Experts suggest that companies are likely to respond to rising costs by intensifying their scrutiny of health insurers and other vendors, aiming to find cost-effective alternatives. Ellen Kelsay, CEO of the Health Business Group, mentioned that while businesses want to protect their employees as much as possible, rising costs might lead to higher premiums and deductions for workers.
Kelsay criticized the approach of simply passing costs onto employees, labeling it as a “band-aid” solution that fails to address long-term financial dynamics.
“Employers still bear more than 90% of their healthcare expenses,” Kelsay noted during a conversation with a reporter. “They’re doing their best to manage these cost increases.”
The anticipated 9% rise in costs is a shift from an earlier estimated 8%. Meanwhile, an increase of 7.5% is projected for 2024, along with 6.8% for 2023. Even if employees aren’t facing direct high costs, rising medical expenses can slow wage growth over time.
This 9% increase aligns with other forecasts; for example, the International Foundation for Employee Benefits Planning recently anticipated a median cost increase of 10% for employers. The primary drivers are catastrophic claims and high-cost specialty drugs.
According to health research, the surge in costs for employers is notably linked to the rising use of GLP-1 medications for obesity and diabetes, with about 80% of surveyed employers indicating an increase in use, and 15% expecting more.
Regarding coverage for GLP-1 drugs used for obesity, the study indicates no significant change in the number of employers offering this benefit. Currently, 99% cover diabetes, while 73% include coverage for obesity. Only 6% reported cutting coverage for obesity circumstances.
Employers that do provide GLP-1 coverage for obesity are likely to implement additional requirements, such as needing prescriptions from specific providers and mandating participation in weight management programs. Such management tactics are becoming common, with 90% of plans requiring prior approval and over half necessitating attendance in weight management programs.
For four consecutive years, cancer has remained the leading condition driving up employer healthcare costs, exacerbated by more frequent diagnoses and rising treatment prices. Almost 90% of employers listed cancer among their top three most expensive conditions for 2025, a notable increase from 80% the previous year. About half plan to direct employees to high-quality, cost-effective cancer care facilities, with 23% considering this for 2028.
Other conditions are less frequently cited among the highest costs for employers. Reports show a decrease in diabetes from 28% in 2024 to 21% in 2025, musculoskeletal issues from 74% to 71%, and cardiovascular conditions from 40% to 35%.
Nearly three-quarters of employers noted an uptick in workers seeking treatment for mental health and substance use disorders, with an additional 17% anticipating further rises.
Women’s health needs are also contributing to rising expenses. Upcoming plans reveal that 58% of employers will expand preventive care services for women—up 22 percentage points in two years. Moreover, nearly 60% will offer menopause support, a substantial increase from 28% in 2024. Other services are also growing: 36% will cover Doula services, 55% for postpartum depression treatment, and 43% for initiatives supporting high-risk pregnancies in underserved communities by 2026.
Robert Andrews, CEO of the Health Transformation Alliance, noted that while they haven’t conducted a formal survey, anecdotal evidence suggests median rises in costs from 7% to 9%. Some members of his coalition have managed to keep costs stable by conducting rigorous audits on claims to avoid overpayments.
Andrews recommends that employers carefully examine their contracts and ensure they are receiving the negotiated deals. “Be vigilant in reviewing your agreements to confirm you’re getting the terms you set out,” he advised.
His additional advice includes setting caps on out-of-network fees for employees needing care and ensuring that insurance providers are effectively implementing these caps.
Delta Airlines is among the employers keeping costs relatively low, as noted by their chief wellness officer, Henry Ting. He highlighted that their proactive measures make a significant difference.
“It’s not mere coincidence,” Ting, a cardiologist with over two decades at the Mayo Clinic, remarked. “We’re committed to delivering optimal value.”
To adapt, Delta has analyzed over 10 billion healthcare records from 100,000 workers and their families to pinpoint high-cost areas. A key finding was that many cancer diagnoses were occurring due to symptoms rather than routine screenings, leading to advanced disease stages. In response, Delta offers a series called “Life with Dr. Henry” to support proactive health management.
“We aim for early cancer detection through routine screenings instead of waiting for concerning symptoms,” Ting explained.
The federal task force, convened last year, focuses on employer roles in healthcare and necessary adaptations for reducing costs and improving access. It plans several meetings in 2024 before releasing its annual report.
Paul Frontstin, a member of the task force and director of Health Benefits Research at the Employee Benefits Institute, believes employers will begin to utilize innovative solutions to analyze vendors, adjust plan designs, and manage conditions like type 2 diabetes and mental health.
However, with low unemployment rates, he argues that employee retention is a top priority for employers, making them reluctant to shift costs onto workers.
“Historically, we’ve often seen employers hold back on increasing premiums,” he noted.
