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Charted: Employer health costs to jump 9% next year


Employer healthcare costs are projected to rise by a median of 9% in 2026, with GLP-1 drugs and cancer treatments driving the increase, according to a new survey from the Business Group on Health.

How cost increases are impacting employers

For the survey, researchers from the Business Group on Health — a coalition of more than 400 companies focused on improving employer-sponsored healthcare — collected responses from 121 large employers who collectively cover more than 11.6 million people.

According to the survey, employer health plan costs are projected to increase by a median of 9% in 2026, "up from an estimated 8% this year and reported increases of 7.5% in 2024 and 6.8% in 2023," STAT reports. Two-thirds of employers say that growing healthcare costs are affecting their ability to provide global benefits.

Employers identified two primary forces behind next year's projected cost hike: rising demand for GLP-1 drugs and the ongoing expense of cancer care.

According to STAT+, "The biggest culprit for higher costs in the Business Group on Health survey is increased use of blockbuster GLP-1 drugs for obesity and diabetes, sold under the brand names Wegovy, Ozempic, Zepbound, and Mounjaro." Around 80% of survey respondents reported seeing an uptick in the use of GLP-1 drugs like Ozempic and Zepbound, while another 15% said they anticipate increases in the future. Although almost all employers (99%) cover GLP-1s for diabetes, fewer cover the drugs for obesity (73%). Many employers also require prior authorization or that workers participate in weight management programs before they cover GLP-1s for weight loss.

"The compounding effect of high healthcare trend increases means that by 2026, healthcare costs [are] projected to be 62% higher than they were in 2017."

Cancer care also continues to weigh heavily on employer spending, with almost 90% of employers citing cancer as a top health condition driving costs. This marks the "fourth year in a row in which cancer is the top condition contributing to cost," MedCity News reports. 

Other top health conditions contributing to growing costs are musculoskeletal conditions, cardiovascular conditions, diabetes, and mental health conditions. "Almost three-quarters of employers said their workers are seeking out mental health and substance use disorder treatment at higher rates, and another 17% anticipate future increases," STAT+ reports.

Commentary

Business Group on Health leaders say the latest survey underscores just how sharply employer health costs are accelerating. "This is the highest single-year forecast in more than a decade," said Ellen Kelsay, president and CEO of the Business Group on Health. "The compounding effect of high healthcare trend increases means that by 2026, healthcare costs [are] projected to be 62% higher than they were in 2017."

Kelsay added that passing costs onto employees is "a Band-Aid approach" that doesn't fix cost-dynamics in the long-term. Instead, she said, "Employers are still going to be absorbing 90-plus percent of the health care costs. They are still going to do their level best to absorb as much of this cost increase as possible." 

Employers are also weighing strategies to contain costs. For example, around 50% of employers said they plan to steer workers toward specific cancer centers of excellence, which provide quality services at lower costs next year. An additional 23% of employers said they plan to do the same by 2028.

However, Brenna Shebel, VP of the Business Group on Health, warned that policy changes could exacerbate the pressure. She said the survey reflects "long-held employer beliefs that efforts to reduce costs for programs like Medicare and Medicaid will often result in cost shifting to employer-sponsored plans."

Other employer coalitions are encouraging companies to take a harder line with insurers. "Watch your carrier very closely, audit the carrier, make sure you're getting the deal that you bargained for," said Robert Andrews, CEO of the Health Transformation Alliance.

Some employers are also leaning into prevention and data-driven strategies. Henry Ting, Delta Airlines' chief health and wellness officer, said the company has managed to keep increases in the low single digits. "That's not just an accident or by chance," Ting said. "We do take a lot of actions to make sure we're delivering the best value."

After collecting over 10 billion de-identified health records from its 100,000 employees and their dependents, Delta saw that a significant percent of cancers among employees were diagnosed due to symptoms instead of screenings, which typically resulted in more advanced disease. To help employees get screened soon, Delta introduced a "Living Well with Dr. Henry" series to educate employees.

"Then we make it easy for them to schedule those appointments without a lot of friction," Ting said. "I'd like to have 99% of our cancers diagnosed on a routine screening test rather than feeling a lump or pain or bleeding."

(Bannow, STAT+ [Subscription required], 8/20; Plescia, MedCity News, 8/19; Business Group on Health report, 8/19)


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