COVID-19 Claims Increased to over 5% of Our Medical Spending in 2021. Here's What We Expect Going Forward.

The cost of the COVID-19 pandemic in human terms is incalculable. Worldwide, more than 5 million people have died from the virus. In the United States alone, the number of deaths is nearing 800,000 as of late November 2021.

And while there is reason to hope that the worst is over, it’s possible that COVID-19 will linger in some form, perhaps permanently. We may have to continue to pay a price for the virus indefinitely.

Compounding the tragedy of COVID-19, the price we pay goes beyond illness and death; the cost also comes in dollars. And we’re getting an idea of just how expensive COVID-19 has been so far.

I wrote earlier this year that Blue Cross and Blue Shield of North Carolina (Blue Cross NC) expected that the company’s COVID-19 spending would likely be higher in 2021 than it was during the initial months of the pandemic in 2020. And while we won’t have precise figures until the first quarter of 2022, we have some preliminary data that confirms our actuarial forecast.

Between the start of the pandemic in the US in April 2020 and the end of that year, COVID-19-related costs amounted to about 4% of our company’s total medical spending. And as we expected, the figure rose between January and September 2021, growing to over 5% of total spending. While these figures are not catastrophic, the costs associated with an unexpected pandemic further reinforce the need for an insurer to remain financially strong in order to avoid significant premium increases.

In fact, Blue Cross NC has lowered premiums in three of the last four years, and the modest increase for 2022 is well below the rate of inflation.

Still, the money spent on COVID-19 claims is a cost that our company – and our customers – haven’t had to pay in years past. Any time we add a new cost driver to the health care system, that makes the road to affordability an even steeper climb.

Planning for the Unplanned

The delta variant of COVID-19 wasn’t something anyone could have predicted, but our financial planning for 2021 did include rising expenses for COVID-19 vaccination, testing and treatment. And we’ll build those costs into our planning well into the future. While the vaccine itself is delivered at no cost to recipients, Blue Cross NC covers office visits for any of our members who receive the shot in a physician’s office. All of our members pay these costs through their insurance premiums.

And of course, Americans also pay for the vaccines through taxes. So far, the US government has spent nearly $3.5 trillion on the COVID-19 response. That’s not imaginary money, it doesn’t get “written off” – we all pay it.

For insurers, the most significant costs associated with the pandemic are hospitalizations. Blue Cross NC will compile more precise figures when we calculate 2021 financial data several months from now, but average costs for every state are already being logged.

In North Carolina, a non-complex hospitalization for COVID-19 (when the patient does not require ventilation or admission to the intensive care unit) is about $45,000. For a complex case (with ventilation and admission to the ICU), the average price tag is roughly $235,000.

That’s almost a million dollars for every four North Carolinians in the ICU with COVID-19. I am proud that we remain strong and have maintained adequate reserves during the COVID-19 pandemic. And as we continue to face uncertainty with the pandemic – the recent arrival of the Omicron variant in the US is an example – we will keep our focus on maintaining strong financial reserves to meet the needs of our customers as they arise.

Investing Today to Meet Tomorrow’s Health Needs

Unfortunately, the costs of COVID-19 aren’t all in the rear-view mirror. Along with the heartbreak for people – and their families – who will contract the virus, we also face the continued accumulation of medical bills that are still to come.

Many medical researchers and virologists believe COVID-19 will ultimately become a seasonal issue, similar to influenza. It’s looking like some COVID-19 costs – in both human and dollar terms -- are likely with us to stay. This, of course, makes it all the more urgent for us to solve the COVID-19 problem through vaccination, masks and distancing during peak periods of transmission.

It’s also important for Blue Cross NC to maintain the company’s financial strength, which will allow us to meet our members’ health care needs whatever may come. Financial stability keeps us on track in our quest to make health care better, simpler and more affordable.

We’ll continue to cover virtual health care delivered by telephone and video conferencing, just as we’ve covered telehealth for more than 20 years. We’re reviewing claims data from the COVID-19 period and conferring with our network of providers to design a longer-term telehealth policy that delivers value without becoming yet another cost driver in health care.

We’re committed to supporting communities across our state, with investments in food security, transportation, diversity and inclusion, and a range of non-medical drivers of health that affect our overall well-being.

Our support for a robust primary care system will help ensure access to important preventive and wellness care for our members. Our collaboration with Quartet helps primary care physicians to identify patients with underlying mental health conditions – many of which have been magnified by the pandemic – and refer patients to a trusted network of mental health providers.

Good health carries a price tag and COVID-19 threatens to drive that price even higher. Through smart financial management and strategic investments aimed at keeping communities healthy, we can mitigate the impact of the virus in both human and financial terms.?