New Strategies for Employers as Healthcare Costs Set to Surge in 2025

Recent surveys on healthcare have taught us one major thing – healthcare costs are expected to rise. A survey completed by Willis Towers Watson reports that employers are seeking new strategies to manage rising health care costs, which are expected to grow by 7.7% in 2025. Instead of raising employee premiums, many companies are focusing on cost-saving measures like improving health plan designs and offering access to higher-quality care at lower prices. There is also a trend away from high-deductible health plans, as fewer employers believe this approach effectively reduces spending. Programs that promote preventive care and steer employees toward more affordable care are becoming central to these efforts.

In addition, Aon has projected that U.S. employer-sponsored health care costs will increase by 9% in 2025, pushing the average cost per employee above $16,000. This rise is significantly higher than the 6.4% increase experienced in 2024. Employers are expected to absorb most of this cost, subsidizing about 81% of the total, while employees will cover the remainder through premiums, deductibles, and out-of-pocket expenses. Factors driving this sharp increase include rising costs for specialty medications, chronic disease management, and high-cost claims related to complex treatments like gene and cell therapies. To help manage these expenses, many employers are expected to adopt cost-saving strategies and use predictive analytics to better plan for high-risk claimants. Without intervention, this 9% increase represents a major challenge for businesses seeking to balance health benefits with affordability for employees.

ASE’s 2024 Health Welfare and Retirement Plans Survey highlights the current trends and offerings in health, welfare, and retirement plans among Michigan employers. This survey, like the previous two, provides valuable insights into how organizations structure their employee benefit programs and the changes occurring in these areas. For example, the survey found that two-thirds of employers offer two to three different types of health plans, with the Preferred Provider Organization (PPO) being the most common, utilized by 86% of surveyed organizations. In terms of funding, 40% of employers self-fund their health plans, which represents a slight increase from the previous year. However, larger companies (those with 500 or more employees) reported a 5% decrease in self-funding, with 70% still choosing this option. Furthermore, opt-out incentives for employees who decline health coverage remain relatively scarce, with only a third of employers offering this benefit. The average incentive amount, however, increased to $1,889, which is approximately $720 more than last year. Lastly, employers are also focusing on educating employees about their health plans, with 26% of companies intending to expand educational efforts in this area. Wellness programs, changes to health providers, and increasing employee cost-sharing are other strategies employers are considering for future implementation.

In conclusion, the rising costs of healthcare are prompting employers to explore new strategies to manage these increases without placing an undue burden on employees. Surveys from Willis Towers Watson, Aon, and ASE highlight a clear trend: employers are moving away from high-deductible health plans and instead, focusing on preventive care, better health plan designs, and offering more cost-effective healthcare options. With U.S. employer-sponsored healthcare costs expected to increase significantly in the coming years, many businesses are adopting measures like self-funding, predictive analytics, and employee education to mitigate expenses. As healthcare costs continue to climb, balancing affordability and comprehensive benefits will remain a key challenge for employers.

Sources: Willis Towers Watson, PR Newswire, ASE 2024 Health Welfare and Retirement Plans Survey

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By Emily Price, courtesy of SBAM-approved partner, ASE.

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