Employers are likely to face an increase in medical costs of between 4% and 10% for their employees in 2021, according to a new report from PricewaterhouseCoopers.

The firm conducted interviews from February through May with health industry executives, health benefits experts and health plan actuaries from companies that represent more than 90 million employer-sponsored large group members.

PwC identified four main factors that are likely to inflate or deflate costs in 2021. One inflator is an increase in mental health benefits use, both as a result of employer efforts to expand mental health benefits and the effect of COVID-19 on anxiety and social isolation, necessitating more mental  health services. The other is new specialty drugs and expanding indications for already approved specialty drugs. The two healthcare cost deflators are telehealth services replacing in-person visits and employers increasingly narrowing their provider networks, according to the report.

“How exactly COVID-19 will affect employer healthcare spending in 2020 and 2021 remains unknown,” the report said. “Whether the changes in consumer health behavior resulting from the pandemic, including decreased use of the emergency room and increased use of telehealth, are here to stay and what impact they will have on employer healthcare spending also are unknown. But healthcare will look different after the pandemic.”

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