One of the most important surveys performed to understand the year-to-year status as well as long-term trends in employer coverage is the Business Group on Health’s annual healthcare strategy survey. The 2025 survey was fielded between June 3 and July 12, 2024. The survey was completed by 125 employers, which cover more than 17.1 million lives in the United States. U.S. and multinational companies completed the survey and range from under 10,000 employees to 100,000 employees and over. About 73% of respondents had more than 10,000 employees. They represent a broad range of industries. Remember that close to a majority of Americans are covered by employer-furnished insurance, usually self-insured ERISA coverage.
What does the survey tell us overall?
Looking at projected annual increases before plan design changes, the projected trend rose from 6% in 2022 to almost 8% for 2025. Even after design changes, actual healthcare costs continued to grow at a rate exceeding pre-pandemic increases. The survey finds that this points to a more than 50% increase in healthcare costs since 2017. The survey also finds that the trends will persist. Employers likely will absorb much of the increase as they have done in recent years, but rising out-of-pocket costs continue to cripple employees and families.
What is driving these cost increases?
There is the return of utilization and inflation in the healthcare sector post pandemic, but the biggest culprit is drug spending. The survey notes that, between 2021 and 2023, the median percentage of health care dollars spent on pharmacy has jumped from 21% to 27%. This means nearly all of the healthcare cost increase noted above is related to pharmacy costs. As a result, employers registered the following concerns:
- 76% of employers are “very concerned” about overall pharmacy cost.
- 58% are very concerned about the opaqueness of the pharmacy supply chain.
- 56% are very concerned about the lack of transparency in pharmacy contracting and rebates.
- Just 1% of employers think that the prescription drug market is competitive enough to keep prescription drugs affordable.
- A majority of employers call for a combination of market and government reform to curb drug prices.
One of the biggest drivers of increases in drug costs are GLP-1 weight-loss drugs. Ninety-six percent of employers are either very concerned or concerned about the appropriate use and long-term costs of GLP-1s and related weight-loss drugs. Seventy-nine percent of employers have seen an increase in interest in obesity medications. This is a result of coverage for disease states but also the expansion to obesity only. Right now, employer coverage is by and large the only line of business that covers GLP-1s and related drugs just for obesity. About 70% of employers currently cover or will cover (in 2025) GLP-1s for obesity alone. Another 13% are considering it in the future. About 87% rely on prior authorization requirements to manage GLP-1s, with more than half using BMI or existence of underlying disease states as criteria. About 52% require patients to participate in a weight management program.
In addition, the disease states that are driving the greatest pharmacy costs are these top 6:
- Cancer
- Musculoskeletal
- Cardiovascular
- Diabetes
- Mental health
- Gastroenterology
What will employers do to temper rising drug costs?
Among the strategies to limit costs are the following. Check out the survey at the link below to see all the strategies.
- 82% will leverage an RFP process to drive better pricing or strongly consider doing so.
- 85% will replace under-performing vendors or strongly consider doing so.
- 52% will limit or reduce GLP-1 cover or strongly consider doing so.
- 54% will adopt a transparent pharmacy benefits manager (PBM) model or strongly consider doing so.
Conclusion
The strategies outlined by employer groups make a great deal of sense. It is often true that employers do not go back to the market often enough to drive down costs. And asking for transparent arrangements will hold great promise in the future. It also is likely that employer groups that have been very open to liberal use of GLP-1s will have to rein in access somewhat.
The real solution, though, is allowing employer groups to access the Medicare drug prices as they roll out. Some of this will occur over time as the market becomes aware of the Medicare negotiated prices. But expanding Medicare drug pricing to the commercial world would help reduce costs much faster.
Survey and analysis: https://www.businessgrouphealth.org/en/resources/2025%20employer%20health%20care%20strategy%20survey%20intro
#employercoverage #drugpricing #healthcare #coverage
— Marc S. Ryan
