Lower Healthcare Costs 2025: 6 Employer Strategies
- Employers are facing a familiar challenge: escalating healthcare costs.
- Jim Winkler, chief strategy officer at the Business Group on Health, noted that this represents the highest year-over-year increase in over a decade.
- The Business Group on Health found that the median percentage of healthcare spending on pharmacy jumped from 21% to 27% between 2021 and 2023.
Facing 2025’s rising healthcare expenses? This article from News Directory 3 unveils six actionable strategies employers can deploy to lower healthcare costs. The chief takeaway: vendor accountability and value-based care are crucial, alongside managing pharmacy expenses and leveraging data analytics. Rising costs, especially from pharmaceuticals like GLP-1 drugs, demand innovative solutions. Explore strategies such as holding vendors accountable, embracing value-based care, and navigating pharmacy costs. Don’t overlook the importance of engaging employees and data analytics. Discover what’s next in securing financial health.
employers Seek Healthcare Cost Control Amid Rising Expenses
Updated July 02, 2025
Employers are facing a familiar challenge: escalating healthcare costs. These expenses are outpacing inflation,consuming an increasing portion of company budgets. A recent Business Group on Health report estimates an almost 8% rise in healthcare costs for 2025, marking a more than 50% surge since 2017.
Jim Winkler, chief strategy officer at the Business Group on Health, noted that this represents the highest year-over-year increase in over a decade. He added that employers have largely absorbed these rising costs in recent years, a trend that is likely unsustainable.
Pharmacy expenses are a primary driver of this increase. The Business Group on Health found that the median percentage of healthcare spending on pharmacy jumped from 21% to 27% between 2021 and 2023. Consequently, 3 in 4 employers express significant concern about total pharmacy costs.
The growing use of GLP-1 weight loss drugs, such as Ozempic and Wegovy, also contributes to rising costs. While effective for treating diabetes and obesity, these drugs cost roughly $700 to $800 monthly. With over 57 million privately insured adults under 65 possibly eligible, increased GLP-1 utilization could further accelerate healthcare spending.
Winkler stated that GLP-1s significantly impact overall pharmacy costs, notably as their use expands beyond diabetes and weight management. Higher rates of chronic conditions, including cancer and mental health issues, also play a substantial role. while an aging workforce contributes, more severe initial cancer diagnoses among younger individuals, stemming from delayed care during the COVID-19 pandemic, are also a factor, Winkler said.
Consolidation among healthcare providers, leading to reduced competition, further exacerbates rising costs, especially for inpatient care.
Strategies for Healthcare Cost management
Experts suggest several key strategies employers can implement to manage healthcare costs and improve healthcare affordability in 2025:
- Hold Vendors Accountable: Over 80% of employers are considering using the request for proposal process to secure better pricing. Winkler advises rigorously assessing vendor ROI, aligning performance metrics with organizational goals, and replacing underperforming partners. Jennifer Chang, HR knowledge advisor at the Society for Human Resource Management, notes that demonstrating ROI for wellness programs can be challenging.
- Embrace Value-Based Care: Centers of excellence and high-performance networks can lower costs for behavioral health and other services, according to Chang and Winkler. Advanced primary care programs that tie reimbursement to chronic condition management can also help.
- Manage Pharmacy Costs: Alternative pharmacy benefit management programs that are more transparent and encourage biosimilar use can help control rising pharmacy costs, Winkler said. He emphasized the need for integrated pharmacy programs and suggested employers consider using different vendors for various pharmacy needs. Pairing GLP-1 access with nutritional counseling can maximize benefits.
- Help Employees Navigate the System: Care navigators and employee training can ensure employees access cost-effective care, experts say. Chang suggests explaining cost-sharing mechanisms to help employees use benefits wisely.
- Build Worksite Health Centers: Megan Colleen McHugh, a health services researcher at Northwestern university, notes that a growing number of organizations are investing in employer-sponsored clinics. A recent study co-authored by McHugh found that these centers can increase preventive service use and improve chronic care management, delivering annual cost savings and ROI. However, McHugh cautions that these centers are best suited for large employers due to high fixed costs.
- Leverage Data Analytics: experts emphasize the importance of assessing vendor performance, clinical conditions, and network utilization to determine the best cost management approach. Chang notes that analyzing claims data can definitely help employers identify and target high-cost areas.
Pitfalls to Avoid
Chang cautions that employers must avoid strategies that could lead to employee dissatisfaction. Winkler adds that employers need to consider their organizational culture and tolerance for change. Excessive cost-sharing can harm morale, while abruptly cutting benefits can lead to backlash. Cost-containment measures can also create equity issues if they disproportionately affect lower-income employees. Chang advises engaging employees early, providing transparent interaction, and monitoring cost-containment measures based on feedback and data.