Rising Healthcare Costs: How Employers Can Prepare

In the United States, health care costs affect both employers and employees, and the costs have projections to jump by the fastest rate in 15 years. The
Business Group on Health estimates the costs will jump by 8% in 2025.

They also predict a sharp increase in pharmacy expenses, new treatments, and ongoing health conditions to drive the bulk of the surge. Knowing which trends to watch helps business owners prepare for the upcoming challenges.

Why Healthcare Costs are Rising

The reasons why health care cost increases are complex, but there are a few main reasons. Pharmacy costs play a large role, including a big jump on prescription medication spending. Throughout 2023, roughly 27% of all health care dollars went to pharmacy expenses, and this is a jump from 2021’s 21% spending. Additionally, some health conditions and weight management medications are playing a part in the cost increase.

The Role of Pharmacy Costs

The cost for prescription medications is putting a big strain on employers. Many employers have valid concerns about the increasing costs of GLP-1 medications. To help curb and manage these expenses, some employers are starting to maximize manufacturer copay programs and work more closely with their
Pharmacy Benefit Managers (PBMs). These are short-term solutions, so the long-term outlook is still shaky.

The Major Health Conditions Driving Costs

The most expensive and common health conditions affecting employees drives healthcare spending. In 2024, the top concerns are:

CancerMusculoskeletal conditionsCardiovascular disease

For example, 80% of employers said that cancer was the leading cause of the increase in expenses. A lot of companies already took steps to help detect the disease early with the hope of lowering the long-term treatment expenses, like implementing cancer screening programs.

The Impact on Employee Out-of-Pocket Costs

In spite of the rising health care costs, employers are working to absorb the bulk of the cost to help make health care affordable for their employees. In 2024, the estimated total cost for these plans for the employer is $18,639. This is a jump from 2023’s $17,201 total.

However, the out-of-pocket costs the employees face are supposed to stay stable. The average cost for 2024 is $1,825, and this is almost the same as in 2023.
Individual health insurance plans come into play here because they offer more tailored solutions without going over budget.

GLP-1 Medications and Their Effect on Healthcare Costs

GLP-1 medications are another big factor pushing health care costs higher. People use them to treat obesity and diabetes, and roughly 96% of employers cover the cost if the employee uses it for diabetes. For obesity treatment, roughly 67% offer coverage. However, these medications have a high price tag attached, and many employers require prior authorizations to ensure the employees use them correctly and follow a treatment plan.

Managing Long-Term Costs of Weight Management Drugs

There is a rising concern over the long-term costs associated with any weight management drug, especially GLP-1. While the drugs are effective, they’re also expensive and need more than one-time use. Employers are trying to figure out how to balance offering coverage for these medications while staying on budget. A lot of them are going with
group health insurance plans to help be more effective at managing costs while balancing employee benefits.

Strategies Employers are Using to Control Costs

Another thing many employers are doing in the face of rising costs is to take another look at their vendor relationships and their pharmacy benefit strategies. A lot of companies are looking at more transparent models to help get a handle on their expenses and improve the overall quality of care. Also, employers are looking at key pieces of information to help make better decisions, including vendor transparency and claims data.

Reevaluating Partnerships

When it comes to choosing healthcare vendors, employers are starting to adopt data-driven approaches. The
request for proposal (RFP) process is not an important tool employers use to help negotiate better prices and pick high-performing vendors. Data quality and transparency are factors employers consider when they make these decisions.

What to Expect in the Future

Looking ahead, the rising trend regarding health care costs shows no signs of slowing down. Employers have to prioritize being proactive in managing these increases by looking into creative solutions and considering programs that encourage employee health. Pharmacy costs, especially revolving around weight management medications, are a focal point.

At the same time, health plans that focus on common conditions like cardiovascular disease and cancer are important for controlling costs. Exploring plans like
Medicare could also be a viable solution for employees around retirement age or those who need supplemental coverage.

Adapting to Rising Healthcare Costs

With healthcare costs on the rise, it’s important that employers act quickly to help ward off future increases. At Sackett Insurance, we’re ready to offer expert guidance to help businesses understand these challenges and the best solutions.
Contact us to learn more about your options and keep your healthcare costs under control.

Sources:

●     Business Group on Health

●     Mayo Clinic

●     American Progress

●     Healthcare.gov

●     GoodRX

●     Universal Service Administrative Co

●     Harvard T.H. Chan School of Public Health

●     NIH