Mercer Marsh Benefits' Health Trends Report surveyed 225 insurers in 55 markets and found that they are expecting half of employers will "want to reduce plan coverage to manage costs in the coming year."
The trends are showing that U.S. healthcare spending rose by 7.5% to $4.9 trillion in 2023, driven by the increased usage of medical services as enrollment climbed for private health plans, particularly those under the Affordable Care Act per the Centers for Medicare and Medicaid. Further, spending on retail prescription drugs had the biggest increase, rising 11.4% to $449.7 billion after a 7.8% rise in 2022, largely due to the use of weight-loss and diabetes drugs.
Over the past five years, employer budgets grew an average of 4.4% per year and employees averaged 1.2% per year. On average, employers subsidize about 81% of health plan costs.
However, according Aon, the average cost of employer-sponsored health care coverage in the U.S. is expected to surpass $16,000 per employee, increasing a minimum of 9% in 2025. Per the Aon report, in 2024 employers were paying $11,956 versus the $2,867 average that employees paid. According to International Foundation of Employee Benefit Plans (IFEBP), U.S. employers projected a median health care plan cost increase of 8%. A big driver of the cost is prescription drugs, specifically GLP-1 (glucagon-like peptide-1) drugs, such as Ozempic and Wegovy.
PwC’s Health Research Institute (HRI) also confirmed these increases estimating an 8% year-on-year medical cost trend in 2025 for the Group market and 7.5% for the Individual market. Per HRI, these cost increases are a result of inflationary pressure, prescription drug spending, and behavioral health utilization.
Family premiums for employer-sponsored health insurance rose in 2024 to 7% to reach an average of $25,572 annually per Kaiser Family Foundation (KFF) 2024 benchmark survey. Employees contribute $6,296 annually to the cost of family coverage per KFF.
According to EBN, employers need to note the following trends:
- The traditional healthcare model may be falling apart, and new approaches may need to be taken. Employers may soon be unable to afford healthcare and are looking at adjusting their budgets or reducing coverage to make room for inflated costs.
- Autoimmune disease support may be the next essential healthcare benefit. As many as 50 million Americans have one of 100 different autoimmune diseases, and 80% of those affected are women, according to a Stanford Medicine-led study.
- GLP-1 usage is growing. Employers need to coordinate coverage for GLP-1s with weight or diet management programs that prioritize sustainable, evidence-based lifestyle changes that will help type 2 diabetes or obese patients improve their health.
Benefit managers need to review how to provide the best possible approach to healthcare to employees, especially understanding that employees are avoiding incurring healthcare costs as they become unaffordable. 85% of Americans have at least $500 in medical debt, while 6% have over $1,000, according to KFF, totaling $220 billion. Pushing employees into the marketplace, especially by smaller employers, may not be a solution, as healthcare organizations have been dropping coverage by the marketplace plans and subsidies for employees may not apply.
Self-funded plans may be an option, especially if the workforce is younger, but most resources are used by 10% of the population and chronic illnesses could lead to major financial issues for employers while stop-gap insurance may not be affordable. Larger organizations are negotiating directly with providers, but that is not yet an option for smaller employers. Even focusing on preventive care is more words than actions, especially by employees. The future of employer healthcare is likely the number one issue for employers as pay raises are reduced to levels before the pandemic.
ASE Connect
Compensation Insights
Keep up on benefits trends by atttending Compensation Insights in Troy or Muskegon. Sessions include:
- Navigating the 2025 Employee Benefits Landscape: Legal Insights and Practical Strategies for Health and Welfare Plan Sponsors
- Why Is Health Insurance So Expensive? Insights and Actions for Employers
- Streamlining Your Benefits Renewal: Insights & Expectations
- AI and the Future of Total Rewards: Smarter Compensation Strategies
- Highlights of the 2025 Deloitte Global Job Architecture Survey: How Job Architecture Still Matters in a Skills-Centric World
- 2025 Pay Briefing - Results of the 2025 ASE Compensation Survey
Troy, June 3rd: https://www.aseonline.org/News-Events/Events/All-Upcoming-Events/compensation-insights-2025-troy-mi
Muskegon, June 5th: https://www.aseonline.org/News-Events/Events/All-Upcoming-Events/compensation-insights-2025-muskegon-mi
Source: EBN 12/17/24, 4/9/24, KFF 10/9/24, PWC, Risk Insurance 8/16/24, USA Today 12/18/24, SHRM, HRD 12/17/24