Buck Bond Group
A degree of healthcare cost certainty amidst the chaos

A degree of healthcare cost certainty amidst the chaos

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The COVID-19 pandemic is rapidly changing every aspect of American society in both expected and unforeseen ways.

Spotting surgical masks outside of hospitals is ordinary, as one would expect. Also ordinary now: Interacting with grocery store workers from behind a Plexiglas barrier. Distancing yourself from those approaching you? Now expected. The unforeseen? Every morning now my nine-year old daughter wants to “come to work” with me — a trip that’s just a few steps away from my kitchen — since she can see herself and my colleagues on camera.

Another unexpected personal twist is how my love of data — healthcare data to be exact — is no longer considered odd by those outside my professional circle. Where talking about my work at a party was once considered a conversation non-starter, it’s now the subject of virtual happy hours!

Of course, for employers with self-insured health plans, projecting the impact of COVID-19 on their claims costs is not the subject of casual conversation, but rather it’s of utmost concern.

No one — no scientific expert, no government official, no financial professional, no health actuary such as myself — knows exactly when the COVID-19 crisis will end or what its lasting impacts will be on our world. It’s wildly uncertain, no less so for how it affects employee benefits. For employers, that’s what poses the most monumental test. Maintaining self-insured employee group health plans requires a modicum of predictability to inform key benefit decisions — what might claims look like month to month and how might this impact the 2020 budget?

It’s all in the data.

So, where in all this chaos can you find even a degree of certainty? Why, in the data of course.

As an actuary, I love data — credible, mature data — and lots of it: It’s the foundation of rate setting for self-insured group health plans. We’re used to working with data and adjusting for plan design changes, regulatory changes, wellness initiatives (remember when measuring the heart attack that didn’t happen due to a wellness program was a challenge?), and other factors. Well, here’s COVID-19 and we need to adjust and account for it, too, in order to shed light on how it will impact those 2020 rates that we set last year, as well as the new claim patterns that will emerge.

What is the COVID-19 impact on the 2020 budget and claims?

To answer these pivotal questions, I developed a comprehensive model with my team that starts with the pandemic itself. As mentioned above, this is a big variable and will depend on actions we all take collectively.

To capture this, we programmed into the model three scenarios based on the percentage of the U.S. population likely to be infected: 10%, 20%, and 30%. We’ve been working with employers to determine where they may fall in that range based on where their participants are located and if their employees are working from home or onsite — a data analytics exercise.

Next up, the shape of the curve: While it’s intuitive that the attack rate will increase the impact, the shape or length of the pandemic has a huge impact on the result. For example, social distancing is good for 2020 claims but 2021 is another story.

Once we nailed down the pandemic scenario, we dove into plan-specific information, such as the composition of a plan’s demographics. Suddenly in this new world, having more children in the plan really helped the impact, and the decision to opt in or out of the plan assuming 100% coverage for COVID-19 treatment comes into play.

Another factor that we data geeks are weighing is how utilization of non-COVID-19 related services will impact claims costs. How will cancellations of elective procedures and service reductions across millions of healthcare facilities affect an employer’s claims costs? What about the high-cost claimant burden of the population, and the new surge of telemedicine that we’ve been pushing for years — what effect can we anticipate in these areas?

Data patterns are shifting.

These specific inputs can generate a variance in results of 2% or more of a plan’s budget within the same pandemic scenario — the same shape, same percentage infected. You can see how this becomes an employer-specific exercise, and one with a statistically, and financially, significant impact.

In order to monitor our clients’ expected claims pattern, we’ll need to refresh the pandemic scenarios and plan-specific information with the most up-to-date emerging experience. These assumptions must then be combined with other available data — such as that available through the major insurance carriers — as well as with the most up-to-date information on deferred care in order to predict the COVID-19 costs by severity and place of care. Using this information, we can not only model potential changes in projected claims costs but — more importantly for some plans — identify measures that can be taken to help mitigate the impact.

We’re seeing significant shifts in the patterns of care and health services among our clients’ data. For instance:

  • A surge in telemedicine claims and a modest drop in in-office visits and
  • A 30% increase in prescription fills in March followed by dramatic reductions in early April.

Reductions in both in- and outpatient surgeries, meanwhile, has been dramatic. Some of these services are unlikely to be “made up,” so we’re projecting a reduction in plan costs in this area, while others will be rescheduled later this year and into 2021. In these cases, heavily promoting the plan’s advocacy service, EAP, and telemedicine resources are easy steps that can be taken to mitigate costs.

Widespread adoption of shelter-in-place restrictions and other measures will eventually slow the spread of the virus. The research community works around the clock to find treatments. So the impact of these positive developments will need to be incorporated into the model.

We can start to see through the chaos. Are we done yet?

One reason I love data is that it helps to make sense of the world. So, while my colleagues and I aren’t on the front lines caring for those stricken by the virus, or working to develop a cure, or providing necessities so our supply chains remain intact, our predictive modeling capabilities are helping employers project and manage their costs — which makes for both a financially healthier world and, unexpectedly, fascinating conversations at virtual happy hours.

Now, if only I could enlist my daughter’s help inputting data…