U.S. Employer Health Care Costs Projected to Rise 9% in 2025
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The average cost of employer-sponsored health care coverage in the U.S. is set to rise by 9.0%, exceeding $16,000 per employee in 2025, according to a projection by Aon.
The forecasted increase is higher than the 6.4% increase in health care budgets experienced by employers from 2023 to 2024, the broker noted. The average budgeted health plan cost for employers in 2024 was $14,823 per employee, up 5.8% from $14,011 in 2023.
Medical claims continue to rise at high levels, while prescription drug costs are escalating due to the continued growth in specialty drugs and increased use of GLP-1 medications for diabetes and obesity.
“In the health care sector, both rising employment levels and wage increases fueled by economy-wide inflation during the past few years are pushing health care costs higher,” said Debbie Ashford, the North America chief actuary for Health Solutions at Aon.
Specialty drugs remain the leading factor in spending on prescription drugs, despite representing a small fraction of overall utilization. The demand for GLP-1 medications has surged, and the introduction of new drugs in the GLP-1 category is expected to further drive up costs, adding 1 percent to the overall healthcare cost increase, Ashford added.
Farheen Dam, North American Health Solutions leader at Aon, emphasized the importance of balancing the costs of GLP-1 prescription drugs with the opportunity they provide to treat obesity and reduce associated chronic conditions.
“It’s imperative that employers consider the clinical evidence and health benefits as well as the near-term cost impacts,” Dam said of employer coverage of GLP-1 drugs.
In 2024, employer costs for medical and prescription drug benefits increased 6.4% to $11,956 per employee, while employee premiums from paychecks were slated to be $2,867, a modest 3.4% increase from 2023.
Both are significantly higher than averages from the previous five years, when employer budgets grew an average of 4.4% per year and employees averaged 1.2% per year. On average, employers subsidize about 81% of health plan costs, with employees paying the remainder.
“Employers continue to bear the brunt of rising health care costs,” Dam said. “Plan sponsors are wary of passing significant expenses on to plan participants, striving to keep benefits affordable.”
The rate of health care cost increases varies by industry. The technology and communications industry experienced the highest average employer cost increase from 2023 to 2024 at 7.4%, while the public sector saw the highest average employee cost increase at 6.7%. The health care industry had the smallest average change in employee contributions, with no significant change from 2023.
High-cost claims continue to be a challenge for employers, driven by emerging high-cost gene and cell therapies, complex procedures, and a rise in chronic conditions.
“Self-insured plan sponsors face challenges in providing stable plan increases, funding, and renewals in this volatile environment,” Dam said.
View the Aon report here. &