Covid could leave its mark on longevity assumptions

Life expectancy in the U.S. dropped by one year in 2020 as a result of deaths caused by Covid-19. While that could be a blip, the pandemic has other effects that may have long-term consequences for longevity.

There are various factors beyond Covid infections to consider, some of which could have a positive effect on life expectancy and others that could take away from it, according to a recent report published by longevity-risk consulting firm Club Vita.

For example, economic factors stemming from the pandemic could hurt life expectancy for many, and some people are dealing with long-term health issues due to Covid infections. The pandemic has hit Black and Latino communities particularly hard, government data show.

A big unknown is how much any delays in seeking or receiving health care for problems other than Covid over the past year will affect longevity. Conversely, the U.S. could come out of the pandemic with a greater awareness of the inequality of its health care system, which could eventually lead to reforms or funding that could increase life expectancy, said Erik Pickett, chief content officer at Club Vita and one of the authors of the report.

Or there could be long-term advances or efficiencies in the medical system stemming from the resources and effort that led to the fast development of vaccines, Pickett noted.

“It has been an extreme event. The number of deaths we saw in 2020 is far higher [than any on record, going back to 1935],” he said. “In isolation, that won’t have an extreme impact on a pension plan or an insurer’s books or cash flows. If it’s just an increase in deaths in 2020, and then everything goes back to normal, that won’t have a knock-on effect.”

Last year, excess deaths were nearly 15% higher than average, according to Club Vita’s analysis. By comparison, the previous high, based on available data, was in 1935, when deaths were less than 5% higher than average.

But because there are so many factors at play, the only immediate conclusion is uncertainty around longevity assumptions. That could have implications for financial planning widely.

“There are drivers pulling in either direction,” Pickett said. “The real thing to take away from this is there is lot of uncertainty now. Pension plans, insurance companies, anyone managing payments going out in terms of how long people live are going to have to deal with more uncertainty.”

Under one scenario, assuming that significant medical innovation results from the efforts to combat Covid, pension plans could see their liabilities increase by less than 2%, according to the firm’s analysis. But if the recovery from the pandemic takes a long time, that factor could have the effect of decreasing liabilities by less than 3%.

“It’s an opportunity for us to build back, after the pandemic,” Pickett said. “It really highlighted the significant health inequalities … What are we going to do about it?”

RACIAL INEQUALITY

Last month, the Centers for Disease Control and Prevention published its report on changes in life expectancy, using data from the first six months of 2020. Life expectancy at birth for 2020 went down to 77.8 years, the lowest number seen since 2006, according to the CDC.

But there were wide disparities by race, showing the disproportionate effect that Covid has had on Black men and women. While life expectancy dropped by 0.8 years for white, non-Hispanic men and 0.7 years for women, that decline was much higher, at three years for black men, 2.3 years for black women and 2.4 years for Hispanic men, according to the CDC report.

“Estimated reductions for the Black and Latino populations are three to four times that for Whites,” a February report from the Proceedings of the National Academy of Sciences read. “Consequently, Covid-19 is expected to reverse over 10 years of progress made in closing the Black−White gap in life expectancy and reduce the previous Latino mortality advantage by over 70%.”

That group also found that the pandemic could result in long-term changes for longevity: “Some reduction in life expectancy may persist beyond 2020 because of continued COVID-19 mortality and long-term health, social, and economic impacts of the pandemic.”

[More: How do advisers estimate a client’s longevity?]

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