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What PwC’s Medical Cost Trend Report Tells Us About Healthcare Headed Into 2023

Quick look: Post-pandemic shifts have affected how Americans gain access to healthcare. These shifts have also influenced price fluctuations and consumer spending; thus, creating what PwC’s Health Research Institute (HRI) has projected as a 6.5% medical cost trend in 2022. Here’s an overview of why analysts expect a gradual return to pre-pandemic numbers, and how brokers can help their clients adapt accordingly.

Medical spending has ebbed and flowed during the transformation of the healthcare system over the past few years. PricewaterhouseCoopers (PwC) recently released a report projecting a slightly lower medical cost trend than 2021, as well as a prediction for a return to spending costs pre-pandemic. Per HRI, the medical cost trend is defined as the year-over-year percentage increase of projected cost to treat patients (assuming benefits are the same).

Part of the increase is due to the bounce-back utilization of healthcare spending following the abrupt halt in 2020. A majority of people deferred medical visits and procedures due to pandemic restrictions and are now resuming regular care. The report expects the medical cost trend to continue gaining and eventually surpass previous years due to ongoing COVID-19 costs, increased reliance on digital and telehealth and services, and what some experts have called a worsening overall health population.

Persistence of COVID-19 costs

Testing for and treating variants of COVID-19- has continued in 2022 and will roll over to 2023. Additionally, preparation for the possibility of another pandemic is likely to inflate the medical cost trend. This includes planning and investments in staffing, personal protective equipment (PPE), and forecasting tools.

Supply chain shortages and delays plagued the health system during the early stages of the pandemic. As a result, money will be spent on predictive modeling to prevent these same issues from reoccurring. The same is expected for sufficient staffing and PPE to sustain a regular flow of operations should another COVID-19 type of emergency take place.

Furthermore, an increase in data breaches and cyberattacks has hindered several operations and remains a looming threat to the health industry. Consequently, many organizations are shifting budgets to put greater protections in place. Additional provider spending is expected to support remote workforces and implement advanced technology, including cybersecurity.

In the short term, these investments will likely drive higher medical costs. However, the goal is to strengthen the healthcare system and benefit patients in the long run. As a professional employer organization (PEO) broker, preparing clients for these fluctuations year to year is essential. Small- and medium-sized businesses (SMBs) seek guidance on balancing business growth with rising healthcare costs to maintain a competitive work environment. By working closely together toward a customized solution, it can strengthen the value of the broker role as companies continue to expand.

Increased reliance on digital medical care

During the early months of the pandemic, telehealth increased by as much as 80% and has continued to be a favored option for many. HRI data reveals 77% of clinicians say nontraditional care venues, including on-demand telehealth, have maintained or improved patient health conditions. The experience provides patients with greater convenience and cost-effectiveness when scheduling care.  Subsequently, the demand has accelerated digital experience improvements between providers and patients in order to maintain relationships and foster new ones.

Per the PwC report, 71% of provider executives also reported significant investments in automating administrative functions. This represents a 47% increase from 2021. The implementation of digital tools, such as mobile apps and online scheduling, has expanded healthcare access and utilization; thus, contributing to the total medical cost trend in 2022. Meanwhile, the use of technology and automation has provided touchpoints and analytics to providers, giving them direct insights on how to improve the patient care journey.

Continuous engagement and customization are what patients want. Employees are closely monitoring healthcare options and choosing lower-cost, yet quality care most convenient to them. PEO brokers keep SMB clients updated on what will help keep them competitive. This includes health insurance plans with lower co-pays, greater network benefits, and care advocacy programs. With patient care being delivered remotely and fewer costs needed for physical real estate spending, these savings could eventually result in reduced costs for consumers, and brokers should be on the lookout for this as well.

Fight against a declining health population

The isolation of the pandemic accelerated health concerns and led to unhealthy habits for many Americans. Lack of proper nutrition and regular exercise combined with the increase in substance use and stress-related conditions have all resulted in a decline in life expectancy. Thus, an increase in healthcare spending focused on these areas has been paramount in 2022 and will continue into 2023.

Though basic, pre-pandemic medical needs and benefits are still in place, mental health treatment has seen a significant spike in demand. A 2021 American Psychological Association survey reveals a year-over-year increase for treating anxiety disorders (84% increased from 74%), depressive disorders (72% from 60%), and trauma- and stress-related disorders (62% up from 50%). The need is apparent, and employees are seeking healthcare plans with inclusive benefits covering their physical, mental, and psychological health.

PEO brokers can rely on their network to help their clients address these needs as well as offer other health improvement perks. These may range from company-wide mental health days, free meditation apps and services, or access to an Employee Assistance Program (EAP). Despite the upfront costs, it can be a smart, long-term retention and recruiting strategy for SMB employers.

Customized strategies to accommodate changing needs

The average approach toward obtaining health insurance coverage no longer applies to the modern workforce. The pandemic changed what people prioritized and valued most. Therefore, SMB leaders have had to swiftly adapt and update their offerings to retain their most talented workers.

As a PEO broker, connecting clients with HR experts is a value-add necessary during these challenging times. A PEO like ExtensisHR delivers comprehensive, cost-effective services to support brokers in fulfilling their clients’ needs. This involves creating tailored solutions to account for the medical cost trend while providing full HR support.

Through our HR, payroll, benefits, and risk management services and industry-specific expertise, we create personalized solutions to empower your clients’ growth. Contact ExtensisHR today.

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