Workplace Health Insurance Costs Could Jump 7% Next Year

A new Mercer report suggests 2025 will be the third consecutive year of unusually high health insurance cost increases.

Even though inflation is subsiding, your out-of-pocket health insurance costs could spike in 2025.

Employers, which provide health coverage to over 150 million Americans, are bracing for yet another year of steep price increases for workplace health plans, according to preliminary results from Mercer’s annual private health insurance survey.

On average, companies told the consulting firm that they expect health plan costs to surge between 5.8% and 7% in 2025. The lower estimate is based on price increases if the employer implements cost-cutting strategies, while the upper figure is how high prices are set to surge if they don’t.

In both cases, the price increases for private workplace insurance are running much hotter than overall inflation, which was 2.5% in August. Specifically, health insurance inflation clocked in at 3.3%, though that includes coverage through the Affordable Care Act, or Obamacare, as well as other federally run health plans (not just workplace plans).

To offset some of the impending price increases, most employers (53%) reported that they do plan to take cost-cutting measures, a notable increase from 44% this year. But those efforts are meant to save the companies money, not the workers.

“Generally, these changes involve raising deductibles and other cost-sharing provisions and result in higher out-of-pocket costs,” Mercer said in commentary shared with Money.

2025 would be the third consecutive year of unusually high health insurance cost increases, according to the firm, following a decade of cost increases averaging around 3%.

Again, these are just initial results, which are based on survey responses from over 1,800 U.S. employers. The full report will be released later this year.

Out-of-pocket health insurance costs in 2025

According to the nonprofit Kaiser Family Foundation, or KFF, the vast majority of workers with health insurance through their employers have to pay deductibles before certain benefits kick in.

The average deductible for single workers is $1,735, according to the latest KFF data. Deductibles for family plans are often double that amount, running between roughly $3,000 and $4,900.

To keep prices down on the employer’s side, many companies are planning to raise deductibles next year, shifting more of the cost burden onto their workers.

Premiums are another major out-of-pocket expense for employees. Simply put, this is the cost of the health care plan, usually broken down monthly or annually. Based on a 5.8% price increase, annual premiums in 2025 are projected to cost about $17,600 per worker, according to a Money analysis of Mercer survey data. (Actual premiums can vary widely depending on single or family coverage, size of the employer and several other factors.)

Usually, a portion of each paycheck is automatically deducted to cover the workers’ share of their premiums. Employers tend to cover the lion’s share — about 79%, Mercer says.

Still, that leaves workers to pay the remaining $3,700 annual premium, on average.

Some key reasons for the continued price surges for health insurance — even as inflation abates — are the health care worker shortage, Mercer says, as well as prescription drug costs.

So far this year, employers told Mercer that drug costs jumped 7.2%, particularly because of an uptick in workers requiring drug treatment related to diabetes, bariatric care, cancer care and other genetic diseases.

More from Money:

The Best Hospitals of 2024

Medicare Drug Negotiations Expected to Save Enrollees $1.5 Billion a Year

An Expert Guide to Hospitals and Saving Money