Year after year, employers are faced with
According to the International Foundation of Employee Benefit Plans, U.S. employers expect to see healthcare costs increase by 7% this year, marking the second year in a row employers predicted a leap beyond the average 4-5% annual increases. Amid economic and political uncertainty, many employers are hesitant to throw money at a problem that is destined to only grow worse — and for many companies, it's becoming harder to avoid passing on those increased costs to employees.
But employers are in no condition to shoulder those burdens either: Medical debt in the U.S. has climbed to $220 billion, according to KFF (formerly known as the Kaiser Family Foundation), despite employers providing health insurance to over half of the American population and around 90% of Americans being insured overall. In fact, KFF estimates that over 40% of Americans have medical debt; health insurance does not make anyone immune to crippling debt.
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Ultimately, Americans often have to choose between their health and making ends meet, and as employers know, unhealthy employees are not cheap. The number one driver of healthcare costs are chronic conditions like cancer, heart disease and diabetes — conditions that can either be prevented or caught early and properly managed, leading to less healthcare spend. If employers want a shot at managing their healthcare costs while sustaining a healthy, productive workforce, they will have to start investigating their own benefits and investing in the right resources for their employees.
In exclusive research from Arizent, parent company of Employee Benefit News, benefit leaders and workers reveal how they're confronting the state of healthcare today, where employers are falling short and what cost drivers they can actually control.
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Nowhere to go but up
Employers are well aware that healthcare prices are climbing. According to Arizent, over 80% of benefit leaders saw an increase in the overall costs of healthcare benefits, with 70% reporting higher prescription drug prices and 66% reporting an increase in what employees pay in monthly premiums. Half of employers are seeing increases from the usual suspects, namely cancer care and overall chronic disease management.
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Notably, large employers are seeing more substantial price hikes for more specialized benefits and care provisions. For example, over 60% of employers with over 2,000 employees saw increases around cancer and chronic condition management, while just 20% of employers with less than 100 employees reported the same. Similar trends were found with mental health care and diabetes management. It's crucial for large employers to invest in health plans and benefits that prevent and effectively manage chronic conditions — because the worse the condition, the higher the costs.
Fifty-five percent of benefit leaders are already experiencing higher costs than expected this year, and they're not optimistic about what prices will look like in 2025. Nearly 80% of employers predict their healthcare benefits will cost even more next year, with 72% expecting to see higher premiums for employees as a result.
Employees take the hit, too
If employers are noticing employee premiums take a hit, then there's no doubt workers themselves are feeling the loss to their monthly take-home pay. On average, Arizent found that employees pay $150 a month in premiums for their primary health plan, and over half of employees agree their premiums are too expensive. On the flip side, just 27% of employees feel their drug costs are too expensive, with the average worker paying around $57 per month for their medication. Of course, costs depend on one's health: 36% of those with chronic conditions report their monthly medication spend as being too high.
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But all plan types are getting pricer as employers find themselves pushing more of the financial benefits burden off on workers. Of the 40% of employees who have experienced an increase in household medical expenses in the last year, 42% point to health plans becoming more expensive as the reason. Employees named other factors, too: 34% said their family's medical circumstances took a turn for the worse and 24% said the prices of routine services were behind the increase.
Financial wellness can become unattainable
What happens when care becomes catastrophically expensive? Americans collectively owe $220 billion in unpaid healthcare costs, and a quarter of employees admit they have outstanding medical debt, with women and those with chronic conditions being 10% to 15% more likely to report this, respectively, according to Arizent. These debts aren't small; six in 10 employees with medical debt need to pay back over $1,000, and 16% need to pay over $5,000. The mean household medical debt sits at $5,664. In a country where rent, food and transportation have seen record price increases in the last few years, this kind of debt is bound to impact their finances as well as their well-being — 40% of employees said that their medical debt was their number one source of stress. Seventy-six percent of employees admit they are worried rising healthcare costs will eventually put them in medical debt.
People care about preventative care
Given just how expensive it is to be sick in the U.S., prevention is key to not only one's physical wellness but their financial one — and it seems that both employers and employees for the most part understand this. In fact, Arizent found that nearly 80% of employers incentivize preventative care through a variety of benefits: 39% host vaccination sessions at the office, 32% host educational talks or webinars about preventative care, 31% host disease screenings, 28% provide monetary incentives and 26% offer PTO specifically for primary care appointments.
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And these employers are being rewarded for their efforts. Employers who incentivized preventative care were 21% more likely to say that the health of their workforce has improved in recent years. This emphasizes how crucial preventative care can be in an employer's overall wellness strategy.
Bolstering preventative care incentives and primary care access can be an effective way to engage an entire workforce in their healthcare benefits. Ultimately, these numbers suggest it's an aspect of the healthcare system that employers and employees alike are comfortable with, and employees are willing to seek out.
Cost-cutting measures
Eight-nine percent of employers are taking steps to lower their healthcare costs, per Arizent's data. The real question is whether said actions are enough.
The top three steps employers are taking to tackle costs are as follows: 40% are integrating well-being programs into benefits packages to bolster preventative care utilization, 39% are offering less expensive alternatives to traditional in-person care (namely telehealth access) and 37% are offering healthcare navigation tools. On the other hand, more extreme changes are less popular, with 24% of employers saying that they have exerted influence over insurance companies to lower costs, 18% reporting that they shifted to a self-insured model and just 13% choosing to shift to a value-based model health plan.
Markedly, only 15% of employers said they decreased the quality of benefits as a way to lower costs, which underlines that for the most part, employers believe improving benefits and lowering costs go hand in hand.
Benefits that count
Knowing the effort employers put into designing their healthcare benefits, it's now time to question what those benefits end up looking like. Unsurprisingly, almost all employers offer standard health, dental and vision plans. Identity-focused benefits, ones that serve a specific group of employees like women or LGBTQ workers, are the rarest benefits: According to Arizent, only 16% of employers offer supplemental access to gender-affirming care, 17% offer access to abortion care and 19% offer family-building benefits. Since these aspects of healthcare are being legally challenged across red states, it doesn't come as a shock that employers are either hesitant or against them altogether. Moreover, these benefits do not necessarily come with widespread demand from employees. For example, 19% percent of employees said they didn't have gender-affirming care but wanted it, and 17% echoed the same sentiment for abortion care. This doesn't mean these benefits can't be impactful, but they're not viewed as table stakes for a majority of employees as of now.
As for the benefits employees wanted the most, gym access or reimbursements, company-provided wellness programs and nutrition support topped the list. This articulates an employee's need for general health management and is arguably an extension of preventative care.
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In terms of what specific benefits employees were happy with, paid sick leave took one of the top scores with 50% of employees being highly satisfied with their employer's offering. Prescription drug insurance followed with a 42% high approval rate, then vision insurance at 40% and abortion care at 38%.
Still uncertain
Despite recent federal regulations like the No Surprises Act and the Hospital Price Transparency Rule, it's clear that employers and employees can't wait for policymakers to fix the healthcare industry. And it seems employers know this, even if they're not sure what steps they should take to control costs. Seventy percent of employers are concerned about whether they will be able to afford healthcare coverage for their employees, with fully insured employers being the most concerned group. To compare, Arizent found that 50% of fully insured employers are at least moderately concerned with affording coverage, versus 28% of self-insured employers. Strikingly, 41% of self-insured employers reported that they weren't concerned at all.
The story of healthcare in 2025 isn't likely to change too much from this one: Prices will go up and put further pressure on employers, who in turn, pass on some of the burden to their employees. However, employers can choose to change the narrative for themselves by challenging their benefits partners, investigating just how beneficial their health plans are to employee health and looking outside of traditional plan models to see if alternative solutions would be a better fit for their company.
