Workplace insurance could soon be stripped down

Driving the news: Absent any changes to the way benefits are designed, the Business Group on Health estimates health care costs will jump nearly 8% in 2025, compared with a 7.2% increase this year.

• The new projection comes days after global benefits firm Aon estimated employer health costs will surge 9% next year, after a more manageable 6.4% this year.
• "That is that's the biggest increase we've seen in a long time," said Karen Frost, vice president of health strategy and solutions for benefits administrator Alight Solutions.

The big picture: The costs of GLP-1s and multimillion-dollar gene therapies and other specialty drugs are major culprits. So, too, is surging demand for outpatient care, tests and other medical services.

• Drug spending jumped to 27% of companies' overall health care spend, up from 21% just two years prior, per the Business Group on Health survey of 125 large employers that cover 17.1 million people combined.
• While specialty therapies can cost millions of dollars per treatment, they are typically used by a small number of workers. But demand is exploding among employees for injectable weight-loss drugs that cost upward of $1,000 a month.
• 56% of employers specifically identified GLP-1s as driving up health costs by a "very great" or "great" extent, and 46% say other high-cost therapies are having a similar effect, per the Business Group on Health survey.
• Pharmacy benefit managers are supposed to help control drug costs. But with the three biggest companies controlling prescriptions for more than 200 million Americans, patients are frequently steered to higher-priced drugs or charged big markups, as the NYT recently documented.
• 37% of companies said they are either already changing their PBM in 2025 or may begin searching for a new one next year.

Between the lines: Higher demand for services at hospitals and clinics is also putting the squeeze on workplace insurance.

• Hospital prices are rising "as fast as we've ever seen it happen" as health plans renegotiate 2025 pricing with providers, said National Alliance of Healthcare Purchaser Coalitions CEO Shawn Gremminger.
• "There was this brief moment during and post-COVID that people were like, 'Oh, well, maybe we've actually gotten a handle on health care cost inflation,'" Gremminger said. "The clear answer is 'No.' Like, everything else in COVID, there was a weird blip."

Friction point: Employers and their insurers have been increasingly trying to control demand through prior authorization and step therapy, drug formulary changes, more high deductible health plans or spousal carve-outs. They may also cut back non-core offerings, experts say.

• That specifically includes efforts to crack down on utilization of GLP-1s with stricter requirements on who gets them. Outside a better solution, they have to, Gremminger said.
• "No one is questioning the value of these drugs ... GLP-1s work," Gremminger said. "But the time that it will take for an employer to recoup their investment is measured, I think, in decades."
• As well, 22% of employers said they planned to change their health and well-being vendors next year, and 15% of employers said they plan to change health plans next year.

What we're watching: How much employers still are willing or able to eat the cost of the increases to avoid giving workers sticker shock.

• Workers "may certainly see some changes in the cost sharing provisions," said Julie Stich, a benefits expert at the International Foundation of Employee Benefit Plans, pointing to higher premiums, deductibles or copays, or just more restrictions on their coverage.
• But, large companies told the Business Group on Health they are still looking to minimize that impact this season, said Ellen Kelsay, CEO of the Business Group on Health.
• "Employers, as we saw in the past couple years, remain committed to absorbing and shielding as much as possible their employees from these increases while offering robust benefits," she said.