Unexpected claims will drive 8% health care cost increase in 2025
Catastrophic claims and specialty prescription drugs are contributing to the increase.
Health care costs are expected to increase 8% next year, driven by catastrophic claims, specialty drugs and medical provider costs. This estimate from the International Foundation of Employee Benefit Plans is slightly higher than projected cost increases of 7% in 2022 and 2023.
Utilization of medical services due to chronic health conditions was cited less among employers as a reason for increasing costs, the report found. Of those who indicated specialty prescription drugs are driving prices upward, most specifically pointed to glucagon-like-peptide-1 drugs (75%), while 19% said cell and gene therapy are driving up costs.
Less significant to cost increases are increased headcount, utilization due to an aging workforce, stop-loss insurance premiums, delayed preventative medicine due to the pandemic, and more dependents covered.
“Employers are reporting that catastrophic claims and specialty drugs are amongst the significant drivers of the health care cost increases,” said Julie Stich, CEBS, VP of content at the foundation. “During 2024, employers have been implementing several strategies to manage costs, with an increased focus on utilization control and cost-sharing initiatives.”
When asked what types of initiatives would make the most impact on managing costs for 2025, the largest share of employers (27%) said utilization control initiatives such as prior authorization, case management, disease management and nurse advice lines. This was up from 22% last year.
Related: CMS: U.S. employers to spend $1.3T on health benefits this year
Twenty-one percent favored cost-sharing initiatives like deductibles, coinsurance, copays and premium contributions, up from 16% last year, and 15% are considering plan design initiatives such as dependent eligibility audits, high-deductible health plans, spousal surcharges/carve-outs and formulary changes, up from 12% last year. Nine percent pointed to purchasing/provider initiatives including telemedicine, price transparency tools, centers of excellence, health care navigators/advocates, coalitions and quality initiatives, down from 12% last year.
Employers are also looking toward data analysis initiatives including claim audits, utilization review, predictive modeling and AI tools, as well as work and wellness programs, but at a lower rate.