As the United States moves past the peak of the COVID-19 pandemic, regional health plans can begin to pivot from pandemic response to 2021 formulary planning. However, the lasting downstream impacts of COVID-19 may still present challenges to many regional health plans as they develop formulary strategy for 2021.
Payer costs were somewhat unpredictable during the pandemic. While pharmacy costs spiked in March as members sought to stock up on their medications, many payers experienced lower than usual medical spend as patients deferred routine care during lock-downs and social distancing practices. With lock-downs ending and a slow return to the “normal,” uncertainly still remains on how the rest of the pandemic and year will play out for payers. In addition to increased costs associated with the treatment of COVID-19 in the event of an outbreak, there is concern that the postponement of routine care may translate to a large pent up demand for health care services. Payers may be hit with costs associated with a large demand for medical services as the population resumes normal care, as well as higher costs associated with poor outcomes stemming from lack of close management of chronic conditions. All of these likely make it difficult for payers to utilize 2020 claims data to determine premium increases for 2021.
With unprecedented levels of unemployment stemming from the economic shutdown, many individuals are at risk of losing their employer-sponsored coverage. Some of these individuals may transition to coverage through Medicaid, Exchanges, and other employers as the economy slowly recovers. Changes in insurance coverage result in a more dynamic population, with members coming in and out of the health plan’s population or between lines of business. The situation presents challenges to payers about continuation of care of products not currently covered on a formulary, and compounds the difficulty in predicting costs as the population continues to shift.
Regional health plans will need to evaluate the relevance of these factors to their geographic area when considering formulary strategy for 2021. Some payers may see the pharmacy budget as an opportunity for cost savings at a time when medical costs are difficult to predict and populations are changing. This philosophy could translate to more aggressive formulary changes, especially in a population that is moving between different coverage types, mitigating some of the disruption associated with negative formulary changes. Payers may also be under pressure from employer groups who have struggled during the pandemic. Other payers may be more hesitant to make bold formulary moves in a time when both coverage is unstable and connection to care is suboptimal. Disruptive formulary changes could result in higher downstream medical costs if members are not successfully transitioned to formulary alternatives; health plans may need to expend significant staff and resources to support successful execution of these changes.
During these unprecedented times, it is important to stay virtually engaged with regional health plans and offer information and support. Underscoring clinical and economic differentiation will become key as payers determine 2021 formulary strategies and content. Value-based or outcomes-based solutions may demonstrate additional value of products. As payers’ reactions to the impact of COVID-19 begin to unfold, continued relationships and partnerships may demonstrate the commitment from manufacturers toward the total cost of care.
- Peterson-KFF Health System Tracker. How health costs might change with COVID-19. https://www.healthsystemtracker.org/brief/how-health-costs-might-change-with-covid-19/. Accessed June 16, 2020.
- Woolhandler S, Himmelstein DU. Intersecting US epidemics: COVID-19 and lack of health insurance. Ann Intern Med. doi:10.7326/M20-1491.
- American Hospital Association. Hospitals and health systems face unprecedented financial pressures due to COVID-19. https://www.aha.org/guidesreports/2020-05-05-hospitals-and-health-systems-face-unprecedented-financial-pressures-due. Accessed June 16, 2020.