In 2020, employers saw something they hadn’t seen in several years: Reduced healthcare costs. We’re talking about costs that, in some cases, decreased by 4-5%. Great news, huh?!

Well…not so fast. Does this mean we’ve magically fixed systemic flaws in our healthcare system that have been plaguing us for years? Have employees suddenly figured out how to make smarter benefits decisions that save them and their employers money? Not exactly. 

In reality, costs dipped because 40% of employees deferred and avoided care during the COVID-19 pandemic. This includes care for chronic conditions, preventive care, and even acute care.

A year later, those decisions now have consequences. Because they didn’t get the care they needed, employees are facing worse symptoms for untreated or poorly managed health issues. That means higher premium costs in 2021, when they finally take care of the conditions and diseases they ignored. That is, unless employers take a proactive approach to empower employees to make better and smarter healthcare decisions.

“I want to assure employers that they’re not adrift,” said Helen Calvin, Chief Revenue Officer at Jellyvision during a recent panel discussion. “There are actual strategies employers can use to mitigate cost increases and get ahead. I think this is the year to do it. They have the opportunity to take on big initiatives.”

Why do healthcare costs keep rising? During the panel discussion, Calvin along with Deb Gordon, author of The Health Care Consumer’s Manifesto, discussed reasons for rising healthcare costs, the effects of rising healthcare costs on employers, and what employers can do to tackle this unsustainable trajectory.

Rising healthcare costs are nothing new. But COVID-19 made things worse.

Employers spend $1.2 trillion on healthcare every year. And that’s not just a big number—much of that spend is wasted due to administrative complexities, failure of care coordination, overtreatment, and employee confusion.

To make things worse, employees can’t keep up either. Healthcare costs are rising twice as fast as average wages, and the average family has seen a 55% increase in healthcare premiums since 2010.

“Premiums are expected to rise—which we’d already seen a continued trajectory of—and COVID escalated it.”

– Helen Calvin, CRO, Jellyvision

Why are healthcare costs rising?

Care deferral

There are several reasons for the rising costs of healthcare. One is care deferral. As we mentioned above, ignored health issues during 2020 means a pretty expensive rise in costs when employees finally get the care they need.

For example, if left untreated for too long, the average cost of treating chronic obstructive pulmonary disease has the potential to rise between 7-11%, going from around $38,000 per patient per year to $41,000. For patients with cancer, treatment costs could increase by 8%.

“People with chronic conditions are going to show up sicker and going to need more care. For employers, folks are going to need more flexibility because they will either be sicker or need time to catch up on care that they had deferred.”

— Deb Gordon, Author, The Health Care Consumer’s Manifesto

And there may not be a real end in sight—at least not in the short-term, said Gordon. “We have been in a traumatic situation collectively, and we’re not done. I think there will continue to be some [health care] avoidance,” she said.

Economic hardships

In addition, the economic hardships many people face today may also be a reason for continued deferred care, she added. Even if people haven’t lost their jobs, Gordon says the ‘contagion of financial anxiety’ may prevent them from seeking care when they need it most.

What are some other reasons for rising healthcare costs?

Behavioral health conditions

Behavioral health conditions have skyrocketed in the last year. Some estimates suggest that 35 million people could develop a new behavioral health condition during the pandemic. This alone could lead to higher healthcare costs, but there’s also the idea that those with behavioral health diagnoses have around four times the average healthcare spending of those that don’t. It’s a domino effect that also has no clear end in sight.

“We don’t really know what the outcomes of this prolonged stress, financial anxiety, and isolation will be,” said Calvin. “There are [physical] health and mental health impacts that have yet to reveal themselves. It’s going to get worse.”

You might have minimum mental health care benefits you need to provide but that is the wrong anchor point. I would look at what do we know is coming and what do we know people need?

— Deb Gordon

Healthcare costs will continue to rise—but by how much?

Estimates vary, but the short answer is: Substantially. On the low side, healthcare costs could increase by 4.4% in 2021. On the high side, they could go up by 8%.

Calvin said future healthcare costs will be largely driven by the following four factors:

1. Unknown short- and long-term health impacts felt by those who had COVID-19

2. Physical and behavioral health impacts of social isolation

3. COVID-19 vaccine availability, distribution, and cost

4. COVID-19 testing and treatment costs (and how those costs are shared the government, insurers, employers, and employees)

Even if rising healthcare costs level out, employee financial challenges will remain.

Household debt soared during the pandemic, and that financial instability will likely continue in the short-term as employees pay their way out of debts incurred during the pandemic, replenish savings accounts that they tapped into in order to cover expenses, said Calvin.

Ways to control the rising cost of healthcare

Employers can’t control everything, and they certainly haven’t seen the full impact of COVID-19 yet. They’re also not going to solve systemic infrastructure problems overnight, but what they can do is start to help employees change their behavior, said Calvin.

Here’s how employers can think about how to control the rising cost of healthcare:

1. Build a foundation for trust through comprehensive benefits.

Ask these questions, says Gordon: What do you know employees need now? What will they need in the future? What’s changing in their personal lives, and how can you support them? How can your shape your benefits and seek additional benefits accordingly to improve outcomes, well-being, productivity, and lower overall costs? For example, employers may be able to increase mental health and telehealth benefits.

2. Intercept employees at points of decision-making.

This is when they are ready to engage and are more likely to absorb information. This includes not only when they’re choosing a health plan but also throughout the year as they engage with healthcare providers and receive healthcare services, said Calvin.

“In the current system, [healthcare] messages arrived based on calendar or business needs—not when they’re important to you.”

– Helen Calvin

3. Embrace an advisory role.

Giving employees choices isn’t enough. They also want to know that they’re making the right choice.

“Curating and guiding options to a manageable number is really important,” said Gordon. “The optimal approach is building trust long-term. If you’re laying your credibility, your allyship, your demonstrated and genuine support for employees, then I think you have a lot more latitude to advise and play an advisory role.”

“Despite your industry, despite your vertical of whatever kind of employer you are, every company is now a healthcare company because you, as the employer, have such a critical voice in terms of where employees seek advice on how to get care.”

— Helen Calvin

4. Frame the math, and the tradeoffs.

Focus on cost transparency for each employee. Detail all of the costs an employee might incur when choosing a specific plan or making a healthcare decision, said Calvin.

It’s not just the math around the plan design. Employees need to understand how a plan might affect their cashflow, for example, if they need hospitalization or an unexpected x-ray or MRI. They need to understand which doctors are in-network, and what happens if they see someone outside that network. They need to understand how their health savings account can help them save for now and for the future. Help them evaluate each plan’s impact on them personally given their unique health and financial status.

In absence of this framing and in absence of the math of the trade off, employees will find an anchor. They will anchor on the deductible, they will anchor on the premiums—they will find the number that they want to just use to choice justify.”

— Helen Calvin

5. Encourage employees to seek preventive care.

Keeping employees healthy, and catching diagnoses as early as possible, can greatly help to address rising healthcare costs, said Gordon.

6. Encourage the COVID-19 vaccination.

“Employers can communicate that it’s safe and effective and make it accessible and help employees find the time and place to get it when it’s their turn,” said Gordon.

Employers that choose to tackle rising healthcare costs head-on will be the differentiators, added Calvin. They will stand out as forward-thinking, employee-centric, and desirable places of employment. The question is this: As an employer, will 2021 be the year you embrace uncertainty and focus on what’s within your control in order to better manage rising healthcare costs?

Watch Helen and Deb’s full conversation: 

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