Payers

Employer health plan costs to rise 5.8% in 2025

And that number could be higher if employers don’t take measures to cut costs, analysts say.
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Anna Kim

3 min read

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Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.

Despite inflation cooling down, employer health plan costs are heating up, according to a September analysis from consulting firm Mercer.

The firm’s 2024 National Survey of Employer-Sponsored Health Plans, which includes data from more than 1,800 US employers, found that employer health plan expenses are expected to rise by 5.8% per employee in 2025, marking the third consecutive year of 5+% increases after a decade of steady 3% increases.

That 5.8% figure takes into account cost-cutting measures employers could take, such as raising deductibles. If employers do nothing, however, expenses could rise by about 7%, according to the analysis. That number would be even higher for smaller employers—defined as those with between 50–499 employees—at about 9%.

The why. One factor putting pressure on employer health plan prices, the analysts said, is the growing gap between the number of healthcare workers and the demand for healthcare services. And the issue will only continue to grow as the US population ages and more people need more healthcare services, according to the analysis.

Another factor is health system consolidation, which is leading to higher healthcare costs, according to the report.

Health system consolidation has “rapidly accelerated” in recent years, according to David Grande, director of policy at the Leonard Davis Institute of Health Economics at the University of Pennsylvania. From 1998 to 2021, the American Hospital Association reported 1,887 hospital mergers, reducing the country’s total hospital count from around 8,000 to roughly 6,000.

“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,” Sunit Patel, senior partner and chief actuary for US health and benefits at Mercer, said in a statement.

But the fastest-growing factor is spending on prescription drugs, the analysts found. Drug benefit spending per employee has increased by 7.2% in 2024, according to the report, and that number is expected to grow with the introduction of high-cost, complex drugs to the market like gene and cell therapies.

Due to these financial pressures, Mercer analysts projected that more than half (53%) of employers will take steps to cut costs in 2025, up from the projected 44% in 2024. Those measures typically include raising deductibles and other cost-sharing measures that end up raising out-of-pocket prices for beneficiaries, according to the analysis.

“Employers are still concerned about healthcare affordability and ensuring that employees can afford the out-of-pocket costs when they seek care,” Tracy Watts, senior partner and national leader for US health policy at Mercer, said in the statement. “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.”

Navigate the healthcare industry

Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.

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