U.S. employers are preparing for a nearly 6% increase in health insurance costs in 2025, according to a recent survey by consulting firm Mercer. This rise is mainly driven by higher prices for medical services and increased healthcare usage.
The projected 5.8% increase marks the third year in a row that employer healthcare costs have grown by more than 5%, well above the 3% average increase seen over the previous decade.
One key factor behind rising costs is a continuing shortage of healthcare workers, which has led providers to raise prices. Additionally, spending on behavioral health services and costly GLP-1 weight loss drugs is contributing to the increase.
Employees are expected to continue paying about 21% of total health plan costs, remaining steady into 2025. To manage rising expenses, more than half of employers—53%—plan to introduce cost-saving strategies next year, up from 44% in 2024.
These strategies focus on reducing the use of expensive treatments among plan members and managing the costs of specialty drugs, which remain the fastest-growing expense. Prescription drug spending increased 7.2% in 2024, though this growth slowed slightly from 2023.
Employers are especially concerned about the rising costs of gene and cellular therapies, which can exceed $1 million per treatment. Though rare, these expensive therapies can have a significant financial impact when claims arise.
Smaller employers, particularly those with 50 to 499 employees, expect the largest cost increases—up to 9% without cost controls, or about 6.3% if they implement cost management measures. Smaller businesses often face higher premiums for fully insured health plans and have fewer opportunities to implement wellness programs to reduce costs.
Mercer’s survey gathered insights from 1,800 U.S. employers of various sizes, highlighting the ongoing challenge of balancing healthcare quality and affordability in the coming year.
