Skyrocketing Health Insurance Costs in the US Shock Workers
Biggest Jump in Employer-Sponsored Health Insurance Costs
People in the US who get their health insurance through their employers could be hit with a big price hike next year. A national survey of employer-sponsored health plans says businesses across the country are preparing for the steepest increase in health benefit costs in 15 years, with an additional six to seven per cent rise in premiums. Consulting firm PWC says the medical costs for employers are also expected to grow. Cancer care and pricey prescription drugs are the top drivers of employer cost increases over the last four years, and that trend is not expected to change.
Impact of Trump’s Cost-Cutting Agenda on Health Insurance
All this comes as President Trump’s cost-cutting agenda is impacting people on government-funded health insurance. It’s still too soon to tell exactly how much Trump’s so-called “big beautiful bill” could impact Americans.
Joining us now is Mark Pauli, a professor of healthcare management at the Wharton School of the University of Pennsylvania. Workers, as I mentioned, are looking at possibly the biggest jump in health insurance costs in 15 years. What is really driving this steep increase that we’re seeing?
The Recovery of Healthcare Spending Post-COVID
Well, we think the primary reason is the continuation of the recovery of health care spending and the use of healthcare that fell during the COVID period. The healthcare system was largely shut down, and while the increasing use of hospitals for COVID patients grew, it was offset by reductions in face-to-face visits and elective surgeries such as joint replacements.
At least the official government projections suggest that the highest growth of spending should have occurred in 2024. We don’t have the official figures on that yet, but they probably are correct, and it has spilt over into 2025. So what we’re seeing is the result of the echo of depressed healthcare use during COVID.
Why Employers Are Passing More Costs to Workers
During COVID, companies absorbed some rising costs to protect employees, but now they are passing more of the burden onto workers. Why the change?
Well, one reason is that last week’s data shows the labour market is softening. Economists believe that the primary way people who get health insurance through their job pay for it is not just the explicit premium, which is only about 20% of the total, but through raises they would have otherwise received being cancelled.
When the labour market was very tight, it was harder for employers to reduce wage growth to cover insurance costs, so they absorbed the expense. Now, with a softening labour market, employers are shifting the costs back to workers.
According to Mercer, although their forecasts tend to be more pessimistic, the punchline is clear: 2025 looks like a difficult year for workers who will face higher health insurance costs.
Economic Trends Driving Health Insurance Costs
Inflation and Tariffs’ Indirect Effect
Broader economic trends are also at play. The cost of many things is rising, partly due to inflation and President Trump’s tariffs. But do tariffs directly affect healthcare costs?
Not particularly. However, overall inflation is impacting the healthcare sector. Healthcare spending actually grew at the same rate as or less than the GDP rate until 2023. The GDP share for healthcare in 2023 was about the same as in 2009. Now, projections suggest growth may slightly exceed GDP after the current surge.
Healthcare as a Labor-Intensive Industry
Healthcare is primarily a labour-intensive industry. Rising labour costs and strong healthcare employment growth mean that sooner or later, the price of healthcare must go up. Healthcare employment has long been one of the bright spots in the economy. But with more hiring and higher wages, the costs passed on to workers are inevitable.
Bottom Line: Workers Will Pay More for Health Insurance
The bottom line is that workers will have to compensate for projected increases in their health insurance costs in the US. As Professor Mark Pauli concludes, these rising expenses will continue to challenge employees, and 2025 could be one of the toughest years yet for affordable healthcare coverage.
✍️ I am Chitta Majhi, and for the last two years, I have been writing blogs on trending stories, viral news, and global issues. With in-depth knowledge across sectors, I bring simple words, clear insights, and honest views to help readers understand what’s shaping our world.
