If your health plan costs are rising 9% while your revenue grows just 3%, how do you keep benefits from breaking your budget—or your talent pipeline? For CFOs managing companies with 100 or more employees, group health insurance is becoming one of the hardest lines on the P&L to justify. Premiums are climbing fast, employee expectations are shifting, and outdated strategies are no longer cutting it. Let’s unpack the current landscape, dissect the cost trends, and explore creative strategies to keep your plan sustainable—all while keeping your workforce engaged.
What’s Fueling the Cost Pressure
The numbers tell a stark story. Group health insurance premiums are set to rise by 7.9% in 2025, outpacing inflation (projected at 2.5%) and wage growth (around 3.2%). For mid-sized employers, particularly those with 100 to 499 employees, fully insured plans are seeing even steeper hikes—some as high as 9.4%—due to limited leverage with carriers.
Pharmacy costs are a primary culprit, now gobbling up 27% of health plan budgets, up from 21% just four years ago. Specialty drugs, like GLP-1 medications for diabetes and obesity, account for a third of that spend, with 67% of employers covering them in 2024, often at $1,000 per patient per month. Add in rising claims for cancer (13% of high-cost claims), musculoskeletal issues (11%), and cardiovascular conditions (9%), and it’s clear why CFOs are feeling the pinch.
Employees Are Rewriting Expectations
But it’s not just about costs. Employees are redefining what benefits mean. A 2024 survey found 83% of workers view health insurance as a key factor in job satisfaction, with 77% of employers reporting a spike in demand for mental health services. Flexibility matters too—27% of employers in competitive markets like Washington offer five or more medical plan options, dwarfing the national average of 6%.
Meanwhile, regulatory complexities, from ACA compliance to new mandates on reproductive care, layer on administrative costs, with 64% of employers citing compliance as a top concern.
Smarter Strategies That Deliver More for Less
So, what’s driving these trends? Pharmacy spending is ballooning as gene therapies and biologics hit the market—only 1% of employers believe PBMs foster enough competition to keep prices in check. Mental health needs are surging, with teletherapy visits up 45% since 2020. And employees want choice, pushing employers to offer personalized plans despite the added complexity. These forces demand a rethink of how you approach benefits.
Smart CFOs are turning to creative solutions to tame costs without gutting coverage. Self-funded plans are gaining traction, with 62% of employers with 200+ employees now self-insuring. By assuming claims risk, you gain flexibility to tailor benefits and tap AI-driven analytics to spot high-risk employees early—think identifying pre-diabetic workers for preventive coaching, cutting future claims by up to 12%. Stop-loss insurance keeps catastrophic costs in check, making this viable even for smaller firms.
Value-Based Care and Digital Health as Cost Levers
Value-based care is another game-changer. By partnering with providers who prioritize outcomes over volume, you can steer employees to high-quality, lower-cost options. Centers of excellence for procedures like knee replacements or cancer care have slashed costs by 8% for shoppable services, with 71% of employers now using tiered networks.
Telemedicine, too, is a proven winner—virtual visits cut non-emergency costs by 15–20%, and 88% of employees say access to telehealth boosts satisfaction.
Rethinking Pharmacy Spend
Pharmacy costs demand scrutiny. Transparent PBMs, which pass through rebates and avoid spread pricing, can shave 10% off drug spend. Employers are also setting stricter rules for high-cost drugs—think medical necessity criteria for GLP-1s, adopted by 43% of plans in 2024. Onsite clinics are another savvy move, reducing urgent care visits by up to 70% for firms with centralized workforces. Wellness programs, from mental health apps to fitness subsidies, drive engagement while lowering chronic disease claims by 5–7% over three years.
Your Health Plan: A Strategic Advantage, Not a Burden
The bottom line? Your health plan can be a strategic asset, not a runaway expense. Audit your cost drivers—pharmacy, chronic conditions, or low preventive care uptake—and lean into data, transparency, and employee-centric design.
For tailored guidance on turning these ideas into reality, reach out to Matthew Fisher at OneDigital. His expertise in cost containment could be the edge your company needs to thrive in 2025.
