U.S. Employers Anticipate 8% Healthcare Cost Surge in 2025

U.S. employers are expecting an 8% increase in healthcare costs by next year, according to a recent survey by the International Foundation of Employee Benefit Plans (IFEBP).

This jump is higher than the 7% increases projected in 2022 and 2023, which suggests how quickly healthcare expenses are climbing, resulting in higher costs for employees.

The survey found a few key factors contributing to rising costs. The first is that catastrophic claims, which are high-cost, low-frequency incidents, that can strain a company's health plan. These types of claims are up slightly from last year, going from 19% to 20%.

Next, there’s the rising cost of specialty drugs such as GLP-1 and cell and gene therapy drugs. Seventy-five percent of survey respondents pointed to GLP-1 drugs, often used for treating diabetes and managing weight, as the significant driver.

Other factors include rising medical provider costs and the ongoing challenge of managing chronic health conditions such as diabetes and heart disease.

Given these key factors, employers are getting creative in their efforts to control costs.

For example, the report shared employers are turning to strategies such as utilization control, which involves tools like prior authorization and case management to make sure that healthcare is necessary and used efficiently.

Another tactic is cost-sharing, where employees take on a bigger share of healthcare expenses through higher deductibles, copays and premiums. These approaches help manage costs, but they also shift more financial responsibility onto employees.

In addition to these methods, improving the annual healthcare enrollment process is another plan, according to Aon's recent 2024 U.S. Health Survey.

Improving the enrollment process is a key opportunity for employers to cut costs while also improving the overall experience for employees, suggests the report.

By offering personalized plan selection tools and a variety of insurance carrier options, employers can help employees make better choices that align with their financial situations and healthcare needs, the report states.

For instance, Aon’s Benefit Experience “Help Me Choose” tool guides employees through assessments of their Health Savings Account (HSA) balances and their ability to manage unexpected costs.

This tool led to Aon clients saving an average of $423 annually on premiums.

Flexibility is also becoming more important, according to the Aon report, as employees are looking for health plans that can adapt to their changing life circumstances, whether they’re starting a family, saving for the future or managing ongoing medical expenses.

For example, 94% of respondents in the report said they want more choice when it comes to healthcare carriers, highlighting the need for plans that are both flexible and accessible.

With the rising costs of specialty drugs, especially GLP-1s, these increases are forcing employers to rethink how they manage prescription benefits. The report suggests more aggressive strategies such as more strict formulary management or negotiating better deals with drug manufacturers.

As employers prepare for 2025, the combination of utilization control, cost-sharing, personalized enrollment processes and innovative plan design shows that these methods of managing healthcare costs could only be the start of solving the problem.