Aon: U.S. Employer Health Care Costs Projected to Increase 9 Percent Next Year (2025)

Aon: U.S. Employer Health Care Costs Projected to Increase 9 Percent Next Year

CHICAGO, Aug. 15, 2024 /PRNewswire/ -- The average cost of employer-sponsored health care coverage in the U.S. is expected to increase 9.0 percent*, surpassing $16,000 per employee in 2025, according to Aon plc (NYSE: AON), a leading global professional services firm.

Aon: U.S. Employer Health Care Costs Projected to Increase 9 Percent Next Year (1)

This projected increase, which assumes employers do not implement employee cost sharing increases and other cost saving strategies, is higher than the 6.4 percent increase to health care budgets that employers experienced from 2023 to 2024 after cost savings strategies. On average, the budgeted health-plan cost for clients is $14,823 per employee in 2024. The analysis uses Aon's Health Value Initiative database, which captures information for more than 950 U.S. employers representing approximately 6.7 million employees.

Medical claims continue to trend at elevated levels, while prescription drug costs are climbing higher due to continued growth in specialty drugs and increased utilization of GLP-1 medications for diabetes and obesity.

"In the health care sector, both rising employment levels and wage increases fueled by economy-wide inflation during the past few years are pushing health care costs higher," said Debbie Ashford, the North America chief actuary for Health Solutions at Aon. "To keep pace with these pressures, the health care industry negotiates higher prices, which in turn emerge as higher medical trends.

"On the prescription drug side, specialty drugs remain the leading factor in spending, even though they represent a small fraction of overall utilization. The demand for GLP-1 medications has skyrocketed, and a surge in new drugs in the GLP-1 category is expected to drive up costs even further, adding 1 percent to the aggregate health care cost increase," Ashford added.

"We are at a pivotal time in helping employers think about balancing the costs of GLP-1 prescription drugs with the opportunity they provide to treat obesity and reduce the chronic conditions associated with this disease," said Farheen Dam, North American Health Solutions leader at Aon. "It's imperative that employers consider the clinical evidence and health benefits as well as the near-term cost impacts."

Increase to U.S. Health Care Plan Costs from 2023 to 2024

In terms of 2024 health plans, employer costs increased 6.4 percent, while employee premiums from pay checks were slated to be a more modest 3.4 percent increase from 2023, according to Aon's analysis.Both are notably higher than averages from the prior five years, when employer budgets grew an average of 4.4 percent per year and employees averaged 1.2 percent per year.** On average, employers subsidize about 81 percent of the plan cost, while employees pay the remainder.

Plan Cost**

2023

2024

Change from
2023 to 2024

Employer Cost

$11,238

$11,956

6.4%

Employee Premiums from Paycheck

$2,773

$2,867

3.4%

Total Plan Cost

$14,011

$14,823

5.8%

Employer Subsidy

80.2%

80.7%

0.5%

"Employers continue to bear the brunt of rising health care costs," Dam said. "Plan sponsors are wary of passing significant expenses onto plan participants, striving to keep benefits affordable."

Employees in 2024 are contributing about $4,858 for health care coverage, of which $2,867 is paid in the form of premiums from pay checks and $1,991 is paid through plan design features such as deductibles, co-pays and co-insurance, according to the firm's analysis.

Employee Costs***

2023

2024

Change from
2023 to 2024

Employee Premiums from Paycheck

$2,773

$2,867

3.4%

Employee Out-of-Pocket Costs

$1,946

$1,991

2.3%

Total Employee Costs

$4,719

$4,858

2.9%

Increase by Industry to U.S. Health Care Plan Costs from 2023 to 2024

The rate of health care cost increases vary by industry, as does the proportion of cost shared by the employer plan sponsor and employee. The technology and communications industry has the highest average employer cost increase at 7.4 percent, while the public sector has the highest average employee cost increase at 6.7 percent. The health care industry has the lowest average change in employee contributions, with no material change from 2023.

Projected 2023 to 2024 Increase
by Industry

Employer
Cost

EE Contributions
from Paycheck

Plan Cost

Manufacturing

5.2%

4.0%

4.9%

Retail and Wholesale Trade

2.4%

0.3%

1.9%

Public Sector

7.3%

6.7%

7.2%

Health Care

5.8%

-0.1%

4.6%

Technology and Communications

7.4%

5.0%

7.0%

Finance and Insurance

7.2%

2.5%

6.2%

Professional Services

6.7%

6.3%

6.6%

Using Predictive Analytics to Identify Emerging Risks and Refine Budgeting Processes

High-cost claims continue to be an issue for employers and are being driven by emerging high-cost gene and cell therapies, complex procedures and a rise in chronic conditions. Aon recently launched its Health Risk Analyzer, which uses advanced machine learning to help employers predict high-cost claimants and gain a deeper understanding of which conditions will drive future health care spending so they can more proactively budget for these costs and implement targeted strategies to manage their highest-risk plan members.

"Self-insured plan sponsors face challenges in providing stable plan increases, funding and renewals in this volatile environment," Dam said. "Combining Aon's Health Risk Analyzer and the firm's health risk financing and reinsurance capabilities, plan sponsors are able to access new funding and risk transfer strategies,allowing flexibility in funding of plan costs and converting unexpected volatility into predictable and planned expenses."

* The projection is applicable in a status quo environment when employers do not make changes or implement care management programs. Aon consultants expect many employers to implement cost-saving changes or programs to help mitigate this increase.
** Plan costs represent the employer's and employee's combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments such as deductibles, co-pays and co-insurance.
*** Based on the weighted average cost of clients in Aon's analysis in both 2023 and 2024.

Aon's Health Value Initiative
The historical information and projections shown above were developed using Aon's Health Value Initiative database, which captures healthcare costs and benefit designs for more than 950 U.S. employers representing 6.7 million employees and $100 billion in 2024 health care spend. The projections above are developed after taking plan design changes as well as demographic and geographic population adjustments into account. To learn more about Aon's Health Solutions, visit https://www.aon.com/home/solutions/health.

About Aon
Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues in over 120 countries provide our clients with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

Follow Aon onLinkedIn,X,Facebook andInstagram.Stay up-to-date by visiting Aon'snewsroom and sign up for news alertshere.

Disclaimer
The information contained in this document is solely for information purposes, for general guidance only and is not intended to address the circumstances of any particular individual or entity. Although Aon endeavors to provide accurate and timely information and uses sources that it considers reliable, the firm does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of any content of this document and can accept no liability for any loss incurred in any way by any person who may rely on it. There can be no guarantee that the information contained in this document will remain accurate as on the date it is received or that it will continue to be accurate in the future. No individual or entity should make decisions or act based solely on the information contained herein without appropriate professional advice and targeted research.

Media Contact
Robert Elfinger
+1 312 381 0071
robert.elfinger@aon.com

SOURCE Aon plc

Aon: U.S. Employer Health Care Costs Projected to Increase 9 Percent Next Year (2025)

FAQs

Aon: U.S. Employer Health Care Costs Projected to Increase 9 Percent Next Year? ›

The average cost of employer-sponsored health care in the United States is projected to increase by 9 percent in 2025, surpassing $16,000 per employee, according to a recent analysis by Aon plc. This anticipated rise follows a 6.4 percent increase in employer healthcare budgets from 2023 to 2024.

What is the average annual increase in health care costs? ›

Health spending grew modestly from 2021 to 2022, by 4.1%, slightly faster than the 3.2% increase from 2020 to 2021.

What is the percentage increase for health insurance? ›

– The CalPERS Board of Administration has approved health plan premiums for calendar year 2025, at an overall weighted premium increase of 10.79%.

What percentage do most employers pay for health insurance? ›

Insurance Costs Vary by Plan Type. Employers will pay different percentages of health insurance costs depending on their plan type. But on average, you should expect to pay between 82 and 85% of health insurance costs for individual coverage and between 67 and 75% of insurance costs for family plans.

What is the rise in US healthcare costs? ›

U.S. health care spending grew 4.1% to reach $4.5 trillion in 2022, faster than the increase of 3.2% in 2021, but much slower than the rate of 10.6% in 2020.

How much are health insurance premiums expected to increase in 2024? ›

SACRAMENTO, Calif. – The CalPERS Board of Administration today approved health plan premiums for calendar year 2024, at an overall premium increase of 10.77%. Basic (non-Medicare) plans will increase 10.95% overall.

What is the average inflation rate for health care costs? ›

Basic Info. US Health Care Inflation Rate is at 3.17%, compared to 3.26% last month and -0.52% last year. This is lower than the long term average of 5.12%. US Health Care Inflation Rate reflects the year over year change in the health care component of the US Consumer Price Index.

How much are health insurance premiums going up in 2025? ›

An August report from Aon, a large insurance broker, predicts a 9% increase in health insurance costs compared to a rise of 6.4% in 2023 and 2024. This means workers could end up paying up to 20% of their premiums, which translates to an average premium of $3,040 per person or about $117 per paycheck.

What is the average increase in health insurance premiums by year? ›

The $23,968 average family premium in 2023 is 22% higher than the average family premium in 2018 and 47% higher than the average family premium in 2013. The 22% family premium growth in the past five years is similar to the 20% growth between 2013 and 2018 [Figure 1.15].

What is the 80% rule in insurance? ›

When it comes to insuring your home, the 80% rule is an important guideline to keep in mind. This rule suggests you should insure your home for at least 80% of its total replacement cost to avoid penalties for being underinsured.

Is $200 a month a lot for health insurance? ›

Is $200 a month a lot for health insurance? The value of $200 per month for health insurance can vary based on individual needs and location. For some, especially those with employer-sponsored coverage or receiving subsidies under the ACA, $200 might seem high.

What is the most expensive health insurance? ›

Platinum health insurance is the most expensive type of health care coverage you can purchase. You pay low out-of-pocket expenses for appointments and services, but high monthly premiums. Plans typically feature a small deductible or no deductible and cheap copays or coinsurance.

What are some disadvantages of employer-sponsored health insurance? ›

Lack of flexibility

Because the employer chooses group insurance, employees don't have a say in what network they'll be on, the deductible they'll need to meet, or the premium they'll have to pay. Samuel Greene, insurance broker and CEO of Blue Insurance said, “Sometimes, group coverage can be limited.

Is healthcare overpriced in the US? ›

The United States has one of the highest costs of healthcare in the world. In 2022, U.S. healthcare spending reached $4.5 trillion, which averages to $13,493 per person. By comparison, the average cost of healthcare per person in other wealthy countries is less than half as much.

How much has the cost of healthcare increased in the last 10 years? ›

Health spending in California shot up 60% in 10 years, reaching $10,299 per person in 2020.

What is the trend in healthcare costs in the US? ›

U.S. health care spending grew 4.1 percent in 2022, reaching $4.5 trillion or $13,493 per person. As a share of the nation's Gross Domestic Product, health spending accounted for 17.3 percent.

Increases in health care costs are coming out of ...UC Berkeley Labor Centerhttps://laborcenter.berkeley.edu ›

The Kaiser Family Foundation calculated that employers were responsible for two-thirds (66 percent) of total health expenditures on average for U.S. workers wit...
Comparing health insurance plans can feel like comparing apples to bananas. Every plan offers something different: you're balancing employee contributions, ...
Plan costs represent the employer's and employee's combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments...

How much has healthcare cost increased in the last 10 years? ›

Between 2010 and 2020, California's health spending per capita grew on average 4.7% per year, exceeding the US rate of 3.8%.

How much has healthcare spending increased? ›

NHE grew 4.1% to $4.5 trillion in 2022, or $13,493 per person, and accounted for 17.3% of Gross Domestic Product (GDP). Medicare spending grew 5.9% to $944.3 billion in 2022, or 21 percent of total NHE. Medicaid spending grew 9.6% to $805.7 billion in 2022, or 18 percent of total NHE.

Are healthcare costs rising faster than inflation? ›

Household health spending has grown twice as fast as wages, and medical inflation is 1.5 times greater than general inflation, according to the Kaiser Family Foundation.

What is the current medical CPI rate? ›

US Consumer Price Index: Medical Care is at a current level of 564.31, down from 565.71 last month and up from 546.96 one year ago. This is a change of -0.25% from last month and 3.17% from one year ago.

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