Rise in US health benefit costs to accelerate to 10.2% next year: WTW
More than half of employers plan to trim health care costs by implementing strategies such as pharmacy benefit management, WTW said.
Dive Brief:
- The cost of U.S. health care benefits will likely rise 10.2% in 2025 compared with a 9.3% gain this year, fueled by inflation, shortages of health care workers and the demand from providers for higher prices on the renewal of multi-year contracts, WTW said.
- Double-digit increases in the cost of cancer treatments have also pushed up the price of benefits, along with “surging” costs of prescription drugs, which account for about 25% of total health care expenses, WTW said in a report on a survey of insurers. Specialty medications such as weight management drugs are in “great demand.”
- “Unit-cost inflationary pressures were expected to take two to three years to incorporate into medical contracts between providers and insurers,” Tim Stawicki, chief actuary for health and benefits at WTW, said Friday. “While those inflationary pressures may wane, additional cost headwinds including an aging American population, provider consolidation and new treatment technologies may continue to increase trends beyond 2025.”
Dive Insight:
More than half of U.S. employers (52%) plan to trim costs in the coming year by implementing strategies such as pharmacy benefit management, WTW said, citing a prior survey. Fifty-one percent of employers intend to adopt health care benefit and network strategies that favor lower-cost, higher quality providers and places of care, WTW said.
Facing spiraling costs, employers “may be more willing to implement plan designs and solutions that limit cost increases through more efficient and quality-based networks, centers of excellence and alternate funding mechanisms,” Stawicki said in an email response to questions.
CFOs at global organizations face a 10.4% growth rate in the cost for health benefits next year, the same rate for 2024, WTW found in its survey.
“The rise in new medical technologies and pharmaceuticals has greatly contributed to the increased cost of care globally,” WTW said after surveying 348 health insurers in 75 countries from June through August.
“Public health care systems around the world have been overwhelmed due to high demand and limited resources available, leaving members to turn to and rely on private medical providers,” WTW said in its report. “Additionally, there has been a surge in health care utilization,” especially in mental health care services.
The pace of growth in the cost of health care will likely remain a long-term challenge, WTW said, noting that 64% of insurers expect higher or “significantly higher” cost trends worldwide.
More than two-thirds of insurers (67%) expect global demand for health care to grow during the next three years, according to WTW.
“While recognizing that some factors influencing costs may be out of their control, employers can explore initiatives that may help control costs while boosting the value of their health benefits,” Courtney Stubblefield, managing director for health and benefits at WTW, said in a statement.
Such efforts include “evaluating vendor and digital health solutions that expand well-being resources and reduce unnecessary utilization,” she said.