Employers face higher healthcare costs in 2025, and may adopt new approaches

Large employers are looking at higher healthcare costs in the coming year, and they will face growing pressure to consider new strategies to control costs.

The Business Group on Health, a trade group which represents large employers on health policy issues, said those higher costs top their trends to watch in the coming year. The organization released a report outlining its 2025 projections earlier this week.

Businesses are facing healthcare cost increases that are expected to be the highest in a decade, and that’s going to drive companies to take a closer look at how much they’re spending and what they’re getting, the report suggests.

Moreover, businesses may consider options previously deemed too disruptive to manage costs more effectively and get more value from their health benefit plans. Businesses also are expected to ask tougher questions of vendors and may consider other options in hopes of seeing better value.

Ellen Kelsay, president and CEO of Business Group on Health, suggests companies are going to apply more scrutiny to their health benefits.

“As employers head into the new year, they face formidable challenges stemming from climbing health care costs, which are putting pressure on how employers manage their overall health and well-being programs,” Kelsay said in a statement.

The report suggests the higher costs are partly driven by conditions such as cancer, heart disease, autoimmune diseases and mental health.

Employers may be facing a “tipping point” in the next year when it comes to higher costs, and that may prompt businesses to take other approaches.

And businesses may be willing to move away from other vendors or partners.

“They may need to leverage strategies previously disregarded as too disruptive to the employee experience and otherwise, which could mean disengaging from long-standing partnerships,” the report stated.

Human resources and benefit leaders may talk with corporate executives about making changes to deal with rising costs.

“Many employers will explore newer entrants in the health plan and pharmacy benefit manager (PBM) space that some consider more agile and disruptive,” the report states. “Those staying with existing vendors will seek to adopt alternative plan designs that prioritize creative network management and more predictable out-of-pocket costs.”

Employers won’t be able to curb their healthcare expenses without getting a handle on their rising pharmacy costs, the report says.

Expect companies to look at their pharmacy partners, the group says. In a survey, one-third of employers said they planned to reassess their pharmacy benefit managers, and they may look for different partners or better deals from their current partners.

Businesses will also have to weigh their coverage of popular weight loss medications, also known as GLP-1 drugs. Those drugs carry a high price tag, and some companies may be looking to limit coverage to employees with type 2 diabetes, the report says. Companies may also look at other requirements for workers who want the drugs, including lifestyle management programs or getting the drugs from specific partners.

But companies also need to weigh the potential of anti-obesity drugs helping patients avoid more serious health conditions, the report suggests.

“Employers should account for these potential long-term savings when determining the impact of present-day plan designs,” the report states.

Employers are also succeeding in helping more workers gain access to mental health services, but mental health has emerged as one of the top five conditions driving healthcare costs for companies.

Companies will likely consider new mental health benefits and programs, but they should also look at their own workplace policies to support the mental health of their employees, the report states.