Health insurance costs are rising faster than wages and inflation, according to a recent survey by KFF, a nonprofit health policy organization. The average cost for a family health insurance plan offered through an employer increased 7% this year to $25,572, marking the second consecutive year of such a rise. These rising costs add up for companies that pay the bulk of the tab, and for families struggling to afford higher costs of rent and groceries.
Health insurance rates accelerated after a decade of more modest increases, likely reflecting the growth of prices in the economy overall and people accessing health care more frequently after skimping on doctor visits during the COVID-19 pandemic. Consumers will see higher prices when their employers start signups for 2025 health insurance plans, meaning larger paycheck deductions. While the average cost of family health insurance has surged 24% since 2019, paycheck deductions for workers increased just 5% over the same period, with employers absorbing most of these expenses.
Some employers seek to rein in costs by excluding pricier hospitals or other medical providers from their insurance plans’ networks. Nearly 1 in 5 companies with 5,000 or more employees have a “narrow network” of providers.
Health insurance burdening family finances
However, many small companies are struggling to limit the spiraling cost of health care. Laura Ivey, the human resources and payroll coordinator at Epting Distributors in South Carolina, said their health insurance prices jumped nearly 30% this year. Ivey is frustrated because health insurers and medical providers aren’t transparent about the prices of medical services, which could help advise workers to choose lower-cost options.
Most large employers don’t cover the cost of expensive weight loss drugs such as Wegovy, and those who do often impose strict requirements. Among companies with 200 or more employees that do not cover GLP-1 agonists, primarily used for weight loss, 62% said they are “not likely” to pay for the drugs next year. The high list price combined with the number of projected users was too much for some states to sustain.
North Carolina discontinued coverage of weight loss drugs for state employees, as the medication was costing the state more than $800 per member per month on average after rebates. Employers are having a difficult time balancing the astronomical costs of these drugs and the potential health benefits of reducing obesity and making employees happy. As healthcare costs continue to rise, companies are focusing on competitive cost-effective plan designs to manage expenses while trying to maintain the quality of healthcare for their employees.
