Stepping into 2025, businesses across the country are facing climbing healthcare expenses. Recent data revealed an anticipated rise in health benefit costs per employee of 5.8%, despite many companies implementing cost-management solutions, such as raising deductibles.
Concerns over employee productivity, job satisfaction, and overall well-being have risen, motivating employers to provide more competitive benefits. Through professional employee benefits consulting, businesses can adopt cost-saving measures that satisfy employees while maintaining a healthy bottom line.
Why Healthcare Costs are Rising Yet Again in 2025
New research shows that commercial healthcare spending growth will likely reach its highest level in 13 years, with a projected 8% year-on-year annual medical cost trend in 2025. Surging healthcare costs in the United States are driven by various factors that affect both employers and employees.
Primary Drivers Behind Cost Increases
As healthcare costs continue to rise, many businesses struggle to keep costs affordable for workers without compromising their own bottom line. However, factors such as the growing demand for behavioral healthcare and costly medications such as GLP-1 drugs, coupled with workforce shortages in the healthcare industry, have put financial strain on today’s businesses. With healthcare expenses increasing, it is more essential than ever for employers to be knowledgeable and proactive.
The Impact on Employers and Employees
Rising healthcare costs impact employers and employees in different ways. For employers, healthcare premiums are becoming a larger portion of their operating budgets, often eating into resources that could be allocated to other growth areas or employee development.
As a result, employees are affected as some businesses shift a larger portion of the health plan cost onto workers. Higher premiums, deductibles, and copays make healthcare less affordable for employees.
Cost-Management Strategies for Employers in 2025
Taking control of healthcare expenses in 2025 requires employers to think strategically and proactively about cost management. As companies face increasing financial challenges, finding creative ways to manage expenses without impacting the quality of employee benefits is now a top priority. Striking this balance is essential for maintaining a healthy bottom line and attracting and retaining top talent in a competitive labor market.
Leveraging Alternative Funding Models
Employers can better manage healthcare costs by leveraging alternative funding models such as self-funding and level-funded plans. Self-funding allows businesses to pay employee healthcare claims directly, offering greater cost control and flexibility while avoiding many traditional insurance fees. Level-funded plans combine the predictability of fixed monthly payments with the transparency of claim data, allowing employers to understand and manage expenses better.
Improving Pharmacy Benefit Management
Improving pharmacy benefit management (PBM) is essential for controlling rising prescription drug costs. Employers can partner with PBM services to negotiate better pricing, monitor usage, and identify cost-saving opportunities.
Redesigning formularies to prioritize cost-effective medications, such as generics and biosimilars, helps reduce expenses without compromising quality. In addition, implementing utilization management programs, such as prior authorizations or step therapy, allows workers to receive the most appropriate and affordable treatments.
Building Employee-Centric Solutions Amid Rising Costs
Employee-centric solutions have become essential for maintaining a healthy and engaged workforce amid rising healthcare costs. Employees are feeling the financial strain more than ever, and businesses have the opportunity to address these challenges with strategies that prioritize affordability, accessibility, and well-being. By focusing on the needs of their workforce, employers can promote loyalty, boost productivity, and reduce turnover.
Educating Employees on Smart Healthcare Choices
Educating employees on smart healthcare choices reduces unnecessary expenses and improves overall cost management. Employers can empower their workforce by providing cost-effective tools that help employees compare prices for medical services and prescriptions.
Offering wellness programs encourages preventive care, reducing the likelihood of expensive treatments down the line. Telehealth options also play a necessary role, providing convenient and affordable access to care for non-emergency issues.
Balancing Cost Control With Competitive Health Benefits
Balancing cost control with competitive health benefits is essential for retaining top talent in a competitive job market. While rising healthcare costs pose financial pressures, offering benefits that prioritize mental health, preventive care, and flexibility can set employers apart.
With employees prioritizing benefits more than ever, companies that fail to offer competitive healthcare options risk losing top talent to competitors. Investing in mental health resources, such as counseling or employee assistance programs, demonstrates a commitment to well-being.
Preventive care options reduce long-term expenses while supporting healthier employees. Flexible benefits, such as customizable plans or remote care options, address differing workforce needs.
Explore Smarter Cost-Management Strategies With Employee Benefits Consulting From New City
Rising healthcare costs in 2025 pose a serious challenge, but they also present an opportunity. By rethinking benefits strategies and prioritizing sustainable solutions, businesses can turn cost pressures into a competitive advantage.
Businesses can overcome these financial pressures while remaining competitive by focusing on cost-management approaches, such as alternative funding models, pharmacy benefit optimization, and employee-centric solutions. Partnering with an employee benefits consulting firm can provide the expertise and insights needed to build smarter strategies customized to your business’s exclusive needs. Contact New City Insurance today to get started.