost Projection Framework for Employers With Self-Funded Health Benefits

Only 5% of employers who offer self-insured health plans say they have produced a financial impact assumption of 2020 health benefit costs, according to preliminary results of a Mercer spot survey regarding the impact of COVID-19.

Among the many financial consequences of the COVID-19 pandemic on U.S. businesses will be its impact on 2020 self-insured health plan costs. Employers that self-fund their health care benefits could see costs jump by as much as 7% this year as a result of testing and treatment costs related to COVID-19, according to an actuarial analysis by Willis Towers Watson.

As there are many uncertainties—such as the prevalence rate, the development of a treatment and so on—reviewing multiple future-state scenarios will be essential as the situation evolves both in the macro environment and in employers’ own organizations, Mercer says. Mercer has developed a framework for developing cost projections.

To update 2020 claims estimates, Mercer says employers need to start with their current 2020 estimate and make three adjustments. The first adjustment covers the costs related to individuals who receive a test, the second is for those who test positive and require treatment, and the last is an adjustment to reflect changes in how employees are consuming non-COVID-19 related medical services. Specifically, Mercer is seeing a reduction in non-critical “elective” services that could offset total costs.

Although only 5% of employers with self-funded health insurance already have a financial impact assumption, 21% say they have begun modelling it, according to Mercer. Among those that provided their working assumption, for about half it’s 5% or below, and for half it’s 6% or higher.