Healthcare costs are projected to increase substantially in 2025, which could greatly impact employers who want to offer quality healthcare to their employees. Estimates show a similar growth in spending to 2024, marking multiple years of compounding costs. While the up-front costs greatly impact the drug organizations, many of these expenses tend to hit employers and employees the hardest.
In fact, healthcare costs in the United States are likely to increase by 7%-8% in 2025, according to the following data from multiple surveys:
- Large employers predicted their healthcare costs would rise about 7.8% in 2025 before plan design changes.
- Employers estimate a median 8% increase in healthcare costs in 2025.
As 2025 approaches, many employers remain curious about what is driving these increases. Here are key factors that will impact rising healthcare costs in 2025.
The GLP-1 Revolution: A Major Cost Catalyst
Glucagon-like peptide-1 (GLP-1) drugs are emerging as a primary driver of healthcare spending. These medications are typically used to help lower blood sugar levels and can even be used to promote weight loss if paired with diet and exercise.
Common examples of name-brand drugs include:
- Mounjaro
- Ozempic and Rybelsus
- Zepbound and Wegovy
GLP-1s typically cost around $1,000 per month, and since they are meant to be taken in perpetuity to achieve their benefits, this means that people who may experience health benefits from the drug will be required to use high-cost treatments on an ongoing basis.
Currently, about 1 in 8 Americans have used a GLP-1 drug, with projections suggesting 9% of the U.S. population could be on these medications by 2030.
Pharmaceutical Spending Dynamics
GLP-1s are not the only drugs with a high price tag. From expected increases in drug costs to the popularity of specialty medications and treatment, pharmacy costs are a major factor in healthcare inflation for 2025. Multiple factors are escalating pharmacy costs:
Existing Drug Cost Increases
A number of commonly used drugs are expected to increase in price this year by anywhere from 4% – 10% or more. In addition, increased utilization of these drugs could drive spending even higher.
Specialty Medications
- Cell and gene therapies can cost between $250,000 and $4.25 million per dose
- By 2025, nearly 100,000 patients will be eligible for these treatments
- Estimated total cost: $25 billion
Biologics and Biosimilars
- Biologics represent only 2% of prescriptions but account for 37% of net drug spending
- The biologics market is expected to grow from $450 billion to almost $850 billion in the next decade
- Biosimilars offer potential cost savings, with $56 billion saved on original biologics in the past decade
Persistent Challenges in Healthcare Inflation
Healthcare is an expensive industry. Even if one were to take out these rising factors contributing to healthcare inflation, the reality is that people will always suffer from chronic conditions and everyone ages. Along with that, the shortage of healthcare workers in such a high-demand environment means that many resources become spread thin.
Here are some baseline contributors to “chronic” healthcare cost increases:
Chronic Health Conditions and Aging Americans
Chronic conditions continue to drive healthcare expenses:
- 90% of U.S. healthcare spend is for people with chronic and mental health conditions
- Obesity affects over 40% of adults
- Annual obesity-related medical costs are estimated at $173 billion
- Cardiovascular diseases could reach $1.8 trillion in expenses by 2050
The aging population significantly impacts healthcare spending:
- Over 55 million Americans are over 55
- Per-person healthcare spending for those 65+ is five times higher than for children
- Projected 80 million people aged 65+ by 2040
Health Care Labor Costs
Healthcare labor costs are rising due to:
- Shortage of healthcare workers
- Increasing demand from an aging population
- High burnout rates
Employer Takeaway
Offering quality health care to employees carries a significant financial cost for organizations, comprising a substantial part of an overall budget. It’s more than just organizations that pay the price for growing healthcare costs; such expenses are often shared between employers and employees.
Rising healthcare costs may be unavoidable, but informed employers can better understand these trends and act appropriately. Contact the healthcare coverage experts at Unland today for more resources on how to keep your employees covered without driving up spending for you and them.