Health care costs are projected to increase substantially in 2025. Estimates show a similar growth in spending as in 2024, marking multiple years of compounding costs.
According to industry surveys and reports, employers anticipate health care costs to increase between 7% and 8% in 2025.
As 2025 begins, many small business owners who offer group health insurance to employees remain curious about what is driving these increases. The following are key factors that will impact rising health care costs.
GLP-1 Drugs
Although initially approved as Type 2 diabetes treatments, glucagon-like peptide-1 (GLP-1) drugs have been found to be effective for weight loss when paired with diet and exercise. GLP-1 drug use for weight loss is already widespread but is expected to increase in popularity. GLP-1 medications typically cost around $1,000 per month. These costly medications are intended to be taken in perpetuity to achieve their benefits. This means that GLP-1 users must use these high-cost treatments on an ongoing basis to experience health benefits.
Cell and Gene Therapies (CGT)
CGT are designed to treat conditions like blood and lung cancer, sickle cell anemia, and spinal muscular atrophy. These therapies demonstrate significant medical advancement but come with a high price tag. In 2025, it’s estimated that nearly 100,000 patients in the United States will be eligible for CGT, which could cost $25 billion.
Chronic Health Conditions
Around 90% of U.S. health care spending is on people with chronic and mental health conditions. Chronic conditions include heart disease, stroke, cancer, diabetes, arthritis, and obesity. Chronic disease is increasing in prevalence in the United States and is projected to continue to do so in 2025 and the upcoming decades.
Aging Populations
Due to increasing life expectancy and decreasing birth rates, the percentage of the U.S. population that is 65 or older continues to rise. Per-person personal health care spending for this population is around five times higher than spending per child and almost 2.5 times the spending per working-age person.
Health Care Labor Costs
The current supply of health care workers does not meet the growing demand for utilization. This shortage is due to factors such as rising health care demands, an aging population, retiring workforces, and not enough talent entering the health care industry.
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 health care costs; such expenses are often shared between employers and employees.
However, for employers who are baffled by the rising costs of health care—especially those with a relatively healthy group —there may be a better solution. Many businesses struggle with increases in health rates despite maintaining a workforce with low health care utilization. These employers can often secure much lower health rates through a pooled health plan such as Tilson’s rather than relying on what is available in the marketplace.
Tilson offers a self-funded plan that pools our clients into a large group policy, providing small to mid-sized businesses with access to more competitive health insurance rates typically reserved for larger employers.
If you’re frustrated by the rising costs of health care, want to provide a comprehensive benefits package to attract and retain top talent, and feel overwhelmed by managing plan administration and open enrollment, talk to Tilson today. We can help you navigate your options and offer a cost-effective, competitive health benefits solution for your business.
