Employers expect the cost of health care benefits to continue to rise – and they will have to make tough decisions

America has a health care access crisis – and depending on how government and business get involved, things could get worse.

US employers expect their health benefits costs per employee to rise 5.8% by 2025, even after taking cost-cutting measures, according to a new report from Mercer, a consulting firm. of HR. This is the third year in a row that business leaders expect these prices to increase by about 5% — much higher than the 3% annual average that has shown most of the past decade. ago.

If employers take no action to cut costs, they expect their health benefits to increase by about 7%. Small businesses with 50 to 499 employees may have a tougher time, with those employers facing a 9% increase if they don’t take cost-cutting measures.

The main factor behind the rising costs is the current state of the health care industry—medical professionals are burned out, stretched by understaffing and long working hours. By 2025, the US could have a shortage of 450,000 nursing workers, according to a 2022 report from McKinsey.

America’s rapidly aging population is another factor contributing to rising costs, according to the Mercer report, as well as consolidating US health care systems. A separate 2024 study from the University of Chicago’s Harris School of Public Policy found that hospital mergers between 2010 and 2015 led to a 5% increase in prices.

“Consolidation can generate revenue in the future through increased efficiency and improved integration, but there is evidence that it puts pressure on prices, as large health systems have the power to communicate. more than smaller systems,” Sunit Patel, Mercer’s US chief executive for health and benefits. , wrote in a statement.

About 53% of employers will make cost-cutting changes to their health benefit plans by 2025, according to the report. That’s a significant increase from the 44% of companies that did so by 2024. The study shows that this reduction includes raising deductibles and other cost-sharing provisions, making and higher costs to plan members.

Although employers have avoided these changes in the past, they are changing their tune during three years of price growth.

“Employers are increasingly concerned about the affordability of health care and making sure that employees can afford out-of-pocket costs when they seek care,” said Tracy Watts, US health policy leader. for Mercer, he wrote in a statement. “But they also need to manage the overall cost of health care coverage to achieve a sustainable level of spending for the organization. Balancing these competing priorities will be a challenge over the next few years. .”

Emma Burleigh
emma.burleigh@fortune.com

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