Newsletter Subscription

A Laser Focus World newsletter subscription is free to qualified professionals:

The Daily Beam

Showcases the newest content from Laser Focus World, including photonics- and optics-based applications, components, research, and trends. (Daily)

Product Watch

The latest in products within the photonics industry. (9x per year)

Bio & Life Sciences Product Watch

The latest in products within the biophotonics industry. (4x per year)

Laser Processing Product Watch

The latest in products within the laser processing industry. (3x per year)

Employers Expect Third Consecutive Year of Health Benefit Cost Increases Above 5% in 2025, According to Mercer

By: Mercer via Business Wire

September 12, 2024 at 09:00 AM EDT

Today, Mercer, a business of Marsh McLennan (NYSE: MMC) and a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people, released preliminary results from its 2024 National Survey of Employer-Sponsored Health Plans.

According to an analysis of responses from over 1,800 US employers, total health benefit cost per employee is expected to rise 5.8% on average in 2025, even after accounting for planned cost-reduction measures. Employers estimated that their cost would rise by about 7%, on average, if they took no action to lower cost. Smaller employers (those with 50-499 employees), which typically have fully insured health plans, have been hit the hardest. They reported that cost would rise by about 9% on average if they took no action to lower cost.

Based on these projections, 2025 would be the third consecutive year of health benefit cost increases above 5%, following a decade of cost increases averaging only around 3%. Meanwhile, general inflation has cooled, suggesting that other factors are contributing to the higher health benefit cost trend.

Complex forces driving higher cost trend

According to Sunit Patel, Mercer’s US Chief Actuary for Health and Benefits, several factors are contributing to faster cost growth. Mr. Patel said, “While we’ve seen significant increases in utilization in a few areas, such as for behavioral healthcare and GLP-1 medications, overall utilization has had a relatively modest impact on trend this year. The biggest driver of higher costs is price dynamics, some of which are macro in nature.”

One source of pricing pressure is the widening gap between the supply of healthcare workers and the demand for healthcare services, which is building as older Americans become a larger part of the population. Another is the continuing consolidation of health systems – which shows no sign of slowing down. Mr. Patel notes, “Consolidation may generate savings in the future through increased efficiency and improved integration, but there is evidence it is putting pressure on pricing, as larger health systems have greater negotiating power than smaller systems.”

Spending on prescription drugs remains the fastest-growing component of health benefit cost. Employers reported that drug benefit cost per employee rose 7.2% in 2024. The ongoing introduction of very high-cost gene and cellular therapies is contributing to this higher cost growth.

The employer response to faster cost growth

The survey results suggest that about half of employers (53%) will make cost-cutting changes to their plans in 2025, an increase from 44% in 2024. Generally, these changes involve raising deductibles and other cost-sharing provisions and result in higher out-of-pocket costs for plan members when they seek care. In recent years, many employers have avoided making these types of changes, but this becomes more difficult in a period of sustained higher cost growth.

According to Tracy Watts, Mercer’s National Leader of US Health Policy, “Employers are still concerned about healthcare affordability and ensuring that employees can afford the out-of-pocket costs when they seek care. But they also need to manage the overall cost of healthcare coverage to achieve a sustainable level of spending for the organization. Balancing these competing priorities will be a challenge over the next few years.”

Because the cost of healthcare coverage is typically shared between the employer and employee, managing cost is also important to minimize growth in employee premium contributions. On average, employees will pay for 21% of health insurance premiums through paycheck deductions in 2025, the same as in 2024.

About Mercer’s National Survey of Employer-Sponsored Health Plans

The 2024 National Survey of Employer-Sponsored Health Plans launched on June 12. The preliminary results are based on responses from over 1,800 employers through August 12. The final survey results, which will include about 2,200 employers, will be released later this year.

About Mercer

Mercer, a business of Marsh McLennan (NYSE: MMC), is a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of $23 billion and more than 85,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit mercer.com, or follow on LinkedIn and X.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240912355491/en/

Contacts

Media:

Ashleigh Jang

Mercer

+1 917 647 0070

Ashleigh.Jang@mercer.com

About Us

Laser Focus World Membership

Magazine Subscription

Newsletter Subscription

The Daily Beam

Product Watch

Bio & Life Sciences Product Watch

Laser Processing Product Watch

Get Published!

Photonics Hot List

Following the Photons: A Photonics Podcast

Social Media

Meet the Laser Focus World Team

Editorial

Sales

Editorial Advisory Board

Employers Expect Third Consecutive Year of Health Benefit Cost Increases Above 5% in 2025, According to Mercer

Contacts

More News