U.S. Employers are struggling to keep up with escalating healthcare costs, driven by mounting prescription drug expenses, inflation, and worsening chronic conditions.  Recent studies show that  employer-sponsored healthcare costs are expected to rise by nearly 8% in 2025, marking the largest increase over a decade.

One survey -- by the Business Group on Health -- finds that a mix of inflation, the growing demand for costly medications, and the ongoing treatment of chronic diseases such as cancer and cardiovascular diseases, are leading to significant challenges for employers. 

The survey collected data from 125 large employers, covering more than 17 million people across the United States. It finds that healthcare costs have risen by 50% since 2017.

“Employers are steadfast in their desire to provide comprehensive offerings to their workforces,” says Ellen Kelsay, president and CEO of the Business Group on Health.
"“However, the foreboding cost landscape has accelerated the need for bold transformation.”

Major problems for businesses include rising pharmacy costs as well as escalating costs to treat chronic diseases such as cancer.

Pharmacy spending was largely responsible for the increased health-care trend in 2023, as the median percentage of health-care dollars spent on pharmacy spiked from 21% to 27% in the two-year period between 2021 and 2023. Three-quarters (76%) of employers report being “very concerned” with overall pharmacy costs.  

GLP-1 medications -- to treat diabetes -- are one of the top drivers of healthcare costs right now. Almost all survey respondents -- 96% -- say they offer GLP-1 Coverage to their workers.  
Among the respondents, 79% said they have seen increased interest in obesity medications, including GLP-1 drugs, among their covered members.  
However, employers are increasingly expanding their GLP-1 coverage to include other conditions, such as obesity and cardiovascular problems.  

The top three health conditions driving costs are cancer, musculoskeletal conditions, and cardiovascular conditions. The report finds that 72% of respondents say they have seen a higher prevalence of cancer among their employees and their families.  

Mental health also continues to be a priority for employers: 79% of them say that access is one of their top three mental health priorities for 2025. To improve access to mental health care and reduce costs, employers are trying out several different strategies:
They include:  
•Virtual Counseling
•Eliminating out-of-network costs
•Providing no- or low-cost, on-site mental health counselors.

In addition to the rising cost of health insurance, one of the major frustrations for employers is the opaqueness of the healthcare coverage journey.  This is leading to a demand for alternatives to traditional insurance, as well as greater transparency in the process.