Unpacking the Surge in Health Care Expenses
You’re not alone if you’re staring at a projected 10%+ increase in your company’s health plan costs for 2025 and feeling frustrated. Watching expenses climb without clear reasons can be exasperating, especially when you’re committed to providing quality benefits to your employees.
Brace yourself… The average cost for employer-sponsored health care in the U.S. is expected to surpass $16,000 per employee in 2025. That’s a substantial jump from previous years.
What’s driving these rising costs and, more importantly, what you can do about it?
Culprits Behind the Increase
Price dynamics and medical inflation: The biggest driver of higher costs is price dynamics, with medical inflation outpacing general inflation. Employers are facing pricing pressures due to factors like the widening gap between healthcare worker supply and demand, as well as ongoing consolidation of health systems.
Prescription drug costs: Spending on prescription drugs remains the fastest-growing component of health plan costs. Drug benefit costs per employee rose 7.2% in 2024, with the ongoing introduction of very high-cost gene and cellular therapies contributing to this growth.
The GLP-1 Drug Surge: The use of expensive GLP-1 (glucagon-like peptide-1) drugs for weight loss and diabetes, such as Ozempic and Wegovy, is significantly driving up costs. These drugs typically cost between $1,000 and $1,500 a month per patient. Including these drugs in your health plan without a strategy can significantly escalate costs.
Taking Back Control: Strategies to Combat Rising Costs
You Need To See Your Data
Dive into your claims data to identify trends and areas that are driving up your costs. This analysis can reveal surprising patterns and spotlight where intervention is needed. If your carrier won’t provide detailed data, ask them for whatever high-level claims information they’re willing to provide. Your broker may be able to help you obtain more detailed information or at least interpret the limited data available.
Consider Alternative Funding Models
Traditional fully-insured plans might not be serving you well. Exploring self-funding or level-funding options, or even a Health Reimbursement Arrangement (HRA), can give you greater control over your health plan spending.
Promote Transparency with Providers and Employees
Transparency isn’t just a buzzword—it’s a strategy. When employees understand the costs associated with their health care choices, they’re more likely to make cost-effective decisions. Utilize tools that provide cost comparisons for services and encourage open conversations about spending.
Empower Employees with Personalized Care and Support
Encourage your employees to take charge of their health. One of the best ways to do this is by implementing care navigation into your employee health plan. Personalized guidance helps employees navigate the complex healthcare system which leads to better healthcare decisions and improving overall satisfaction with the benefits package.
You can also offer incentives for regular check-ups and screenings, catching potential issues early. And investing in mental health resources can improve overall well-being and productivity.
Building a Resilient Benefits Package Amid Rising Costs
Rising health plan costs don’t have to dictate the quality of your employee benefits. By understanding the factors at play and proactively implementing strategies to manage expenses, you can maintain a robust benefits package that supports your employees and your bottom line.
Let’s talk. Schedule a 15-minute call with our benefits team to explore solutions for your company: https://insights.dsgbenefits.com/dsg-benefits-webinar-9-28-2022-1-0