Employers say they’ll double down on healthcare benefits despite rising costs

Dive Brief:

  • Employers plan to maintain their current health benefits in 2025, a recent Mercer survey of nearly 700 organizations found. This is despite the per-employee cost of benefits rising about 5.2% in 2023 and 2024, after nearly a decade of 3% annual cost growth. 
  • Additionally, employers plan to increase their support for or consider certain specialized coverage, Mercer found. Coverage for reproductive health needs is growing, the firm said, and employers are increasingly interested in covering weight-loss medications. 
  • Employers are split on how to cover rising costs. While 45% said it’s very likely or likely they will shift rising costs onto workers, 47% said it was not very or not at all likely. Many plan to offer or are considering alternative strategies like high-performance networks or enhanced clinical case management, Mercer said.

Dive Insight:

The rising cost of healthcare benefits is nothing new for HR to contend with, though the pace has climbed in recent years. Mercer attributed this in part to medical inflation.

“It took about a year for the spike in general inflation in 2022 to be felt in health plans as provider contracts came up for renewal and health systems and other providers negotiated higher reimbursement rates to offset higher wages and medical supply costs,” the firm wrote in its report on the findings.  

Rising prescription drug cost, which leapt 8.6% in 2023, is another contributing factor. Mercer said this rise was in part due to the rising use of glucagon-like peptide 1 (GLP-1) drugs for diabetes and obesity, which the firm said costs an estimated $1,000 per person per month. Employers do not generally seem deterred by the cost, however; most that currently cover such drugs said they’d continue to do so and close to a third of those not currently covering them said they are considering it. 

Overall, Mercer’s report showed employers are generally aware of financial strain on workers and looking to avoid adding to it if possible. Mercer found in another survey that about two-thirds of large employers said “improving healthcare affordability” would be a health plan priority over the next few years, and employers have been working to achieve that goal through strategies like offering no/low deductible healthcare plans, making larger HSA contributions and offering telemedicine to employees not eligible for the medical plan.

Some employers also said their financial benefits extended to other areas, like providing a financial wellness program, subsidizing utilities and meals for remote workers, and subsidizing transportation costs.