Health care costs are growing at historical rates – sparking an impetus for change.

While employers have long prioritized cost management and affordability, employers will have a heightened focus on addressing health care costs in 2025. In recent years, employers have invested in thoughtful strategies to improve quality and outcomes—all while their health care costs have grown at unpredictable and impractical levels. For many employers, 2023 costs were higher than anticipated, and heading into 2025, cost increases are projected to be higher than they have been in more than a decade, accelerated in part by costly conditions such as cancer, cardiovascular, diabetes, autoimmune and mental health.

This continued increase in cost suggests that an incremental approach is not viable, and more decisive and swifter measures must be taken. These concerns are compounded by changes in other parts of the health care ecosystem, which have historically fueled cost shifting to the employer or commercial market. Next year may trigger a tipping point for employers: They may need to leverage strategies previously disregarded as too disruptive to the employee experience and otherwise, which could mean disengaging from long-standing partnerships. Many HR/Benefit leaders will need to have candid discussions with their C-Suite about the company’s health care budget, organizational comfort with disruption and bolder change and higher expense volatility, all necessary in the new reality to address untenable costs. This near-term disruption may be just what is required to meaningfully address cost and quality, ultimately resulting in an improved experience in the long term.

Some employers are ready to implement near-term cost control measures, while others will be setting their sights on longer-term investments—or a combination of the two. This extends to global benefits as well, with multinational employers deploying more sophisticated captive insurance strategies to achieve cost savings.

Employers will be highly scrupulous in 2025, with increased levels of RFP activity that includes exploring a larger range of options through these RFPs, as well as increasing vendor/partner accountability and focusing on care appropriateness. Many employers will explore newer entrants in the health plan and pharmacy benefit manager (PBM) space that some consider more agile and disruptive. Those staying with existing vendors will seek to adopt alternative plan designs that prioritize creative network management and more predictable out-of-pocket costs. In making decisions about the viability and effectiveness of programs, employers will rely on broader sets of quality data and independently verified program outcomes. However, “quick fixes” can’t solve the cost crisis alone; employers need to play the long game by investing in prevention and immunizations, advanced primary care, quality, value-based initiatives and chronic condition programs that generate tangible results and improved outcomes. Employers will also lean into holistic well-being and health equity to address overall affordability for their plans and employees.

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To successfully manage costs, employers must address growing pharmacy expenditures.

Heading into 2025, pharmacy-related costs are consuming more than a quarter of employers’ U.S. health care budgets, and that is only expected to increase. Therefore, employers cannot address their overall health care costs without tackling pharmacy expenses and leveraging both private sector strategies and engaging policymakers to help, where appropriate, with supporting policy and regulatory reforms.

From employers’ standpoints, they will revisit and assess their current pharmacy partners. In fact, one-third of surveyed employers anticipate doing so for their PBMs, potentially conducting RFPs to get improved pricing from their incumbent partner or opening the door for new partners promising competitive and more transparent financial terms. The landscape of solutions is expanding to include a newer generation of vendors that provide increased visibility into contract terms, guarantees and rebates, as well as newer models offered by incumbent partners. This trend is consistent with the Business Group’s policy position on drug pricing.

Employers will also continue to evaluate their coverage of GLP-1s in the broader context of their obesity and cardiometabolic health strategy. With an estimated 42% of patients with private insurance deemed eligible for these costly medications, based on the current FDA approved indications, the price tag of GLP-1s in the U.S. looms large for employers looking to rein in health care costs. Some employers will narrow coverage of GLP-1s to just those with type 2 diabetes. Others may layer on more requirements for those receiving the drug, such as step therapy to include other anti-obesity medications, engaging in lifestyle management programs, meeting a specified BMI threshold and/or having a comorbid condition and securing the medication through a specific provider. Alongside their pharmacy and other partners in this space, employers should monitor outcomes and adherence of those on GLP-1s and seek to minimize waste resulting from treatment abandonment. With that said, these drugs are effective at addressing (and even eliminating) serious health conditions among those who take them, which will no doubt mitigate costly claims in the future. Employers should account for these potential long-term savings when determining the impact of present-day plan designs.

Additionally, challenges and opportunities exist with specialty medications, including treatment related to cancer, which continues to be the top condition driving health care costs for employers. The cell and gene therapy (CGT) pipeline is robust, and existing industry strategies and approaches are not well equipped to manage the needs of patients or the ensuing cost. On the upside, there is ample opportunity for employers to leverage biosimilars as a lower-cost option to more expensive specialty medications, a strategy that has been underutilized so far. Considering this strategy is particularly integral to managing specialty costs related to autoimmune diseases, as some reference products, such as Humira^® and Stelara^®, have come off patent. Historically, these two medications have been the costliest treatments that employers pay for, more expensive than GLP-1s. 2025 will be another year that employers will look to their PBMs to establish biosimilars as the preferred treatment within their formularies – one road on the quest to the lowest net cost.

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Employers may need to defend physical well-being programs – which will provide an opportunity to emphasize the need for more sophisticated approaches. 

With rates of chronic conditions and health care costs rising worldwide, the current model to improve physical well-being is being called into question. Notably, the prevalence of chronic disease—especially in the areas of obesity, cardiovascular, musculoskeletal and autoimmune conditions—has seen steady increases with no signs of abating. In 2025, HR/Benefit leaders will be called upon by senior leaders to produce conclusive data on the value of investing in well-being.

2025 presents an opportunity for HR/Benefit leaders to address questions about the company’s investment in and impact of its well-being initiatives. To do so, employers will use data to showcase how programs and benefits are performing from a clinical, experience and/or financial standpoint. When and where possible, employers can also demonstrate ways well-being programs are helping employees flourish—experiencing and evaluating their home and work lives positively—and contributing to business outcomes like productivity and retention. As a part of this process, employers must also be prepared to improve the efficacy of well-being strategies and partnerships.

Weight management programs are a likely topic within this broader conversation due to the prevalence of obesity and the costs associated with GLP-1s. To be successful, weight management programs must incorporate the best evidence, integrate other types of treatment (e.g., anti-obesity medications) and services (e.g., mental health) into their care models, and ultimately bridge the divide between traditional behavior change programs and health care benefits. In working in close collaboration, Finance and Benefit teams can position their company’s programs for success by insisting on outcomes-based contracts from vendors. These agreements should require that vendors demonstrate improvement in health outcomes and deliver promised returns.

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Progress has been made in mental health, yet more challenges lie ahead for employers. 

While employers have gained ground in mental health, particularly with regard to reducing stigma and increasing care access, this dimension of well-being continues to present new challenges. Mental health conditions were among employers’ top five conditions driving costs, an indirect validation that more employees are accessing mental health support than ever before. While mental health services have been integrated into primary care, offered directly at the worksite and made widely available virtually, there is more to do. Numerous mental health challenges have been identified as important to tackle (e.g., child and adolescent mental health, maternal mental health, loneliness, substance use disorder, suicide). New or revamped programs and benefits may address some of these serious and important issues, but employers must continue to look beyond specific solutions as a means of supporting mental health and focus on workplace policies, practices and norms to protect mental health and reduce risk factors. Although the cost of and need for robust mental health services is an acute challenge in the U.S., the need to address access, stigma and holistic mental health is a growing concern for employers with populations around the world.

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It’s critical that employers and their vendors enable employees to find the right support at the right time (and price); this is particularly true for services embedded within a health plan’s network.

Over the past few years, we have witnessed a surge of specialty solutions that provide clinical support for patients with conditions like diabetes, musculoskeletal, digestive health, autoimmune and more. However, the mere existence of solutions does not eliminate care gaps, especially as employers struggle to reach employees in need of integrated subspecialty care. In fact, the introduction of these solutions has produced an unintended effect of increasing care fragmentation. To address access gaps and to better integrate virtual care and in-person care, many health plans have expanded their networks to include digital health providers, yet, utilization of those programs remains inadequate.

We call this the “Lost in Network” phenomenon, and in 2025 employers will be keenly focused on holding health plans, specialty solutions and navigation partners accountable for solving it. The first and most critical step is to address the lack of awareness of these new network-based solutions among employers as well as employees. Many employers may not be aware that these solutions are already part of the health plans’ networks as a standard offering. Additionally, employees are either unaware of these options or struggle to navigate to these specialty solutions. These challenges need to be addressed. Integrating solutions into the broader health care vendor ecosystem is a step in the right direction; however, if participants are not aware that these solutions are present in existing health plan networks, the industry hasn’t solved this important “last mile” issue.

In 2025, navigators of all forms will continue to advance. “Macro navigators” who help employees navigate a wide range of benefits and care options will adopt technology like generative artificial intelligence (AI) to provide more timely and precise recommendations. In addition, it’s anticipated that “micro navigators,” such as those that specialize in a subset of patients with a common set of needs (e.g., oncology, mental health, obesity), have the potential to make connections between providers of all types within that specialty. Furthermore, in response to growing employer cost and waning patient satisfaction, pharmacy navigation will emerge as a solution to address high-cost conditions emanating from poor population health. While all these navigator types are filling critical gaps in support, the breadth of options will ironically compound fragmentation concerns. Navigators came onto the scene to address patient confusion and improve their experiences navigating the health care system. Now, we are seeing a landscape in which the industry has a growing need for sub-navigation.

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Employers will hold their vendor partners to higher standards.

Vendor partnerships will be streamlined and reassessed in the coming year. Employers will focus on vendors’ ability to garner meaningful engagement as well as observe their partners’ level of proactivity in presenting innovative (and effective) ways to solve persistent challenges in managing employee health. Transparency of cost, quality and outcomes data is critical to both employer and employee decision-making; vendors will need to show how they enable access to this information in 2025. When it comes to health plans specifically, employers will challenge their carriers to gain control over unit price for services, in parallel with driving value-based contracting that rewards for outcomes and quality care. Further, employers will explore alternative means, including contracting directly with Centers of Excellence (COEs), promoting network arrangements that steer employees toward high-value providers and looking to emerging copayment-based models to address affordability.

Above all, vendor partners will be held to a higher level of accountability for producing outcomes. The core of this process will be employers’ access to usable data and clear insights. The days of measuring vendor performance in a silo are gone; instead, employers will press for data integration to enable deeper vendor measurement.

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Change in the U.S. policy and the global economic climate will impact employers and their employees.

2025 will bring change to the governmental environment around the world. In the U.S., the change in Administration and assertion of single-party control has implications for U.S. policy with reach into the global economic climate. For employers operating in the U.S., three major health care benefits policy developments will be on the docket for 2025: 1) safeguarding the tax-free status of employer health plan coverage; 2) protecting ERISA preemption and the ability to offer uniform coverage/programs nationally; and 3) enhancing competition and the ability of employers to hold vendor partners accountable, primarily through robust transparency and greater employer empowerment to determine if and when vendors serve a fiduciary function. All three of these issues could have dramatic repercussions for employers’ ability to provide high-quality, affordable health coverage to their employees.

Globally, rising health care costs, fueled by increases in chronic condition prevalence, are putting pressure on taxpayer-funded systems. In addition, growing political instability around the world may also impact employer efforts globally. While employers work to support employees under threat of war and those impacted by climate change, they will remain focused on health and well-being efforts overall.

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Emerging “micro-trends” merit further observation, with potential for impact on employer strategies.

While the topics discussed above have direct and immediate impact on the role employers play in designing and delivering health care benefits and well-being programs, a host of additional areas of focus—what we’ve dubbed “macro-trends”—have potential to shape future strategies. These macro-trends include:

• Shifting demographics, including longevity: The makeup of the world’s population is facing multifactorial changes; birth rates have declined across the board, while people are living and working longer in many countries. These shifts have resulted in five generations working alongside one another in the global workforce, bringing its own unique challenges. Employers will need to assess benefit plan design, well-being offerings and leave strategies to adapt to this evolving workforce composition.
• Artificial Intelligence (AI)’s growing role in benefits management and medical care: Employers see the potential in AI for benefits management but also have their concerns. As AI permeates health and well-being initiatives, there is an opportunity to leverage it for data aggregation, as well as communication and engagement, to accelerate progress in these areas. Providers and vendor partners will seek to deploy AI to improve operations, care delivery and data aggregation, along with enabling personalization and enhancing the overall patient experience.
• Food as key to health: Employers, public health officials and others are exploring strategies to address the role of food in the health and well-being of the population, potentially leading to policy and/or programmatic changes.
• Climate change: Employers will explore how changes in climate – including storm severity, ground-level heat and access to clean water – impact their employees’ health and well-being.