While inflation in the US slowed to its lowest rate in three years this September, medical care remains an outlier, with costs in this category rising faster than those of overall goods and services.
Inflation’s impact on the healthcare sector is reflected in projected health plan costs for the next year, according to recent reports from HR and benefits consulting firm Segal and WTW, a global advisory, broking, and solutions firm.
In 2025 medical plan cost trends are expected to rise by a median of 8%, according to Segal’s projection, representing the highest increase in 15 years apart from 2021, when prices were affected by the rebound of the Covid-19 pandemic. US employers surveyed by WTW similarly anticipate healthcare costs will tick up by 7.7% next year, up from 6.9% in 2024.
The cost of outpatient prescription drugs is expected to rise by a rate of 11.4%, the highest of any trend Segal analyzed in health benefit plan costs. Employers are continuing to keep a close eye on GLP-1 weight loss drugs, as they’re a major driver of higher prescription drug costs, said Eric Miller, a VP and consulting actuary with Segal’s National Health Practice.
Medical cost increases lag overall inflation. The projected increase in medical plan costs is part of a “lagged effect” from a period of elevated global inflation, Miller said.
While entities across the healthcare sector—from doctors and hospitals to insurers—saw the cost of doing business go up as inflation rose, “it takes time to raise prices, and it takes time for the effect of raising prices to make its way all the way into the cost trend,” he said.
In recent years employers have tried to avoid passing on higher health costs to their employees, and Miller said he doesn’t expect that to change even as the price of insuring them goes up: “I'm sure some portion will be passed along, but the sentiment is very much that employers are planning to absorb the majority of those trends.”
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The billion-dollar GLP-1 question. Obesity and weight management is a top focus area for employers as they seek to address affordability and employee well-being, according to the WTW survey.
But GLP-1 drugs to treat obesity remain costly, and are one of the primary factors driving up prescription drug costs. The maximum allowed cost per member per month for anti-obesity GLP-1 drugs increased nearly fourfold from Q4 2022–Q4 2023, the Segal report found. What’s more, it’s not yet clear how long employers might have to pay to cover these drugs before they see tangible health benefits for their workforces that could translate into cost savings. A recent Blue Cross Blue Shield analysis found many patients stop taking the drugs before they see “clinically meaningful” results.
“Plans and employers are trying to figure out how best to cover these medications...how to optimize health outcomes relative to the high cost of the drugs,” Miller said.
Among the strategies HR leaders are considering to manage the costs of weight loss drugs are keeping coverage limited to patients with higher body-mass index scores, capping the duration of coverage, or pairing the medications with lifestyle changes like exercise, he said.
Nearly one-half of employers surveyed by WTW said they were interested in “compounded” GLP-1 medications coming onto the market at lower costs. The wellness company Hims & Hers released a compounded version of GLP-1 injections in May, and weight loss platform Noom followed suit in September.