U.S. employers project their health care costs will increase by 7.7% in 2025, up from 6.9% in 2024 and 6.5% in 2023, according to a new according to a new survey from leading global advisory, broking and solutions company WTW.
As the cost of healthcare in the U.S. rises to a record high since the COVID-19 pandemic, nearly half of employers responding to WTW’s 2024 Best Practices in Healthcare Survey expect healthcare costs will exceed budget projections this year. In response, employers are embracing different approaches to safeguard program affordability for their companies as well as for their employees. While focusing on more competitive, cost-effective plan designs to control costs, they are seeking to maintain employee wellbeing, the survey reveals.
As a result of the expected uptick in costs, employers are reaching beyond traditional cost-shifting strategies to improve healthcare affordability and employee health. More than half of employers (52%) plan to implement programs that will reduce total costs, and just as many (51%) intend to adopt plan design and network strategies that steer to lower-cost, higher-quality providers and sites of care. Only 34% expect to shift costs to employees through premium contributions, and just 20% will promote account-based health plans or high-deductible health plans.
“The cost of healthcare has been rising steadily for years. With cost increases reaching a post-pandemic high, companies are concerned about the burden it’s putting on their workforces, especially since it affects decisions about insurance coverage and care,” said Tim Stawicki, chief actuary, Health & Benefits, WTW. “To tackle high prices and other causes driving increased spending, companies are pursuing initiatives that are beyond cost-shifting.”
These initiatives are focused within the prescription drug space as well, with strong interest in alternative drug channels and pricing. According to the survey, 21% of employers are planning for or considering promoting drug discount cards or direct-to-consumer prescription delivery to lower out-of-pocket costs in the next two years; 18% expect to allow members to purchase drugs through a retail or “cost plus” outlet, and 17% expect to have an acquisition cost pharmacy benefit manager (PBM) contract structure.
Other proactive efforts to control costs over the next two years include taking vendor/health plans out to bid (43%), evaluating employee assistance programs/mental health programs (38%), and exploring narrow networks (30%) and centers of excellence (25%). Additionally, employers continue to explore new technology-enabled solutions for managing costs, with 54% exploring navigation or technology that shares provider price and quality information with members.
To support affordability and employee wellbeing, employers’ top focus areas are obesity and weight management (40%), cancer and oncology (34%), cardiovascular health (28%) and women’s health (27%).
Employers are still contending with the continued demand for high-cost weight loss medications. While most employers are maintaining coverage for obesity medications with some restrictions, those not offering coverage today state cost and safety as the biggest barriers. Employers are eager to consider safe and effective lower-cost alternatives; 48% of employers expressed interest in compounded GLP-1 medications available through certain vendors at much lower costs.
“To navigate the current healthcare environment, companies need to proactively address cost challenges and implement effective risk management strategies,” said Courtney Stubblefield, managing director, Health & Benefits, WTW. “By doing so, they can mitigate financial risks, support the wellbeing of their workforce and achieve long-term sustainability.”
Other survey findings:
• Employers report the greatest opportunities for artificial intelligence in supporting health and benefits are navigation solutions (64%) and communication (58%).
• More than two-thirds (67%) of employers provide coverage for fertility services beyond diagnosis of infertility, including in vitro fertilization and medications.
• To lower costs, 73% of employers plan to carve out pharmacy benefits over the next few years, and 27% would consider a smaller PBM that offers alternate pricing models.
A total of 417 employers employing 6 million workers participated in the 2024 Best Practices in Healthcare Survey, which was conducted in June and July 2024.
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