Employers Expect Health Care Costs to Increase by Nearly 8 Percent in 2025: Survey

A patient has her blood pressure checked by a registered nurse in Plainfield, Vt. on June 6, 2013. Toby Talbot/The Canadian Press/AP

Employers expect health care costs to rise by nearly 8 percent in 2025, driven by inflation, increased demand for costly drugs and therapies, and the ongoing need for cancer treatment, according to a Business Group on Health survey published on Aug. 20.

The survey found that 76 percent of employers reported being “very concerned” with overall pharmacy costs. The median percentage of health care dollars spent on pharmacies increased from 21 percent in 2021 to 27 percent in 2023.

Around 79 percent of employers surveyed said they have also seen a heightened interest in medications used to treat obesity, including GLP-1s such as Ozempic and Wegovy, with 96 percent expressing concern about the long-term cost implications of such drugs.

Most employers called for a combination of market and government reform to reduce drug prices. Employers also plan to reassess the quality and effectiveness of vendor partnerships to secure better prices and end partnerships with underperformers, according to the Business Group on Health.

Cancer remains the condition driving the highest costs for employers, the survey found, with employers pointing to an increased prevalence of cancer among younger populations and the growing cost of cancer treatments.

Due to this trend, employers see the need to boost cancer prevention efforts, such as early screenings, according to the survey.

Some employers also cited musculoskeletal conditions as an ongoing cost concern, with 40 percent of those surveyed identifying cardiovascular conditions as their third biggest cost driver, up from 30 percent in 2023.

Despite the projected increases in costs, employers plan to continue absorbing much of the increase while “more rigorously leaning into additional cost management strategies,” the survey found.

Health care costs have increased by a cumulative 50 percent since 2017, according to the Washington-based nonprofit organization.

‘Challenging Times’

Employers remain “steadfast in their desire to provide comprehensive offerings to their workforces,” Business Group on Health President and CEO Ellen Kelsay said.

“They continue to absorb much of the upticks in cost and remain keenly focused on lowering spending and improving outcomes and experiences for employees. However, the foreboding cost landscape has accelerated the need for bold transformation, and employers seek partners who will make that happen.”

Kelsay added that these are “challenging times for benefits professionals.”

The latest findings were released just days after professional services firm Aon projected that the average cost of employer-sponsored health care coverage in the United States would increase by 9 percent next year to more than $16,000 per employee.

That projected increase—which assumes employers do not implement employee cost-sharing increases or other cost-saving strategies—is higher than the 6.4 percent increase seen from 2023 to 2024 after cost-saving strategies, according to Aon.

Dr. Tanya Evans from CalDerm is seen performing skin cancer spot screening on a firefighter in Huntington Beach, Calif., on April 30, 2023. Sophie Li/The Epoch Times

Aon also said the increased costs would likely be driven by higher prescription drug costs, continued growth in specialty drugs, and increased use of GLP-1 medications.

Medical claims also continue to trend at elevated levels, Aon noted.

“In the health care sector, both rising employment levels and wage increases fueled by economy-wide inflation during the past few years are pushing health care costs higher,” North America chief actuary for health solutions at Aon, Debbie Ashford, said. “To keep pace with these pressures, the health care industry negotiates higher prices, which in turn emerge as higher medical trends.”

Ashford said specialty drugs remain the leading factor in spending, despite the fact they represent a small fraction of overall utilization.

“The demand for GLP-1 medications has skyrocketed, and a surge in new drugs in the GLP-1 category is expected to drive up costs even further, adding 1 percent to the aggregate health care cost increase,” Ashford added.

The Business Group on Health survey was conducted between June 3 and July 12, among 125 large employers across varied industries, covering 17.1 million people in the United States.