Employers are up against escalating healthcare costs driven by mounting prescription drug expenses, inflation and worsening chronic conditions, a new survey shows.
The Business Group on Health released its annual Employer Health Care Strategy Survey on Tuesday morning, which examines the trends that large employers are watching and their plans to address the healthcare challenges they may face. The survey projects that healthcare cost trend will jump to 8% in 2025, growing from 6% in 2022.
Actual healthcare costs have increased by 50% since 2017, according to the report.
"I would say the headline here is healthcare costs are making a big jump, thanks largely to pharmacy costs overall," said Ellen Kelsay, CEO of the Business Group, during a briefing with reporters.
The survey includes responses from 125 employers representing 17.1 million workers. Generally, the employers surveyed said they plan to largely shield workers from major cost increases, instead deploying other cost-management options.
The report found that the median percentage spent on pharmaceuticals grew to 27% in 2023 compared to 21% in 2021. Multiple factors are driving this increase, including the significant demand for GLP-1s as well as greater use of high-priced cell and gene therapies.
Three-quarters (76%) of the employers surveyed said they were "very concerned" with growing pharmacy spend, while a mere 1% said the market for prescription drugs is competitive enough to drive affordability. By comparison, 5% said the same in 2023.
Employers said a mix of market and government reforms will be needed to address mounting costs, according to the survey.
The survey asked employers directly about GLP-1s and the impacts they're feeling from the interest in these products. Seventy-nine percent of those surveyed said they saw greater interest in obesity medications, including GLP-1s, from employees.
Most (96%) of employers covered GLP-1s for diabetes in 2024, and 67% covered these drugs to treat obesity. In addition, 34% offered coverage for GLP-1s to treat cardiac conditions. Given the demand, 96% of those surveyed said they were concerned about the long-term cost implications.
While coverage has expanded, many employers are using utilization management tools to avoid inappropriate use. Eighty-seven percent require prior authorization, while 52% require members to be in a weight management or lifestyle program to secure GLP-1s.
In addition, 51% require members to reach a certain body mass index threshold or have comorbid conditions to receive GLP-1s, the survey shows.
"GLP-1s are very prevalent right now for the treatment of diabetes, growing at leaps and bounds for the treatment of obesity over the past year and also growing considerably for the treatment of cardiovascular conditions," Kelsay said during the briefing. "The GLP-1 cost equation certainly is one that is already quite large and is poised to become even larger for employers in the year ahead."
Cancer also remains the condition driving the highest costs for employers, according to the report. This includes both elevated costs for new therapies as well as a growing prevalence of cancer diagnoses among younger employees.
Due to this trend, employers are putting a focus on prevention efforts, according to the study.
Kelsay said during the briefing that 72% of surveyed employers said they're seeing a higher prevalence of cancer diagnoses across their member populations broadly.
"This didn't come as a surprise, given the delayed access to care, to screenings and preventive services caused by the pandemic," she said.