Another year, another double-digit increase in employers’ medical costs.
The hit is expected to be a global average of 10.4% next year, according to Willis Towers Watson’s 2025 Global Medical Trends Survey. This will be the third consecutive year of double-digit cost spikes, with a peak of 10.7% in 2023. (Net of general inflation, next year’s increase will be 7.4%.)
The anticipated increase is less in North America at 8.7% (6.8% net of general inflation), the lowest for any of the five regions addressed by the study, which polled 348 health insurers in 75 countries. Asia-Pacific will see the greatest hike at 12.3%, which will be the region’s second straight year leading the pack.
The rise of new medical technologies and pharmaceuticals is among several major factors in the continually swelling cost of care. Globally, about two-thirds (69%) of the surveyed insurers reported the cost of such technologies as the top driver of medical costs.
On the pharmacy side, one in five (21%) of the insurers said they expect cost increases of 15% or more next year, while almost half (46%) expect moderate growth of 5% to 15%.
Another key cost trigger: public healthcare systems are overwhelmed by high demand amid limited resources, leaving members to rely on private medical providers. More than half (57%) of insurers reported that a decline in the quality or funding of public healthcare is a top driver of an increase in medical costs
A big part of the surge in healthcare utilization over the past few years is a growing trend in the utilization of mental health services. A third (33%) of the surveyed insurers said they expect increases of 15% or more in costs per person for mental health services over the next three years.
While factors influencing healthcare costs may be out of employers’ control, there are initiatives they could explore that could both hold down costs and boost the value of their health benefits, noted Courtney Stubblefield, managing director of health and benefits for Willis Towers Watson (WTW).
For example, employers could evaluate vendor and digital health solutions that expand well-being resources and reduce unnecessary utilization, Stubblefield said. They also could review their markets to ensure efficient sourcing of private healthcare coverages.
U.S. Trends
In the United States, inflation remains a driving force behind the rising cost of healthcare, WTW wrote in its survey report.
“Healthcare providers are responding to inflationary pressure, labor shortages and pandemic-related revenue losses by negotiating higher prices as multiyear hospital contracts come up for renewal,” WTW said.
Cancer treatment is another major contributor, with costs growing by double digits, and surging prescription drug costs now accounting for roughly a quarter of total healthcare costs.
More than half (52%) of U.S. employers plan to implement programs (such as pharmacy benefit managers) that will reduce total costs, the report noted, citing WTW’s 2024 Best Practices in Healthcare Survey.
Just as many (51%) intend to adopt plan design and network strategies that steer toward lower-cost, higher-quality providers and sites of care.
