U.S. employers anticipate an average health insurance cost increase of 5.8% in 2025, according to a recent survey by consulting firm Mercer.
This rise is primarily attributed to escalating medical service costs and increased utilization. The projected increase marks the third consecutive year that employer healthcare costs will exceed 5%, following an average increase of just 3% over the previous decade.
The ongoing shortage of healthcare workers is a significant factor driving up the cost of medical services, as providers respond by raising prices. Additionally, increased spending on behavioral health and the rising popularity of expensive GLP-1 weight loss drugs are contributing to the overall cost surge.
Beth Umland, Mercer’s director of employer research for health and benefits, noted that employees are expected to continue covering about 21% of total health plan costs in 2025. Furthermore, 53% of employers plan to implement cost-management strategies next year, up from 44% in 2024. These strategies will focus on reducing utilization among members with costly conditions and managing specialty drug expenses.
Prescription drug spending remains the fastest-growing cost for employers, with a 7.2% increase in 2024, down from 8.6% in 2023.
Employers are particularly concerned about the high costs associated with gene and cellular therapies, which can exceed $1 million per treatment. Umland emphasized the unprecedented levels of these drug costs, stating, “When one of those claims hits, employers really feel it.”
Employers with 50 to 499 employees are projected to experience the most significant cost increases, with a 9% rise if no cost-management measures are taken and a 6.3% increase if such measures are implemented. Smaller employers tend to pay higher premiums for fully insured health plans and often lack the resources to introduce cost-saving wellness programs, according to Mercer’s Chief Actuary Sunit Patel.
Mercer’s survey included responses from 1,800 U.S. employers, ranging from those with 50 employees to those with over 500. As companies brace for these rising costs, many are exploring ways to manage their health benefits more effectively while maintaining employee coverage.
