"Healthcare Costs to Surge by 5.8% in 2025: Strategies for Employers to Mitigate Rising Expenses"
By Amina Niasse
NEW YORK (Multibagger) - Employers Brace for Another Year of Rising Healthcare Costs
The recent survey by consulting firm Mercer (NASDAQ:) reveals a concerning trend for U.S. employers: health insurance costs are expected to rise by an average of 5.8% in 2025. This marks the third consecutive year of such increases, following a decade where annual cost hikes averaged just 3%.
Key Drivers of Healthcare Cost Increases
- Medical Service Costs: A significant contributor to the rise in healthcare costs is the increased price of medical services. This is largely due to a persistent shortage of healthcare workers, which forces providers to raise their prices.
- Behavioral Health and Weight Loss Drugs: Spending on behavioral health services and the popular but costly GLP-1 weight loss drugs are also driving up expenses.
Employees and Employers: Cost Sharing Dynamics
Beth Umland, Mercer’s Director of Employer Research for Health and Benefits, notes that employees' share of total health plan costs is expected to remain stable at around 21% in 2025.
Employers' Cost-Management Strategies
In response to the rising costs, 53% of employers plan to implement cost-management changes in 2025, up from 44% in 2024. These strategies include:
- Reducing Utilization: Targeting plan members with expensive conditions to reduce unnecessary utilization.
- Managing Specialty Drug Costs: Controlling the costs of specialty drugs, which have seen a rapid increase in spending.
Challenges Faced by Employers
- Gene and Cellular Therapies: Employers are particularly concerned about expensive gene and cellular therapies, which can cost over $1 million. These high-cost claims can significantly impact an employer's budget.
- Small Employers' Burden: Smaller employers (50-499 employees) face the highest cost increases, projected at 9% without cost-management measures and 6.3% with them. Many small employers rely on private insurers for fully insured health plans, which tend to have higher premiums and lack cost-saving well-being programs.
Breakdown and Analysis
To put it simply, healthcare costs are going up, and employers need to brace for impact. Here’s what it means for you:
- For Employers: Rising healthcare costs mean you’ll either have to absorb these higher expenses or pass them on to your employees. Implementing cost-management strategies can help mitigate some of these increases.
- For Employees: While your share of health insurance costs might not change much, expect that your employer may look for ways to control costs, which could affect the benefits and services available to you.
Understanding these dynamics is crucial for both employers and employees to prepare for the financial impacts of rising healthcare costs in the coming years.