Telehealth May Help Payers Control Uncertain Healthcare Spending

Two cost inflators for 2021

Mental healthcare utilization will be a major driver of healthcare spending in 2021.

Because of rising unemployment, the virus, and social isolation,  mental health has been deteriorating for the past couple of months. As a result, around 12 percent of employer-sponsored health plan members said that they sought mental healthcare services due to the pandemic and another 18 percent plan to do so.

Blue Cross Blue Shield of Massachusetts, for example, reported that its mental health services accounted for almost 50 percent of its surge in telehealth claims.

Employers will actually encourage mental healthcare spending, knowing it will cost less to invest in mental healthcare now than to pay for the larger bills that result when members neglect mental health.

For members with chronic conditions, this is especially true. PwC found that employers end up spending twelve times more to cover costs for employees with complex chronic diseases and mental healthcare needs, as opposed to a healthy employee.

Virtual mental healthcare tools will play a big role in managing the surge in mental healthcare utilization. Plans may need to adjust their benefit design to incentivize telehealth use for conditions in need of mental healthcare services. PwC advised payers to waive or decrease mental healthcare cost-sharing, apart from the temporary legislative injunctions to do so.

Specialty drug usage will also see an influx in 2021, resulting in higher healthcare spending. While specialty drug prices have already been a major financial stressor, they could become even more prominent in payer budgets going forward.

For seven in ten employers that PwC surveyed, paying for specialty drugs was among their top pharmacy concerns.

Not only are the prices for these drugs considered extremely high, but availability and demand are also increasing. Specialty drugs make up nearly three-quarters (73 percent) of drugs expected to be released in 2021, up from 62 percent in 2020.

In 2021, payer specialty drug spending growth is likely to nearly double from 1.5 percent in 2020 to 2.6 percent in 2021, PwC projected.

“The million-dollar therapies are certainly eye-catching,” Mike Hartjes, vice president of employer group actuarial and analytic services at Humana, told PwC. “Other specialty drugs without the million-dollar price tag often start out treating a narrow range of ailments, such as a certain type of cancer, and then get used more broadly over time. These drugs are used by far more patients and will continue to drive spending.”

CMS has implemented value-based payment strategy in part to deal with high and rising specialty drug costs.

Payers need to reckon with their current strategies around these therapies. Some may partner with financial institutions, pharmaceuticals, other payers, and other entities to meet these cost.

Two positive influences for 2021

In the midst of these challenges and the escalating prices, payers are turning with hope to telehealth. This is good news for the medical cost trend in 2021.

“In 2021, HRI expects telehealth to put the brakes on medical cost trend as it replaces more costly in-person visits and lowers spending on downstream services and diagnostics,” the report predicted.

Around 9 million Americans tried telehealth for the first time due to the pandemic, PwC’s April 2020 consumer survey revealed.

Payers see two major cost saving opportunities in telehealth:

• Lower cost per visit in comparison with in-person visits
• Fewer diagnostics associated with telehealth visits than with in-person visits

Finding the right reimbursement rate for telehealth may be a challenge.

Many expect the increased utilization to boost healthcare spending on telehealth higher. But PwC found that this projection did not concern some payers.

“Even if telehealth increases utilization, many payers see the platform as an opportunity to get members the right care at the right time in the right place while also saving the member and the employer money,” the report found.

PwC highlighted two decisions that payers need to make regarding telehealth strategies:

• Whether to partner with a national telehealth vendor, local vendor, or collaborate with a fusion of both
• Whether to expand their virtual provider networks

Another “bright spot” is that employers are looking to narrow their networks.

The new year could see an even higher rate of narrowing networks, PwC suggested. This is particularly true on the ACA marketplaces.

Over a third of employer-sponsored health plan members that participated in PwC’s consumer survey (35 percent) indicated that they would be open to switching to a plan with a narrower network if it meant lower cost.

Payers will need to reconsider their network size and those that already have small networks may be ahead of the curve for 2021.