(image from pexels.com)
Employers are doubling down on healthcare cost management. While some will use traditional cost-shifting, others are choosing alternative medical plans that steer employees to higher-value providers.
Affordability concerns are shaping health benefit cost management strategies as employers seek to ensure benefits’ long-term value creation, according to data in a new survey of 711 organizations by consulting firm Mercer for its annual national survey of employer-sponsored health plans.
Employers are seeking to support varied workforce needs with inclusive benefits that have meaningful impact. A new focus area is preparing for the effects of extreme climate on workforce health.
Health benefit costs increased by 4.5% during 2024, with an increase of 5.8% predicted for 2025. They follow a decade of annual cost increases averaging around 3%, except for a pandemic-related blip in the trend in 2021. That’s after accounting for any cost-reduction measures they planned to implement, employers had estimated that their cost would rise by about 8%, on average, if they took no action to lower cost.
A major issue is employers are suddenly faced with exponential growth in the utilization of costly GLP-1 medications that are being used to treat obesity, according to respondents to the Mercer survey.
New fiduciary risks for health and welfare plans have garnered attention. Health plan transparency requirements, cybersecurity risks, high-profile lawsuits, and an increase in DOL health plan audit activity are top concerns and have led to heightened concerns about fiduciary risk for both self-funded and insured ERISA plan sponsors. Employers are reassessing their fiduciary roles and responsibilities, and revisiting strategies to manage risk. Very few (just 5%) responded they are not currently taking action to address fiduciary risk.
A lower-cost option that has gained traction in recent years is the Exclusive Provider Organization (EPO) plan, which uses a closed provider network to save money, according to data from Mercer. In 2024, 12% of all large employers and 29% of the largest employers (20,000 or more employees) offered an EPO option. Almost a third of these plans do not require a deductible, which is rare among Preferred Provider Organization (PPO) plans and not permitted for Health Savings Account-eligible plans. Currently, 5% of all covered U.S. employees are enrolled in an EPO.
See the full set of responses and trends at https://www.mercer.com/assets/us/en_us/shared-assets/local/attachments/pdf-2025-us-survey-on-health-and-benefit-strategies-for-2026.pdf
