While employers have become accustomed to annual increases in healthcare costs, 2025 is expected to bring some of the highest rates in more than a decade. Despite continuing to prioritize cost management and affordability, many businesses struggle to mitigate healthcare costs while improving benefits.
This delicate balance requires today’s employers to understand upcoming health plan cost trends and develop cost-management strategies to manage rising healthcare costs without sacrificing employee well-being.
With employee benefits consulting services, employers can find invaluable solutions that address affordability while supporting health equity.
Comprehending the Health Plan Cost Trends for 2025
Health plan cost trends refer to the rate at which the average cost of medical claims per insured person within a health plan increases over time. Many factors can contribute to increases in per capita claims costs, such as an aging population, advancements in medical technology, rising chronic disease prevalence, provider consolidation, changes in utilization patterns, and higher prescription drug costs.
Important Projections for 2025 Plan Costs
The 2025 Segal Health Plan Cost Trend Survey reveals the latest health plan cost trends to expect in upcoming months. The highest projected rate of increase is for outpatient prescription drugs, which is expected to reach 11.4%. The projected specialty drug trend is 13.3%, while the projected per-person cost trend for PPO/POS plans is 7.9%.
What’s Driving the Surge in Health Plan Costs?
Health insurance premiums influence both the accessibility and affordability of healthcare services. When factors such as medical price inflation and new treatments and therapies drive these premiums higher, employers and employees feel the impact.
The primary contributor to rising health insurance premiums is the overall rising costs of medical services. As inflation continues to rise, so does the cost of hospital stays, healthcare procedures, pharmaceuticals, and medical staff. Let’s look at some top factors causing health plan costs to skyrocket.
Utilization of High-Cost Therapies and Drugs
The growing reliance on expensive specialty drugs and innovative new treatments is quickly replacing lower-cost therapies. Utilization of high-cost therapies and drugs is driving a trend of rising healthcare costs as these newer medications and therapies, often with complex manufacturing processes, are increasingly prescribed.
In turn, this increases overall drug spending and impacts healthcare budgets for many employers. Research shows that U.S. drug spending will grow from 4% to 7% through 2028.
Price Inflation and Provider Cost Shifting
When necessary services experience price inflation and healthcare providers are forced to cost-shift due to reduced Medicare and Medicaid reimbursement rates, the result is often higher costs for private insurance patients.
This is typically due to providers charging more to commercially insured individuals to recoup lost revenue from government programs. Consequences of price inflation and provider cost shifting can range from reduced access to care to increased patient financial burden.
Strategies to Manage Rising Health Plan Costs
Effectively managing rising health plan costs requires employers to implement various strategies to increase affordability while maintaining a competitive benefits package.
There are many things employers can do to make positive changes, such as by offering wellness programs to promote preventative care, providing assorted health plan options for employees to choose from, switching to high deductible health plans (HDHPs), or encouraging the use of telehealth services. Other strategies that can help employers better manage rising healthcare costs include:
Pharmacy Benefit Management Optimization
Pharmacy benefit management (PBM) can be achieved through various strategies. Switching to a value-based formulary can help employers manage health plan costs by prioritizing medications with proven clinical effectiveness and better health outcomes. This encourages the use of higher-value drugs while discouraging less effective, more expensive options.
Requiring rebate transparency can also be a valuable approach. It helps employers manage health plan costs by providing them with clear information about drug rebates they receive from pharmaceutical companies.
This allows them to negotiate contracts better and identify potential cost savings. Employers should also encourage using generic alternatives whenever possible to take advantage of their lower price points.
Chronic Condition and Site of Service Management
Actively managing chronic conditions among employees and guiding them toward lower-cost healthcare options can help employers significantly reduce their healthcare expenses. Early intervention and preventative measures are essential in managing chronic illnesses, often preventing advanced complications caused by delayed treatment.
Educating employees about their health conditions and treatment options can empower them to make informed decisions that help minimize healthcare costs.
Partner With New City for Employee Benefits Consulting to Control Costs and Optimize Benefits
With healthcare plans expected to continue rising in 2025, many employers are concerned about keeping their benefits affordable without diminishing their quality. At New City Insurance, we’re proud to offer powerful employee benefits consulting that saves businesses money without reducing benefits or network access. Get started with New City today.