Employer healthcare costs are projected to rise significantly next year, with estimates ranging from 8% to 9% according to two new reports. These increases are driven in part by the growing use of GLP-1 medications, which are commonly used to treat diabetes and obesity.
A report from Aon, a major insurance broker, predicts a 9% increase in health insurance costs for the upcoming year. This represents a significant jump from the 6.4% increase seen in 2023 and 2024. As a result, workers may end up shouldering up to 20% of their premiums, equating to an average premium of $3,040 per person or about $117 per paycheck.
GLP-1 medications have been identified as a key factor contributing to the rise in healthcare costs. Aon’s data shows that the use of GLP-1s cost employer health plans $6.25 per member per month in 2023, marking a substantial 224% increase compared to the previous year. While data for 2024 is not yet available, studies indicate a 15.6% increase in GLP-1 utilization for diabetes and a 78% spike for weight loss.
The Business Group on Health (BGH) also anticipates an 8% increase in employer healthcare costs, based on survey results released recently. The group highlighted that healthcare costs have surged by 50% since 2017, with spending on drugs and treatments accounting for a growing share of expenses.
According to BGH, factors such as inflation, increased demand for expensive drugs like GLP-1s, and the rising costs of treating chronic conditions are driving up healthcare expenses. Additionally, heart treatments and cardiovascular care are identified as significant contributors to escalating costs.
BGH’s report, compiled from surveys of 125 large employers covering 17 million individuals, reveals that the majority of employers cover GLP-1 medications for diabetes and obesity. Employers expressed concerns about the long-term cost implications of these medications, particularly given the heightened interest in obesity treatments among covered members.
Despite the cost challenges posed by GLP-1 medications, there is a glimmer of hope in the form of increased competition. Aon noted that Eli Lilly priced its weight-loss drug Zepbound slightly lower than Novo Nordisk’s Wegovy, setting the stage for potential price competition in the future. However, supply issues and drug shortages are currently limiting the impact of price competition.
In conclusion, the rising costs of healthcare, driven in part by the increased use of GLP-1 medications, present significant challenges for employers and employees alike. As the healthcare landscape continues to evolve, it will be crucial for stakeholders to explore innovative solutions to mitigate cost pressures and ensure access to essential treatments.