While the cost of groceries and car prices has stabilized, health care expenses are still rising sharply, according to a recent survey.

The annual employer health benefits survey issued by KFF, a nonprofit health policy organization, reveals that the average cost of a family health insurance plan from employers has risen by 7% this year, reaching $25,572.

This increase of 7% marks the second consecutive year of rising costs after a decade of smaller increases. In 2022, rates for family insurance increased by just 1%.

Individual insurance costs also saw a rise of 6%, hitting $8,951 this year, following a similar 7% increase last year.

These escalating health insurance prices are burdensome for businesses that largely cover these expenses and families who are already facing high costs for rent and groceries. Health insurance expenses have been rising faster than both the 4.5% increase in workers’ salaries and the 3.2% inflation rate, which is easing after significant spikes in 2021 and 2022.

Approximately 154 million working-age Americans and their families rely on workplace health insurance. KFF obtains this data through an annual survey of 2,142 public and private employers across the country.

The rapid increases in health insurance premiums likely reflect the general price growth in the economy, noted Matthew Rae, associate director of KFF’s health care marketplace project. He highlighted that more people are seeking health care now after delaying visits and routine screenings during the COVID-19 pandemic.

“We’ve returned to normal levels,” Rae remarked.

Medical costs tend to lag behind overall inflation, which may explain why health insurance rates are climbing even as general inflation steadies, according to Tim Nimmer, TriNet’s senior vice president of insurance services and operations.

When Will I Learn My Health Insurance Costs?

Individuals will notice increased prices soon as employers begin rolling out sign-ups for 2025 health insurance plans. This will likely result in higher paycheck deductions during a time when many families are feeling the squeeze of rising living costs.

As indicated by the survey, employers are aiming to limit the amount of cost increases passed on to their employees.

Despite the average family health insurance cost rising by 24% since 2019, paycheck contributions from workers only increased by 5% in the same timeframe. Employers are shouldering most of these expenses. For this year’s average family plan costing $25,572, companies paid $19,276, while employees contributed $6,296 through payroll deductions.

The average deductible for individuals stands at $1,787 this year, showing an increase of just $52 from last year. This deductible is the amount individuals must pay out of their own pockets before insurance coverage kicks in.

The premiums charged to companies for insurance are influenced by their employees’ medical spending on hospital stays, doctor visits, prescription medications, and other health services.

Some companies attempt to reduce costs by limiting access to more expensive hospitals or medical providers within their insurance networks. Employees and their families benefit from lower negotiated rates when visiting a hospital or doctor within that network.

Yet, many small businesses are struggling to manage the soaring healthcare costs.

For instance, health insurance expenses for Epting Distributors, a small South Carolina firm specializing in heating and air conditioning distribution, surged nearly 30% this year, reported Laura Ivey, the company’s HR and payroll coordinator.

With 130 employees, many of whom are older and managing chronic health issues such as obesity, diabetes, and heart disease, Epting covers health insurance costs. Some eligible employees could opt for Medicare, the federal health program for those 65 and older, but they prefer to stay with the company’s insurance, which puts extra pressure on the business.

Ivey finds the lack of transparency from health insurance providers and medical facilities around the costs of medical services particularly frustrating. If she had access to this information, she believes she could guide her employees towards lower-cost alternatives, like visiting outpatient centers for tests instead of hospitals.

Under a federal rule enacted in 2021, hospitals are required to publicly disclose certain pricing information, including cash prices and rates negotiated with insurers for a range of procedures, in a computer-readable format.

However, Ivey expresses that this price transparency doesn’t help her company control expenses because accessing the data requires specialized programs and advanced technology.

“It’s not user-friendly at all – I’ve tried,” Ivey stated.

The American Hospital Association claims that most hospitals adhere to the price transparency requirements and assert that they offer user-friendly price estimator tools for consumers.

Ivey reflects that if small businesses were better informed about the costs charged by hospitals, doctors, and other service providers, they could more effectively manage expenses. Instead, Epting and its employees face continuously rising insurance premiums, which has become a point of contention among some staff members.

“We do have people who say, ‘I’m going to go work for someone nearby who offers better coverage because of these costs.’

“my health insurance,” Ivey stated.

Employers Reduce Coverage for Weight Loss Medications like Wegovy

According to a recent survey, the majority of large employers do not provide coverage for costly weight loss medications, such as Wegovy. Among those that do, many impose specific conditions that must be met.

Employers that include weight loss medication in their coverage often require employees to follow strict protocols. This may involve consultations with a dietitian, psychologist, social worker, or therapist prior to obtaining a prescription. Some employers mandate that employees join a weight loss program concurrently with the use of glucagon-like peptide 1 (GLP-1) agonists, the new category of weight loss medications.

From the 25% of larger employers that do cover weight loss drugs, 46% indicated that providing this coverage has a “significant impact” on their overall prescription drug expenditures.

Nonetheless, the majority of employers do not currently support coverage for these drugs and have no immediate plans to initiate it. Among companies with 200 or more employees that do not offer GLP-1 agonists, 62% suggested they are “not likely” to include this coverage in the coming year.

While many companies cover medications like Ozempic for diabetes management, the same coverage is often lacking for weight loss medications that can exceed $10,000 annually.

These weight loss medications have gained widespread popularity in a country where approximately 40% of adults are considered obese, based on estimates from the Centers for Disease Control and Prevention.

However, North Carolina officials decided against continuing coverage for weight loss drugs due to high costs. To maintain coverage, the state would have needed to increase premiums to nearly $50 a month for about 750,000 employees and their dependents under the state health plan.

Currently, more than 23,000 individuals within North Carolina’s health plan are utilizing weight loss prescription drugs. The average monthly cost for the state amounted to over $800 per member, even after rebates. The state treasurer projected that expenses for these medications could exceed $1 billion over the next six years, significantly influencing the decision to stop coverage.

Rae, representing KFF, mentioned that employers considering coverage are struggling to balance the enormous costs of these medications against the potential health advantages of addressing obesity and improving employee satisfaction.

“Employers face a complex challenge they need to navigate,” Rae remarked.