U.S. employers project a median health care cost increase of 8% for 2025, according to International Foundation of Employee Benefit Plans survey results. This is an increase over similar surveys conducted in 2022 and 2023, which projected a 7% rise in costs.
Causes of Cost Increases
Employers shared their thoughts on the primary factors contributing to a rise in medical plan costs for 2025. The top four factors (listed by percent of employers that identified them as primary causes) are as follows:
- 20%—Catastrophic claims (up from 19% last year)
- 20%—Specialty/costly prescription drugs, (up from 16% last year)
- 18%—Medical provider costs (up from 14% last year)
- 16%—Utilization due to chronic health conditions (down from 22% last year).
Respondents who selected specialty/costly prescription drugs as a primary reason for the cost increase indicated that the following types of drugs were predominantly responsible for the increase:
- 75%—Glucagon-like peptide-1 (GLP-1) drugs
- 19%—Cell and gene therapy
- 31%—Other specialty drugs.
Employers are reporting that catastrophic claims and specialty drugs are amongst the significant drivers of the health care cost increases. When I spoke with Julie Stich, CEBS, Vice President of Content at the International Foundation she said that during 2024, employers have been implementing several strategies to manage costs, with an increased focus on utilization control and cost-sharing initiatives.
Managing Costs
When asked what types of initiatives would make the most impact on managing costs for 2025, employers indicated the following strategies for the coming plan year:
- 27%—Utilization control initiatives: e.g., prior authorization, case management, disease management, nurse advice lines (up from 22% last year)
- 21%—Cost-sharing initiatives: e.g., deductibles, coinsurance, copays, premium contributions (up from 16% last year)
- 15%—Plan design initiatives: e.g., dependent eligibility audits, high-deductible health plans, spousal surcharges/carve-outs, formulary changes (up from 12% last year)
- 9%—Purchasing/provider initiatives: e.g., telemedicine, price transparency tools, centers of excellence, health care navigators/advocates, coalitions, quality initiatives (down from 12% last year).
Survey responses reflected in the survey report are for corporate employers and do not include public plans or collectively bargained plans. Visit www.ifebp.org/healthcarecosts2025 for more information and a copy of the full survey results.
