Employers that provide health insurance to employees will likely pay 9% more next year for the same coverage, according to a new report from Aon, a professional services firm. Employees who pay for a portion of their health coverage should expect to pay more as well.
The projected 9% increase in health insurance premiums amounts to an average cost of $16,000 per employee. Assuming the employer bears the entire cost of the increase, costs will rise significantly more than the 6.4% increase to health care budgets that employers experienced from 2023 to 2024 after cost savings strategies.
The study points to one significant culprit for the sharp rise in costs – the popularity of GLP-1 medications like Ozempic that treat diabetes and obesity. Of course, old fashioned inflation also plays a big role.
"In the health care sector, both rising employment levels and wage increases fueled by economy-wide inflation during the past few years are pushing health care costs higher," said Debbie Ashford, the North America chief actuary for Health Solutions at Aon. "To keep pace with these pressures, the health care industry negotiates higher prices, which in turn emerge as higher medical trends.
The role of specialty drugs
But Ashford acknowledges that when it comes to prescription drugs. specialty drugs remain the leading factor in spending, even though they represent a small fraction of overall utilization.
“The demand for GLP-1 medications has skyrocketed, and a surge in new drugs in the GLP-1 category is expected to drive up costs even further, adding 1% to the aggregate health care cost increase," Ashford added.
Farheen Dam, North American Health Solutions leader at Aon, says employers need to balance the extra cost against the benefits GLP-1 drugs might deliver. If they can reduce chronic conditions and improve overall health, employee productivity might rise.
"It's imperative that employers consider the clinical evidence and health benefits as well as the near-term cost impacts," Dam said.
Employees in 2024 are contributing about $4,858 for health care coverage, of which $2,867 is paid in the form of premiums from pay checks and $1,991 is paid through plan design features such as deductibles, co-pays and co-insurance, according to the firm's analysis.