Gain insights and analysis on the impact to employers from Gallagher’s Healthcare Analytics Consulting team

AuthorMark Rosenberg

In March 2020, Gallagher’s Healthcare Analytics Consulting team released a white paper titled “COVID-19 Practice Update – Potential Cost of Care – What We Know”. In this paper, we discussed the impact on both COVID-19 and Non-COVID-19 related healthcare costs.

A central takeaway from this piece was that “Non-COVID-19 related monthly claim costs may, in fact, reduce significantly as a result of a virtual shutdown of non-urgent care procedures and population self-quarantining across the country.” For comparison, Gallagher’s Healthcare Analytics team evaluated our database of past claim activity tied to significant regional events, (i.e., natural disasters), where there had been a disruption in clinical and surgical access for a period of time and we found that many of the affected claims were ultimately avoided altogether. This was early in the pandemic, and we continued to monitor the impact of the pandemic and shutdown closely.

In April 2020, we released “COVID-19 Practice Update – Estimated Cost Implications of COVID-19 for Self-Funded Employers”. This update was accompanied by our COVID-19 Cost Modeler. The model followed our initial thesis that there would be a decrease in claims for several months, followed by an increase, with approximately 50%-60% of deferred elective services avoided entirely. The remaining costs would be spread out throughout the remaining months of 2020. We released several versions of the COVID-19 cost modeler enhancing the deliverable for additional functionality, emerging information and new studies.

The COVID-19 cost modeler illustrated a range (Scenarios 1 through 5) from lesser to greater impact based on incidence of infection and testing rates. This range allowed consultants and employers to examine how differing conditions could affect the overall cost impact to their plans.

Where we are now amid COVID-19 

November 2020 brings us eight months into the COVID-19 pandemic, and we continue to collect insightful claims information in our GBSInsider data warehouse. We are now able to credibly evaluate actual impacts on clients’ insurance claim costs during the past several months.

The coronavirus has spread across the country impacting different locations at different times. Similarly, certain industries have been more drastically impacted than others. Much of the country’s healthcare systems are closer to full function than they were in the spring; however, the current spike in hospitalizations that some geographies are experiencing may again test the system. Through September, elective care delays (or eliminations) had lessened, but elective health care services had not yet fully returned to pre-pandemic levels.

Increasing hospitalizations may contribute to further delay of procedures that have been on hold since the spring. It remains to be seen what portion of these deferred health services will be permanently avoided and what portion will be simply delayed and rescheduled when people feel more comfortable returning to clinical settings. We are continuing to analyze trends in health outcomes associated with this ongoing deferral and/or avoidance of care.

Finally, we have continued to provide thought leadership on how to account for these uncertainties in health plan financial projections and, additionally, how to best understand trends from 2020 to 2021. For most plans, it is perhaps more reasonable to compare 2021 to the budget forecasted for 2020 and not the actual 2020 claims given how the COVID-19 pandemic has skewed 2020 insurance claim costs. We encourage you to work closely with your Gallagher team to understand your actual claim results and projections for 2021.

What the data is telling us

Our analysis looked at organizations for which we have full and complete paid claims data through September 2020. This represents nearly 700 self-funded clients, over 1M member lives and over $5.8B in annualized claim dollars. Within this data, we have seen the following notable trends:

  • Compared to pre-COVID 2020 baseline projections, we have seen a dramatic decrease in per member per month (PMPM) paid insurance claims in April and May. This decrease is in-line with our initial models, though even more pronounced in April.
  • Claims from July through September have returned to normal levels-- within +/- 3% from baseline. However, we have not yet seen an increase in insurance claims that was anticipated from deferred care returning to the health system. This may be due to the more prolonged nature of the COVID-19 pandemic than what was initially projected.
  • Importantly, while the monthly PMPM claims have a similar overall trend shape as initially projected, month-by-month timing varies by location, vendor, etc.
  • The 12-month average PMPM claims ending September 30, 2020, shows a variance from 1.82% to 2.48% when comparing actual to modeled scenarios. This shows that our model was within a small margin of error and slightly more conservative than actual experience.
    Month Scenario 1 Scenario 2 Scenario 3 Actual
    March -5% -5% -5% -3%
    April -15% -13% -12% -25%
    May -22% -21% -18% -23%
    June -11% -12% -14% -8%
    July +9% -3% -7% +2%
    August +6% +16% -1% -1%
    September +3% +7% +18% -3%
    12-Mo Average through September 2020 2.17% 2.48% 1.82% N/A
  • Pertaining to prescription drug claims, our models anticipated an initial increase in insurance claims due to loosening restrictions around filling scripts for 90-day supplies and allowing for early renewal due to quarantining. We then anticipated a return to more normal levels following this initial spike. While the initial increase has proven out in the actual claims with a return back to normal levels shortly after, we have observed another spike approximately three months following the initial increase. This appears to show that insurance claimants are remaining on a 90-day cycle – not necessarily increasing utilization or cost, rather shifting the timing of prescription drug claims.

Claims considerations moving forward amid COVID-19

There are several areas where Gallagher’s data and analytics teams will be paying close attention as we finish 2020 and move throughout 2021:

  • Deferred claims – Will we continue to see the effects of deferred claims into 2021? Will there be an uptick in 2021 corresponding to claims that had been deferred in 2020 if and when people become more comfortable receiving elective care?
  • Preventive health screenings – Will these screenings return back closer to pre-pandemic levels? Will there be any measurable impact to health outcomes from the delay of these screenings (including serious health conditions being identified at a later stage)?
  • Behavioral health claims – Studies have begun to show increasing mental health concerns during the COVID-19 pandemic. Will we begin to see these concerns result in an increase to mental and behavioral health claims and other stress-related claims as the pandemic continues?
  • Substance abuse claims – Will insurance claims associated with substance abuse issues increase and severity of those claims increase?
  • Vaccine availability – When vaccines become available, what impact will they have? How will availability, uptake and efficacy of any available vaccines influence these outcomes?

Analysis of the data thus far appears to confirm our assumptions of how COVID-19 impacted costs during 2020. As outlined above, many considerations will factor into how costs will continue to be impacted as we move into 2021. We remain focused on reexamining assumptions as new information and studies become available. Please reach out to your Gallagher contact to have a detailed conversation related to your plan.

Request Gallagher’s COVID-19 Cost Modeler for more information.

Author Information:


Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as “Gallagher Benefit Services of California Insurance Services” and in Massachusetts as “Gallagher Benefit Insurance Services.” Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.