In a year marked by stabilization in grocery and car prices, health care costs continue to escalate, as indicated by a recent survey from KFF, a nonprofit health policy organization. The average premium for a family health insurance plan provided by employers rose 7% this year, reaching $25,572. This marks the second consecutive year of 7% increases, contrasting sharply with a mere 1% increase in 2022.
Individual health insurance premiums also saw a significant rise, increasing 6% to $8,951. These escalating costs pose challenges for employers, who largely bear these expenses, and for families grappling with rising living costs. Notably, health insurance price increases outpaced the 4.5% rise in workers’ wages and the 3.2% increase in inflation, which had cooled from its earlier highs.
Approximately 154 million Americans receive health insurance through their jobs, as tracked by KFF’s annual survey of over 2,100 employers nationwide. According to Matthew Rae, KFF’s associate director, the sharp rise in health insurance costs reflects broader economic price growth and increased healthcare access following the pandemic. “We’ve rebounded to normal levels,” he stated.
Medical inflation typically lags behind overall inflation, which helps explain why health insurance costs continue to climb even as general inflation rates decline, noted Tim Nimmer, senior vice president at TriNet, which supports small businesses.
As employers prepare for 2025 health insurance sign-ups, workers can expect larger payroll deductions, compounding financial pressures amid rising living costs. The average cost of family health insurance has surged 24% since 2019, while employee contributions increased just 5%. For this year’s average family plan, companies paid $19,276, while employees contributed $6,296.
The survey also highlighted that the average deductible for individuals is now $1,787, a modest increase from the previous year. Employers often manage costs by limiting access to more expensive medical facilities, with nearly 20% of larger companies utilizing “narrow networks” of providers.
Small businesses are particularly vulnerable; for example, Epting Distributors in South Carolina experienced nearly a 30% increase in health insurance costs this year. HR coordinator Laura Ivey noted that many employees are older and manage chronic conditions, complicating the cost structure as some remain on employer-provided insurance despite being eligible for Medicare.
Ivey expressed frustration over the lack of transparency in healthcare pricing, which hinders efforts to find lower-cost services. While federal regulations require hospitals to disclose some pricing information, she pointed out that the data is not user-friendly for consumers or small businesses.
The American Hospital Association asserts that most hospitals comply with the transparency requirements, but the information remains difficult for employers to utilize effectively.
In addition, the survey revealed that most large employers are reluctant to cover expensive weight loss medications, such as Wegovy. Companies that do offer coverage often impose stringent requirements on employees, including consultations with healthcare professionals.
Despite the popularity of these medications, which are crucial in addressing obesity—affecting nearly 40% of U.S. adults—many companies with over 200 employees do not plan to cover them next year due to high costs. North Carolina officials, for instance, opted to discontinue coverage of weight loss drugs after determining that it would necessitate a significant increase in premiums for state employees.
Rae concluded that employers face challenging decisions in balancing the high costs of these medications against potential health benefits and employee satisfaction.
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