Healthcare spending in the United States continues to climb year over year, with estimates projecting an increase of 7%-8% in 2025. While these cost surges have been a recurring trend for years, many employers and employees are wondering how much more they can handle --- and if there is a way they can manage expenses while maintaining a critical piece to their overall health.
To help you mitigate the impact of these rising expenses, let’s break down the driving forces behind this growth and share behaviors both employers and employees can adopt to reduce costs.
A significant factor in the projected increase in health costs is the growing use of glucagon-like peptide-1 (GLP-1) drugs. Originally developed to treat type 2 diabetes, GLP-1 medications such as Mounjaro, Ozempic, and Wegovy have gained popularity for their effectiveness in aiding weight loss when combined with diet and exercise.
The costs associated with these drugs, which can run approximately $1,000 per month, are expected to contribute substantially to overall healthcare spending in 2025. Because their continued use is necessary to maintain the efficacy of the drug, this will have long-term financial implications for both individuals and insurers.
In addition to GLP-1 treatments, the cost of other existing and specialty drugs is also on the rise. Medications for chronic conditions, including cancer treatments and immunotherapies, are projected to see price increases ranging from 4% to 10%.
The uptick in both the cost and utilization of these medications contributes to heightened pharmacy spending. Specialty drugs, although accounting for only a small percentage of total prescriptions, represent a significant share of overall pharmaceutical expenses due to their complexity and targeted use.
Cell and gene therapies (CGT) represent a breakthrough in medical treatment, addressing severe conditions such as blood cancers and genetic disorders. While their potential to improve patient outcomes is undeniable, the price tags are substantial for health care spending — ranging from thousands of dollars per week to upwards of $4.25 million for a single treatment.
The estimated cost impact for CGT could reach $25 billion by 2025 as more patients become eligible for these therapies. This high price is due to the advanced technology, extensive research, and limited patient base associated with CGT.
Biologics, which are derived from living organisms, are another fast-growing category in healthcare spending, used to treat diseases like rheumatoid arthritis, psoriasis, and various cancers. Although they represent only 2% of total prescriptions, they account for approximately 37% of net drug spending.
Biosimilars, designed to be cost-effective alternatives to biologics, have provided some relief by saving billions of dollars in drug costs. However, challenges such as regulatory hurdles, patent protections, and limited adoption have slowed their integration into mainstream healthcare.
Labor shortages and increasing salary demands are placing additional pressure on healthcare costs. The demand for medical professionals continues to grow, driven by an aging population that requires more services and a workforce grappling with high rates of burnout.
These factors push providers to increase wages to attract and retain talent, ultimately passing the costs onto employers and consumers in the health care system. With inflation affecting nearly every aspect of the economy, labor-related expenses are a significant contributor to the anticipated cost surge in 2025.
Chronic conditions account for roughly 90% of healthcare spending in the U.S. Diseases such as heart disease, diabetes, and cancer, combined with an aging population, significantly impact overall expenses. The CDC reports that more than 2 in 5 U.S. adults are considered obese, which is associated with various chronic diseases that amplify healthcare costs in annual spending.
Additionally, the number of Americans aged 65 and older continues to grow, with projections showing nearly 80 million people in this age group by 2040. This demographic shift means higher per-person spending, as older adults typically require more intensive and frequent medical care.
Given these trends, employers must be proactive with reducing healthcare costs to sustain benefits for their workforce. This includes implementing strategic changes such as:
Offering health insurance is a significant tool to attract and retain key talent, but the rising cost of healthcare may soon make it unaffordable for most employers to offer if strategic changes are not implemented.
While employers can proactively implement strategies to reduce healthcare costs, employee behavior may have the most significant impact on future health insurance premiums.
Here are four behavioral changes to help you become a smarter healthcare consumer and avoid unnecessary expenses without reducing health outcomes.
While emergency rooms at hospitals are essential for life-threatening conditions, they come with significantly higher costs than urgent care centers. For non-emergency situations (i.e. not life- or limb-threatening), opting for urgent care can save both the individual and the insurance plan substantial money. Better yet – use telehealth services!
Telehealth has become a mainstream option for non-emergency consultations. These virtual visits often come with lower copays than in-person visits and offer convenience and quick access to care. Several primary care physicians also offer telehealth services; contact your primary care physician to see if this might be available for your needs.
Embracing telehealth can help employees save on medical expenses and reduce the burden on the healthcare system.
Generic medications provide the same active ingredients as brand-name drugs but at a lower cost. Employees can ask their healthcare provider or pharmacy benefit managers for generic alternatives, which can significantly reduce both out-of-pocket expenses and insurance plan costs.
Using in-network providers helps control costs, as these healthcare professionals have pre-negotiated rates with the insurance company. Out-of-network visits typically result in higher charges that are passed on to the individual and insurance plan.
Employees should take advantage of insurance company tools or apps that make it easy to locate in-network providers and make informed choices.
The healthcare landscape is becoming increasingly complex, with various factors driving costs upward.
Employers who take a strategic approach and educate their workforce about cost-saving measures can help mitigate future premium increases, ultimately supporting sustainable healthcare coverage. Employees, in turn, can contribute by making informed choices, leading to healthier outcomes and more affordable care for all.
By understanding these dynamics and adopting smarter healthcare practices, both employers and employees can better manage expenses. For more information, please contact your certified HR expert.
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