Mercer Report Projects 5.8% Health Benefits Cost Increase in 2025
U.S. employers estimate health benefit costs will increase by 5.8% in 2025, according to Mercer’s 2024 National Survey of Employer-sponsored Health Plans. This would mark the third consecutive year that the total cost per employee rose more than 5%. The report attributed the higher costs to the widening gap between the supply of health care workers and the demand for health care services, along with costly behavioral health care and weight loss medications.
Furthermore, employers estimated that their costs would rise by an average of 7% if they took no action to lower costs. Half (53%) of employers said they would make cost-cutting changes (e.g., raising deductibles) to their plans next year to manage rising costs, compared to 44% in 2024. Not surprisingly, smaller employers (organizations with 50-499 employees) estimate being impacted the most, reporting that costs would rise by an average of 9% if they took no action to lower costs. In general, most industry reports project an increase in the 7%-9% range.
While the best strategies for reigning in these costs may vary by organization, employers should nevertheless review their benefits offerings to determine the most effective cost-saving strategies and whether they are meeting employees’ needs. Contact us for more health care resources.
Understanding the Key Drivers of 2025 Health Care Cost Increases
Health care costs are projected to increase substantially in 2025—likely by 7%-8%. Estimates show a similar growth in spending to 2024, marking multiple years of compounding costs. Here are the key factors impacting these costs in 2025:
- Glucagon-like peptide-1 (GLP-1) drugs—GLP-1 users typically need to take them in perpetuity to experience the intended health benefits. While 6% of Americans are currently taking a GLP-1 drug, 9% could be by 2030.
- General pharmacy spending—Other factors expected to drive up general pharmacy spending are existing drug cost increases, cell and gene therapies, and biologics and biosimilars.
- Health care labor costs—When key players in the health care industry need to spend more on employment and salaries, those costs are often passed on to both employers and users of the health care benefit.
- Chronic health conditions—Around 90% of U.S. health care spending is for people with mental and chronic health conditions, including heart disease, stroke, cancer, diabetes, arthritis and obesity.
- Aging population—The U.S. population of people 65 or older continues to trend up, with over 55 million Americans over the age of 55. Estimates project almost 80 million people age 65 and older by 2040.
While rising health care costs are unavoidable, educated employers can better understand these trends and act appropriately. Contact us for more health care resources.
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