Employers continue to struggle with rising health care costs and providing employees with affordable and quality care options. Unfortunately, according to several industry surveys and reports, employers expect health care costs to increase significantly through 2025. These findings revealed that employers anticipate health care costs to grow between 7% and 8% in 2025, marking multiple years of compounding costs. As a result, employer-sponsored health care plans may cost more than $16,000 per employee.

In previous years, employers mostly avoided shifting increasing health care costs onto employees due to the tight labor market and ongoing attraction and retention challenges. Yet these talent challenges have leveled out, and employers now hold more leverage in the employment market. In addition, the burden of rising health care costs may be unrealistic for most employers to absorb without cost-sharing. As a result more of these rising costs are passed on to employees, who are paying more for health care.

Health insurance costs are already among the biggest expenses for American families; therefore, employees will likely feel increasingly stressed and financially burdened as they pay more for care. However, employers have an opportunity to support their workers by helping them navigate rising costs.

This article provides guidance to help employers discuss increasing health care costs with their workers and assist employees in mitigating these expenses.

Why Are Health Care Costs Rising?

Health care costs have increased relatively slowly over the last few years, in part due to decreased utilization during the COVID-19 pandemic and because insurer contracts typically are not renegotiated annually. However, several recent market conditions have led to steep increases in health care costs. Medical inflation, rising pharmacy spending and increased demand for behavioral health care services are likely to continue the rising trajectory of health care spending. In general, key reasons health care costs are expected to increase in 2025 include the following:

• Rising pharmacy spend
• Glucagon-like peptide-1 drugs
• Cell and gene therapies
• Technological advancements
• Aging populations
• Chronic diseases
• Workforce shortages  

How Employers Are Responding to Rising Costs

Employers are expected to embrace cost-control initiatives, such as requiring prior authorization, utilizing disease management and adding nurse advice lines. Other strategies employers will likely implement to manage rising health care costs include wellness programs; plan design initiatives (e.g., offering high deductible health plans, requiring spousal surcharges or carve-outs, and conducting dependent eligibility audits); and offering telemedicine, price transparency tools and centers for excellence.

Helping Employees Navigate Rising Health Care Costs

With more employers passing on rising health care costs or implementing cost-reduction efforts that may impact health care coverage, an organization's effectiveness in communicating with plan participants is likely to determine the success of these changes.

Rising health care costs present employers with an opportunity to build trust, strengthen employee loyalty and reduce the risk of turnover. Employers should consider the following strategies for communicating with employees about rising health care costs.

Establish Key Messaging

How employers communicate about rising health care costs and any benefits changes to employees can often impact whether they are understood and accepted. By keeping key messaging simple and clear, such as focusing on new or updated benefits offerings, employers can better ensure employees understand any changes. Concise messaging can be repeated often, helping to distribute important health care and benefits information to the entire workforce.

If changes to benefits plans result in increased costs or reduced offerings for employees, employers can find ways to communicate not only takeaways but also givebacks (e.g., increasing employee premium contributions but adding certain supplemental benefits, such as transportation benefits). This allows employers to demonstrate to employees what they are doing to address rising health care costs and that they are mindful of employees’ financial burdens due to these costs. This can help organizations get employee buy-in for any benefits changes and build loyalty and trust with their workforce, which can help improve productivity and attraction and retention efforts.

Communicate Changes to Employees

As organizations make changes to their health insurance plans and offerings to address increasing medical costs in 2025 and beyond, it’s important to clearly communicate those changes to employees. Failing to do so may result in employees paying for expensive and, in some cases, unnecessary care. This may include employees going needlessly out of network to receive care, resulting in increased medical costs. With this in mind, effective employee communication can help employers implement cost-control measures.

Select Appropriate Communication Channels

Since every workplace is different, selecting multiple communication channels that are engaging and relevant to the workforce is essential. Leveraging technology can help employers communicate frequently and effectively with employees about changes to health care costs, benefits and offerings rather than simply relying on in-person or physical communication methods. Digital channels allow employees to access information when and where they need it. Still, in-person communication, on-site meetings and physical mailers can play an important role in communicating increasing costs and benefits changes to employees, as well as ensuring these changes are understood and received.

Educate Employees About Health Care Costs

Employers can educate employees on the current state of the health insurance industry and how to effectively use their health plans to avoid unnecessary or high-cost care. By educating employees about any changes and rising costs, organizations can enhance the overall effectiveness of their communication methods and increase the likelihood that employees will accept them. Employers can also provide a breakdown of total health care premiums and the portions paid by each party to help workers understand how medical costs impact a company’s bottom line as well as the total value of the benefits provided to employees. Additionally, employers can provide tools to help employees make the most cost-effective health care decisions.

Employer Takeaway

Helping employees navigate rising health care costs is an ongoing process, but it’s essential that workers feel properly informed about medical expenses, benefits options and mitigation strategies. Establishing strategies to communicate important information regarding increasing health care costs and benefits changes is vital to the health and well-being of an organization’s workforce. As health care costs will likely increase for the foreseeable future, employers who act now to address workers’ concerns regarding rising health care costs and provide actionable solutions can improve employee retention, increase productivity, strengthen staff morale and gain a leg up on their competition.

Contact us today for additional employee benefits resources. This Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. © 2025 Zywave, Inc. All rights reserved.