Health costs for US employers to see significant increase

Health costs for US employers to see significant increase – Aon | Insurance Business America

Life & Health

Health costs for US employers to see significant increase – Aon

Rise in claims and costs to further drive up coverage expenses

Life & Health

By
Kenneth Araullo

The average cost of employer-sponsored health care coverage in the US is projected to increase by 9% in 2025, surpassing $16,000 per employee, according to a new report from Aon.

This expected increase is higher than the 6.4% rise in health care budgets experienced from 2023 to 2024, a period during which cost-saving strategies were employed. Aon’s analysis shows that the average budgeted health-plan cost for clients is expected to be $14,823 per employee in 2024.

The findings are based on Aon’s Health Value Initiative database, which includes data from more than 950 US employers representing approximately 6.7 million employees.

The continued rise in medical claims and prescription drug costs, particularly due to the growth of specialty drugs and the increased use of GLP-1 medications for diabetes and obesity, is contributing to the overall cost increase.

Debbie Ashford (pictured above, left), North America chief actuary for health solutions at Aon, noted that rising employment levels and wage increases, driven by economy-wide inflation, have pushed health care costs higher.

She also explained that the health care industry’s response to these pressures has been to negotiate higher prices, which is reflected in the upward trend in medical costs.

On the prescription drug front, specialty drugs are identified as a leading factor in spending, despite their relatively low utilization rates.

Ashford pointed out that the demand for GLP-1 medications has surged, with the introduction of new drugs in this category expected to further drive up costs, adding approximately 1% to the overall health care cost increase.

Farheen Dam (pictured above, right), North American health solutions leader at Aon, further emphasized the importance for employers to balance the costs of GLP-1 prescription drugs with the potential benefits these medications offer in treating obesity and reducing related chronic conditions.

Dam stressed the need for employers to consider both the clinical evidence and health benefits, as well as the near-term cost impacts.

From 2023 to 2024, employer costs for health plans increased by 6.4%, while employee premiums from paychecks rose by a more modest 3.4%, according to Aon’s analysis.

Both increases are higher than the averages from the previous five years, during which employer budgets grew by an average of 4.4% annually, and employee contributions increased by an average of 1.2% per year. On average, employers subsidize about 81% of the plan cost, with employees covering the remainder.

In 2024, employees are expected to contribute approximately $4,858 toward health care coverage, with $2,867 paid through paycheck premiums and $1,991 paid via plan design features such as deductibles, co-pays, and co-insurance, according to Aon.

The rate of health care cost increases varies across industries, as does the proportion of costs shared by employers and employees. The technology and communications industry is expected to see the highest average employer cost increase at 7.4%, while the public sector is anticipated to have the highest average employee cost increase at 6.7%.

The health care industry is expected to see the lowest average change in employee contributions, with no material change from 2023.

High-cost claims continue to be a significant challenge for employers, driven by emerging high-cost gene and cell therapies, complex procedures, and a rise in chronic conditions.

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