August 20, 2024

Key Takeaways

• Addressing health care costs is employers’ number one priority for 2025. When asked to rank eight priorities for 2025, 81% put health care costs overall in their top three, with more than half (53%) placing it as their top concern. Affordability for the organization, employee experience and affordability for employees will also be prioritized by many employers in 2025.
• Employers are experiencing several issues impacting their employee populations. A large majority are seeing an increase in services to treat mental health and substance use disorders, as well as a rise in interest in obesity treatments. Seventy-two percent report a higher prevalence of cancers within their workforce.
• If faced with the challenge of reducing cost to prior year levels, employers would redouble efforts to manage vendor performance via RFPs (30%) and eliminating those who underperform (22%). Further, employers would assess difficult decisions related to effective but costly treatments such as GLP-1s and other medications (22%).
• Employers are firmly committed to providing robust health and well-being benefits to their employees, but they also want to make sure that these benefits are competitive with those offered by their industry peers and enhance the employee value proposition.

Cost Takes Center Stage for Employers

Rising health care costs have been a concern for employers for quite some time, but this year, costs have reemerged as the primary focus. Fifty-three percent of employers selected the overall cost of health care as their top priority for 2025. Other cost-related concerns are health care affordability for employees (#2 ranking), affordability for the organization (#3 ranking) and pharmacy costs (#4 ranking) (Table 1.1).

These findings come as no surprise. Employers have been grappling with balancing cost, quality of care and access to care for many years. What stands out this year is that cost is consistently employers’ top priority and a source of concern throughout the survey.

Despite mounting cost pressures, employers remain committed to offering quality care and comprehensive programs while trying to balance affordability for the plan and employees. Figure 1.1 illustrates their continued commitment to offering competitive and robust benefits to employees – nearly all (99%) do so in the face of rising costs and increased complexity. Subsequent survey data reveal how this perspective may shift in the next 3 years.

Troubling Health and Well-being Trends Make Reducing Costs More Challenging

As employers brace themselves for exceedingly high costs, they have been confronted with a growing list of health care issues affecting their employees now and into the immediate future. Some of these issues, such as mental health needs and substance use disorders, have been observed acutely the past few years, while others, such as high demand for new obesity treatments, have emerged more recently. At this point, 79% of employers are seeing increases in mental health and substance use disorders among their employees, 79% are seeing growing interest in obesity treatments and 72% are seeing a higher prevalence of cancer in their populations - an outcome predicted in light of delayed access to care during the pandemic and perpetuated by alarming rates of cancer diagnoses in younger people (Figure 1.2).

Employers are anticipating a shift in their employees’ health status in the coming years. Thirty-eight percent of employers are preparing for an increase in medical services due to worsening population health, and 30% of employers expect to see higher chronic condition management needs. Both trends have negative repercussions for an already unsettling cost situation – compelling many employers to get ahead of it in 2025.

Cost-cutting Measures Being Considered

In light of these concerns and persistent cost pressures, employers continue to explore and avail themselves of multiple strategies to reduce overall health care costs. Figure 1.3 shows the answers to a hypothetical question inquiring which tactics employers would deploy if forced to reduce costs to prior year levels. At the top of the list are leveraging the RFP process to secure better pricing from vendors (30% would implement immediately), followed by reducing coverage for GLP-1s and other medications (22%) and replacing underperforming vendors (20%). See Figure 1.3 for other options employers may have to turn to.

Despite these headwinds, nearly all employers (98%) continue to view their health and well-being strategy as a part of their overall workforce strategy, with 64% noting that it is integral to that strategy (Figure 1.4). And in this climate of rising costs coupled with pressing affordability concerns, it is to be expected that senior leadership will take notice. Ninety-four percent of employers strongly agree or agree that there is greater visibility of the company’s health and well-being initiatives among both leaders and employees. As acknowledgment of the cost pressures not only placed on HR/Benefits but also organizations overall, more employers say that finance plays a more significant role in health and well-being strategy. Seventy-six percent of employers noted increased involvement of their financial team in health and well-being strategy in 2024 compared to 64% in 2023 (Figure 1.5). 

Global Health Care Priorities

Just as employers with U.S. employees are experiencing the impacts of mental health issues, so are those with employees around the world. As a result, 57% of global employers are looking to expand their mental health offerings to either a very great extent or great extent. Improving global consistency is also top of mind, with 32% of employers pursuing this issue, along with 31% looking to improve data measurement of health initiatives (Figure 1.6).

AI: A Source of Help and Concern

Artificial intelligence, or AI, is being increasingly leveraged in health care administration and delivery. Employers were asked to assess their overall perceptions and comfort level with the new technology supporting benefit programs and offerings. Seven out of 10 employers see the promise of AI but also have reservations (Figure 1.7).

At this point in time, employers are more comfortable with AI being used in administrative and operational aspects of health care rather than in clinical delivery of patient care. Seventy-three percent of employers are either very comfortable, mostly comfortable or somewhat comfortable with AI improving data aggregation and being leveraged for more targeted communication and engagement.

A smaller percentage of employers, however, are comfortable with the use of AI for clinical purposes. Fifty-six percent of employers are comfortable to some degree with AI being leveraged for diagnostics. Slightly more employers—63%—are open to AI being deployed for chronic condition management (Figure 1.8). As the applicability of AI and comfort with the technology expands, it will be interesting to see if these perceptions change and how employers develop guardrails to monitor the use of AI in their health and workforce strategy.

“

One of the areas that I believe will impact health care in the future is artificial intelligence. AI is currently gaining momentum in the HR/Benefit space and has the potential to change the way health care is practiced; I look forward to seeing how it can help improve the overall experience and health of our employees.”

- Katherine Tahami, Equifax

Related Business Group on Health Resources

• Artificial Intelligence: Evolve Thinking, Accelerate Health and Well-being
• Cracking the Cost Code Through Value
• Driving Value in Health Care Around the Globe
• Value-Based Purchasing: 7 Calls to Action for the Health Care Industry and Employers to Accelerate Adoption

More Topics

Resource Cost Management Plan Design & Administration Value-Based Care