Boost benefits or manage cost? Employers did both in 2024 

Shifting trends, cost challenges, disruptive strategies – as always, there was a lot to digest in the results of Mercer’s latest National Survey of Employer-Sponsored Health Plans, now in its 39th year.   

The survey found that the average per-employee cost of employer-sponsored health insurance reached $16,501 in 2024, an increase of about 5% over 2023. Employers expect cost to rise about 6% in 2025 after making planned changes – they reported cost would rise by nearly 8% if they made no changes.   

Yet despite this significant cost growth, the survey found that many employers enhanced key benefits to support employees and their families in 2024, while pursuing cost management strategies that reflected concerns about healthcare affordability.      

Pharmacy benefit cost and GLP-1s

The fastest-growing component of health benefit cost continues to be prescription drugs. Pharmacy benefit cost rose 7.7% in 2024, following an increase of 8.4% in 2023. One driver of this spend is the growing utilization of GLP-1 drugs for diabetes and weight loss.  

While nearly all health plans cover GLP-1 drugs for diabetes, that is not the case for obesity treatment. However, despite some headlines about some organizations dropping coverage for these obesity medications due to the cost, overall the prevalence of coverage rose in 2024.  Of all large employers (those with 500 or more employees), 44% offer coverage, up from 41% last year. Of the largest employers (20,000 or more employees), nearly two-thirds -- 64% -- now offer coverage, up sharply from 56% in 2023.  

This trend may reflect the hope that GLP-1 medications will turn the tide on the obesity epidemic and positively impact downstream medical costs.  Cost is clearly a concern, and nearly all employers that cover obesity medications now have authorization requirements in place to ensure they are used by members who will benefit the most.  

Employers are also managing the rising cost of specialty drugs, including expensive gene and cell therapies for conditions such as hemophilia and sickle cell disease. The most common strategy to curb costs is working with medical carriers and pharmacy benefit managers to implement clinical management programs for patients.  

Addressing affordability with more medical plan choices

With the recent acceleration in health benefit cost growth, cost management has moved to the top of employers’ list of priorities. However, concerns about healthcare affordability – employees' ability to pay for care when needed -- have led more employers to pursue strategies that take into account their employees’ differing financial and medical circumstances.   

One such approach is to expand medical plan choices.  This year, 65% of large employers offered three or more choices to employees at their largest worksite, up from 60% in 2023. The largest employers now provide an average of five options, up from four last year.  

A lower-cost option that has gained traction in recent years is the Exclusive Provider Organization (EPO) plan, which uses a closed provider network as one means of saving money.  In 2024, 12% of all large employers and 29% of the largest employers offered an EPO option. About 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 (HSA) eligible plans. Currently, 5% of all covered US employees are enrolled in an EPO. 

EPOs have lower employee premium requirements, on average, than PPO plans $156 monthly for employee-only coverage compared to $185 for PPOs, among large employers.  While HSA plans have the lowest average monthly contribution ($106), the average deductible is nearly twice that of the EPO, even after employer HSA contributions are deducted.   

While HSA plans remain a popular choice, enrollment across employers of all sizes has leveled off after years of robust growth and actually declined for the first time in 2024, from 38% of all covered employees to 37%. 

Promoting higher-quality care and easier access

Many of the EPO plans offered by the largest employers (40%) incorporate a high-performance provider network, in which providers are selected based on quality and cost metrics, as do 10% of the PPO plans. By steering employees to providers of demonstrated quality and cost-efficiency, cost savings result from less waste and better outcomes, a win for both employees and the plan sponsor.  

Another way to steer employees to higher-quality, cost-efficient care is by providing specialized health navigation or advocacy services. Nearly half of all large employers (49%) have either contracted a specialized vendor or purchase enhanced services from the health plan to provide member assistance beyond standard customer service.   

Employers are also offering members a convenient way to find lower-cost care with virtual primary care “point solutions,” a popular benefit that can enhance healthcare accessibility.  These programs typically provide 24/7 access via text messaging to physicians who can diagnose and treat certain conditions, including ordering labs and writing prescriptions.  In 2024, 20% of large employers provided this service, with 27% of the largest employers offering it.  

Family-forming benefits 

Coverage for fertility treatment is becoming increasingly common, with in vitro fertilization (IVF) now covered by 47% of all large employers, up from 45% last year. Of the largest employers, 70% cover IVF, up from 62%. Elective egg freezing and elective sperm freezing are covered by 21% and 20% of all large employers, respectively. 

Most employers offering fertility benefits (64% of large employers) say that they are intended to be inclusive, meaning eligibility is not limited to those meeting the clinical definition of infertile. “Fertility benefits have become table stakes for employers wanting to offer comprehensive, inclusive benefits,” continues Ms. Watts. 

Cancer support 

Employers are increasingly providing specialized support to employees dealing with cancer. The range of services and resources provided include campaigns to promote prevention and early detection, case management and Centers of Excellence to ensure high-quality care, and other types of support such as caregiver resources and workplace programs. Two-thirds of large employers now provide at least one of these resources, with one-fifth of the largest employers having a “robust” cancer strategy and another 24% actively developing one.  

The challenge ahead

Health benefit cost growth began trending higher in 2023 and employers expect a third year of annual increases of about 5-6% in 2025, well above general inflation. Employers are still concerned about healthcare affordability and ensuring that employees can afford the out-of-pocket costs when they seek care. They also need to manage the overall cost of healthcare coverage to keep employees’ premium contribution down and achieve a sustainable level of spending for the organization. Balancing these priorities will be a central challenge for employers over the next few years.