As we approach 2025, employers across the United States are bracing for a significant uptick in health care costs. According to a recent survey by the International Foundation of Employee Benefit Plans (IFEBP), U.S. employers are projecting a median 8% increase in health care expenses for the upcoming year. This projection marks a notable rise from the previous two years, where the anticipated increase was 7%.
Key Drivers of Health Care Cost Increases
Several factors are contributing to this anticipated surge in costs. The top drivers identified by employers include:
Catastrophic Health Claims: These claims are expected to account for 20% of the cost increase, slightly up from 19% last year.
Specialty and Costly Prescription Drugs: Another 20% of the rise is attributed to specialty drugs, with a particular emphasis on glucagon-like peptide-1 drugs (75%), cell and gene therapy (19%), and other specialty medications (31%).
Medical Provider Costs: With a contribution of 18%, medical provider expenses are another significant factor, up from 14% last year.
Utilization Due to Chronic Health Conditions: Although contributing less than in previous years, chronic health conditions still play a role, accounting for 16% of the expected cost increases.
Employer Strategies for Managing Rising Costs
In response to these rising costs, according to the report, employers are implementing a variety of strategies. The focus has shifted towards cost management, with 27% of employers planning to introduce control initiatives, such as prior authorization, case and disease management, and nurse advice lines. Additionally, International Foundation of Employee Benefit Plans (IFEBP) report shows more employers (21%) are looking to pass higher costs onto employees through increased deductibles, coinsurance, copays, or premium contributions, compared to 16% in 2024.
Other strategies include:
Plan Design Initiatives (15%)
Purchase and Plan Initiatives (19%)
Administration and Data Analysis Initiatives (7%)
Work and Wellness Programs (6%)
The Path Forward for Employers
The IFEBP report underscores the challenges employers will face as they navigate rising health care costs in 2025. To effectively manage these increases, it’s crucial for employers to review their benefits offerings, assess cost-saving strategies, and ensure they meet the evolving needs of their workforce. While there’s no one-size-fits-all solution, a proactive approach to managing health care expenses can help organizations maintain a balance between cost control and employee satisfaction.
For more detailed insights and health care resources, it’s recommended that employers consult with health care experts to tailor strategies to their specific circumstances.
This blog post references the IFEBP Report on health care cost projections for 2025. For a detailed breakdown of the findings and strategies, refer to the original report.
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