Open enrollment surprise: Expect health insurance premiums to be ‘highest in decades' in 2025

• Health-care premiums in workplace benefits plans are expected to rise 7% to 8%, on average, for 2025.
• Many workers will pay more next year for health insurance and other benefits given inflation, wider adoption of GLP-1 drugs and an increase in catastrophic medical claims.
• The rate increases make it important for employees to closely review insurance plans during open enrollment and consider high deductible options as one way to potentially lower costs.

Open enrollment season is underway, but many workers haven't yet selected their benefits for next year. When they sit down to do so, they may get an unwelcome surprise: higher costs.

Many workers will pay more next year for health insurance and other benefits given inflation, wider adoption of GLP-1 drugs and an increase in catastrophic medical claims. These factors have propelled costs for employers, and while some companies are eating these extra costs, for now, others are finding ways to pass expenses onto employees. Some are also switching plan providers or narrowing coverage options as cost-reduction measures.

Employees should expect to pay, on average, 7% to 8% more in premiums than they did last year, said Regina Ihrke, health, equity and wellbeing leader for North America at WTW. Because this is the average, it means that your company could be raising premiums by 4%, while another company could be raising them by 15%. "It is the highest increase we've seen in decades, unfortunately," Ihrke said.

Here's what workers should consider when choosing benefits this open enrollment season:

Start by figuring out how much you can afford to pay for benefits

Employees always have to consider their pocketbooks when selecting benefits, but this year many are looking to spend less.

Limra, an insurance trade association, polls employees annually about what they are willing to spend on benefits. That figure for 2024 was a median of $120 per month out-of-pocket on benefits, excluding retirement savings, and an average of $223 per month. In 2023, the median was $150 per month and the average was $234. Limra attributes the decline to inflationary pressures that have squeezed household budgets.

Notably, a Voya survey conducted in September and October found that 73% of respondents select the plan with the lowest out-of-pocket costs, while 69% said they choose the plan with the lowest monthly cost. What's more, 53% of respondents agree they are willing to pay less for health insurance even though they may have fewer coverage options.

See if switching to a high-deductible option may lead to savings

Some employers offer employees the option of choosing a high-deductible plan. With this type of plan, the monthly premium is usually lower. However, you'll pay more out-of-pocket for health care before the insurance company's share kicks in. (There's an exception for preventive care, which is covered at 100% under most health plans for in-network services.) 

Workers need to consider whether they can afford to pay for medical services until they meet their deductible, Ihrke said. They may also be able to pair a high-deductible plan with a health savings account (HSA), a tax-advantaged savings vehicle that can be used to help pay for eligible medical expenses.

Search for new and alternative plans that may be available

In trying to keep costs at bay, employers may be offering new plan options to workers. This could include new carrier options or new plan options with an existing provider, said Carole Mendoza, vice president of benefits at Voya. 

Some employers are turning to alternative providers such as Surest Health Plans, a UnitedHealthcare company, Centivo or Firefly Health in an attempt to lower costs for workers, while still providing quality care.

Pay attention to pharmacy benefit coverage, especially if you use weight-loss drugs

Since some employers offer workers more than one plan option, it's a good idea to use self-service tools or talk to your open-enrollment team about the medications you take and the cost implications. "It could drive significant differences in out-of-pocket costs," Ihrke said.

This is especially true if you're taking or considering GLP-1 drugs including Wegovy and Ozempic for weight loss. While employers generally cover these drugs for diabetes, coverage for weight-loss purposes is mixed. Fifty-two percent of employers offer coverage for GLP-1 drugs for weight loss, according to a July poll by WTW, while 48% are still deciding coverage options. Just because your employer covered these drugs last year, or if it didn't, you should review the employer plan coverage policy for this year because it could be different, Ihrke said. 

Consider supplemental health benefits to help manage costs

More companies may also be offering critical illness coverage, hospital indemnity and accident insurance to fill the gaps for workers who have high deductible plans, in particular. Employers are offering these because they are "focused on finding ways to make health care more cost-effective," Mendoza said. 

Costs for these benefits can vary, so it's important to do the math. Premiums for accident insurance, for example, can range from $6 to $20 monthly per employee for basic coverage, according to UnitedHealthcare. Premiums for critical illness coverage generally run in the $21 to $70 per month range, according to PolicyAdvisor. Hospital indemnity coverage, meanwhile, starts at about $10 per month, according to Aflac. 

A recent survey by Equitable, which offers supplemental health insurance solutions, found that 60% of Americans would struggle to cover the total costs of an unexpected hospital stay. 

"Employees need to take inventory of what their needs are and make choices that provide them with the best coverage for their lifestyle and life situation," said Stephanie Shields, head of Equitable's employee benefits business.

Spend more time on open enrollment to avoid regrets

Many people spend minimal time choosing benefits, according to multiple surveys. A recent one from Voya found that 49% of benefits-eligible employed Americans spend less than 20 minutes reviewing workplace benefits at open enrollment time, but it's worth taking the time to fully understand your choices. That's especially important given that 53% of respondents eligible for workplace benefits through their employer regret the choices they made during last year's open enrollment period, the Equitable survey found. The top reasons cited include failing to adjust their benefits in connection with lifestyle changes, missing the deadline and not understanding their options or the benefits they chose.

Getting ahead of the game for 2025 is a good idea because you should expect the cost issues to return in 2026. Even if your company hasn't passed on additional costs to workers for the coming year, it's a safe bet that many employees will see at least some changes in subsequent years. Ihrke said she expects many employers will offer new carriers and different plan options or pass on more costs to employees. "A lot of employers are trying to figure out how they are going to deal with significant cost increases that are likely to happen for the next several years," she said.

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