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Would you, the cost-minded CFO, be surprised to hear that healthcare benefit costs rose last year and are expected to increase at an even greater clip this year? No? We aren’t either, TBH.
Employer-sponsored health plan costs rose 4.5% in 2024 to an average per-employee cost of $16,501, marking “a second year of elevated cost growth,” according to the latest Mercer survey of organizations with at least 50 employees.
Respondents said they expect health benefit costs to increase by 5.8% in 2025. Without making changes to health plans, respondents said costs would instead rise by nearly 8%.
Costs have tracked above the overall rate of inflation going back to at least 2013, the survey report shows, with 2022 being the sole exception.
Respondents whose organizations employ more than 500 people indicated “managing high-cost claimants” was their top strategy for health plans in the coming three to five years. Nearly nine in 10 respondents (86%) said the strategy was “important” to “very important.” Following that were managing the cost of specialty drugs (76%), improving benefits to better attract and retain workers (71%), and improving the affordability of healthcare (66%).
Highly medicated. There’s hope that health costs will decrease now that overall inflation has cooled, though other factors remain that contribute to the upward climb, Beth Umland, research director in Mercer’s health and benefits business, said in a recent episode of Mercer’s The Beneficial Workplace podcast. Two “big” factors, Umland continued, are healthcare system consolidation and prescription drug costs, especially with more people using GLP-1 drugs for diabetes and weight loss.
Nearly all health plans cover GLP-1 drugs for treating diabetes, but not all cover them for obesity, according to Mercer. But more plans covered the drug for obesity in 2024, the survey found. Some 44% of organizations with 500 or more employees said they covered the medication to treat obesity, up from 41% in 2023. And 64% of employers with 20,000-plus employees said they covered the drug to treat obesity last year, up from 56% the prior year.