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Employers

Health Benefit Costs Expected to Rise 5.8% in 2025

Strategic Insights

— 2 min read

U.S. employers are preparing for a 5.8% increase in health benefit costs in 2025, marking the third consecutive year with costs rising more than 5%. This estimated increase comes from new survey results from Mercer, which analyzed responses from over 1,800 employers. The expected rise is after a decade of average cost increases of just 3%. Smaller employers, typically with fully insured health plans, will likely face the largest impact, with costs rising by around 9% on average if no action is taken to lower them.

Key Takeaways:

  • U.S. employers plan for a 5.8% increase in health benefit costs in 2025, after accounting for cost-reduction measures.
  • This marks the third consecutive year with health benefit costs increasing more than 5%, after a decade of average increases of 3%.
  • Smaller employers (50-499 employees) will likely be hit the hardest, with estimated costs rising by 9% on average if no action is taken.
  • The share of health insurance premiums paid by employees in 2024 (21%) is expected to remain about the same in 2025.
  • Mercer's findings are in line with other reports, including an 8% median increase from IFEBP and a 9% average increase from Aon.
  • Use of expensive GLP-1 drugs, like Ozempic and Wegovy, is driving some of the cost increases, with high costs (typically $1,000-$1,500/month) presenting a significant issue for employers.
  • Spending on prescription drugs remains the fastest-growing component of health benefit costs, with employers reporting a 7.2% rise in drug benefit costs per employee in 2024.
  • Continued health care worker shortages, linked to providers raising prices due to supply and staffing shortages, adds to the higher costs.
  • Mercer found that employers plan to make 53% of cost-cutting changes to their plans in 2025, up from 44% in 2024, including raising deductibles and implementing cost-sharing provisions.
  • The ongoing balancing act for employers between ensuring employee affordability and managing overall healthcare costs will be a challenge in the next few years.

Statistics:

  • 5.8%: Estimated increase in health benefit costs for 2025.
  • 3%: Decade-long average increase in health benefit costs (2015-2024).
  • 9%: Estimated cost increase for smaller employers (50-499 employees) without cost-reduction measures.
  • 21%: Average share of health insurance premiums paid by employees in 2024 and expected in 2025.
  • 7.2%: Rise in drug benefit costs per employee in 2024.
  • 8%: Median health care plan cost increase projected by IFEBP.
  • 9%: Average cost increase of employer-sponsored health care coverage in the U.S. (Aon analysis).
  • $1,000-$1,500: Typical monthly cost per patient for GLP-1 drugs like Ozempic and Wegovy.
  • 53%: Percentage of employers planning cost-cutting changes to their plans in 2025, up from 44% in 2024.

Sources:

  • Mercer (no date)
  • International Foundation of Employee Benefit Plans (IFEBP) (no date)
  • Aon (no date)

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