In 2024, healthcare premiums reached $18,639, up from $17,201 in 2023. Like previous years, employers are shouldering most of this increase in costs, contributing $12,932 to premiums in 2024 compared to $11,762 in 2023.

Growing pharmacy costs, which are taking up more of healthcare budgets, are largely responsible for the increase in overall healthcare costs. The median percentage of healthcare dollars spent on pharmacy increased from 21% to 27% between 2021 and 2023.

Among the respondents, 76% said they are "very concerned" about overall pharmacy costs. Over 50% are also very concerned about the opaqueness of the pharmacy supply chain and the lack of transparency in pharmacy contracting and rebates.

GLP-1 drugs are one of the top drivers of healthcare costs right now. Among the respondents, 79% said they have seen increased interest in obesity medications, including GLP-1 drugs, among their covered members.

Currently, 96% of employers say they cover GLP-1 drugs for diabetes, but coverage is also expanding to other health conditions, such as obesity and cardiovascular problems. 

The top three health conditions driving costs are cancer, musculoskeletal conditions, and cardiovascular conditions. In the report, 72% of respondents said they have seen a higher prevalence of cancer among their employees and their families. 

How employers are managing costs, supporting workers

When asked about strategies they would consider to reduce costs, the top three answers from employers were leveraging the RFP process to secure better pricing from vendors, limiting or reducing coverage of GLP-1 and related medications, and replacing underperforming vendors. 

Mental health also continues to be a priority for employers, with 79% saying that access is one of their top three mental health priorities for 2025. To improve access to mental health care and reduce costs, employers are trying out several different strategies, including offering virtual counseling, eliminating out-of-network costs, and providing no- or low-cost, on-site mental health counselors.

Employers also said they are committed to health equity efforts. Employers are adopting strategies to promote health equity, such as working with employee resource groups to promote benefits/well-being initiatives to specific groups, requiring health plans and care navigation partners to maintain healthcare and mental health provider directories, and expanding their provider network to include more diverse healthcare and mental health providers. 

"Employers are steadfast in their desire to provide comprehensive offerings to their workforces," said Business Group on Health president and CEO Ellen Kelsay. "They continue to absorb much of the upticks in cost and remain keenly focused on lowering spending and improving outcomes and experiences for employees. However, the foreboding cost landscape has accelerated the need for bold transformation, and employers seek partners who will make that happen."

"While health care costs exert pressure on a fragmented health care environment, employers will always work to strike a balance between cost management, quality improvement and enhanced employee experience," Kelsay added. "These are challenging times for benefits professionals." (Business Group on Health press release, 8/20; Business Group on Health executive summary, 8/20; Berryman, Modern Healthcare, 8/20; Reed, Axios, 8/21 [1]; Reed, Axios, 8/21 [2])

Our 3 takeaways on employer concerns about healthcare costs 

By Sally Kim

Every year, I look forward to the Business Group on Health's large employer health care survey because it provides valuable longitudinal data that informs my research. Here are three key findings from this year’s report that particularly stood out:

1. GLP-1 uptake: GLP-1s and other pharmacy costs are significantly impacting employer healthcare expenditures. GLP-1s have been a major topic of discussion among employers this year, and it's intriguing to see their uptake and associated spending increase. Over two-thirds of large employers now cover GLP-1s for obesity treatment, a notable rise from the approximately 40% reported late last year. Moreover, the proportion of healthcare spending on pharmacy has surged from 21% to 27% in just two years, a startling increase.

However, employers should not overlook the broader pharmacy landscape, especially cell and gene therapies. These treatments can cost millions per patient and pose substantial financial challenges with few viable payment options. Dependence on stop-loss insurance is becoming unsustainable due to skyrocketing rates, targeted exclusions of high-cost members, and the growing number of available therapies.

2. Vendor Management: It is noteworthy that strategies such as "leveraging the RFP process to secure better pricing from vendors" and "replacing under-performing vendors" are top priorities this year, ranking first and third respectively. This indicates growing employer frustration with current healthcare vendor options, including health plans. The four main expectations I consistently hear from employers regarding vendors are:

a. One-to-five-year ROI timelines, ideally with a 3:1 ROI.

b. Consideration of implementation costs in ROI calculations.

c. Preference for outcomes-based contracting whenever possible.

d. Demand for holistic solutions rather than multiple point solutions.

3. Top-Cost Conditions: The leading cost-driving conditions among employees are not particularly surprising, as they tend to remain consistent year-over-year. The conditions most frequently cited by employers I work with include cancer, musculoskeletal disorders, cardiovascular conditions, NICU deliveries, diabetes, and renal disease.

However, it's crucial to highlight an increasing concern: Younger employees are becoming sicker and more costly. We cannot assume that young equals healthy anymore. In fact, they may have more underlying conditions that haven't surfaced yet as more patients put off care because of lack of access or affordability. The top conditions for younger plan members lean more towards cancer, prenatal/neonatal care, and long Covid consequences.

For more on this topic, check out Advisory Board's related resources:

• Inside employers' concerns about high healthcare costs
• 5 care navigation strategies to help employers cut healthcare costs
• The four things your employer partners won’t tell you about their UHCD strategy
• How to navigate the evolving high-cost drug landscape
• Market outlook for employer-sponsored insurance