Employers, the largest purchasers in aggregate of health insurance in the U.S., will need to make some swift and pivotal decisions for the new year, specifically on how to best meet the healthcare needs of their workers.
According to the latest annual survey of employers by the Business Group on Health, projected healthcare cost trend, the anticipated percentage increase in the cost to treat patients year-over-year, jumped to almost 8% for 2025, the highest increase in more than a decade. Actual healthcare costs have grown a cumulative 50% since 2017 and show no signs of abating.
Related: Employer health plan costs expected to rise 9%
Our survey further shows that pharmacy costs were a significant driver of healthcare spending for employers. The median percentage of spending on pharmacy rose from 21% in 2021 to 27% in 2023, fueled in no small part by the popularity of glucagon-like peptide-1 agonist weight loss drugs, or GLP-1s.
In general terms, employers as a whole will need to disrupt the current healthcare system and existing partnerships to drive meaningful change, while remaining cognizant of the impact of change on their employees.
Employers will need to hold vendors to a heightened level of transparency and accountability, by leaning into value and challenging their partners to deliver savings. The Business Group’s survey revealed that employers are reassessing their partnerships, with 22% looking to change health and well-being vendors in 2025 and 38% putting out requests for proposals or reassessing current offerings.
Pharmacy benefit manager relationships are already under scrutiny, including at the highest levels of the federal government, with a third of employers planning an assessment and/or RFP process in 2025.
In addition, as the rates of cancer and chronic conditions such as diabetes, obesity, cardiovascular disease and musculoskeletal disorders continue to surge, employers will require their vendors to demonstrate meaningful improvements in patient outcomes.
Fortunately, the news isn’t all dire: We also have discovered that companies leveraging some combination of similar strategies have already seen lower year-over-year spending as well as gains in patient outcomes.
More specifically, employers that have achieved a lower cost trend have used specific strategies that include:
Contracting with centers of excellence.
The use of centers of excellence, groups of healthcare providers who practice high-quality, efficient care for predictable prices, often leads to a reduced total cost of care. These centers also achieve better health outcomes for severe, acute and highly specialized conditions, such as cancer, transplant, bariatric and fertility.
Focusing on primary care and prevention, with incentives for engagement.
Employers that have a robust focus on primary care often offer education and incentives for pursuing immunizations, preventive screenings and mental health care, among other services, and generally see an increased use of these services. Engagement with primary care is directly linked to stemming future costs, as well as better maintenance for patients with chronic conditions.
Offering high-touch navigation and advocacy services.
The American healthcare system is deeply fragmented. Patients often bounce from doctor to doctor without coordination, which can result in delays in care. In 2025, navigators of all kinds will become increasingly advanced. Some will even leverage artificial intelligence and focus on areas such as pharmacy to help patients receive coordinated care and see improved outcomes.
Adopting a strategy to favor lower-cost biosimilars on drug formularies.
Biosimilars, medicines that are very close in structure and function to an existing biologic medicine, are underused for numerous reasons. They are not well understood by the general public. Also, patients and physicians are not immediately inclined to use them, even though they work as well as the original “reference” drug. PBMs often do not list biosimilars as part of a “preferred tier,” another area in need of change.
Adding more restrictions for the use of GLP-1s.
Clearly, employers will need to reassess all aspects of their pharmacy offerings. Tighter control over the use of GLP-1s to treat obesity will have a positive impact on cost. Employers are exploring additional requirements for those receiving the drugs for obesity, including step therapy to include other anti-obesity medications, engaging in lifestyle management programs, meeting a specified body mass index threshold or having a co-morbid condition.
To be sure, employers, whose innovative approaches across cost management, programs and services have positively influenced the healthcare industry at large, face formidable challenges as they contemplate switching vendors, eliminating programs and steering people to high-value providers.
An incremental approach is no longer an option; companies need to deftly play the long game by investing in advanced primary care, value-based initiatives and disease management programs, alongside other offerings that generate tangible results.
Collaboration among all stakeholders, including employers, health plans, clinicians, PBMs and other vendor partners, will also prove essential as employers move to provide affordable, unparalleled healthcare to their workforces.
Ellen Kelsay is president and CEO of the Business Group on Health.
