Employers are bracing for a third straight year with health benefit costs increasing more than 5%, according to a new report from Mercer.
The organization released preliminary findings from its annual National Survey of Employer-Sponsored Health Plans and found that the total health benefit cost for individual employees is expected to increase by 5.8% in 2025. This accounts for any cost-reduction initiatives that employers may take on.
The survey, based on responses from 1,800 employers across the country, estimates that with no cost-reduction efforts, expenses would increase by 7% per worker.
The trend toward increases of 5% or more follows a decade of cost increases of about 3% on average, Mercer said.
Just over half (53%) of employers surveyed said they plan to make cost-cutting changes in their coverage plans for 2025, up from 44% saying the same in 2024. Changes include increasing deductibles or other out-of-pocket expenses, which shift some of the costs to members.
Over the past several years, employers have sought to avoid these changes, according to the study, but that is becoming harder for them to achieve.
"Employers are still concerned about healthcare affordability and ensuring that employees can afford the out-of-pocket costs when they seek care," said Tracy Watts, Mercer’s U.S. leader for health policy, in a press release. "But they also need to manage the overall cost of healthcare coverage to achieve a sustainable level of spending for the organization. Balancing these competing priorities will be a challenge over the next few years."
The survey found that employees will pay 21% of their health costs on average in 2025, the same rate as in 2024.
There are a number of factors contributing to this trend, according to the report. The healthcare worker shortage, consolidation among providers and prescription drug costs are among the challenges driving up healthcare costs.
Employers said that drug benefit cost per employee grew by 7.2% for 2024, according to the report.
“While we’ve seen significant increases in utilization in a few areas, such as for behavioral healthcare and GLP-1 medications, overall utilization has had a relatively modest impact on trend this year," said Sunit Patel, Mercer’s U.S. chief actuary for health and benefits, in the press release. "The biggest driver of higher costs is price dynamics, some of which are macro in nature.”