The health insurance dilemma: How companies can tackle rising costs and keep benefits affordable for employees.
The pressure to control health insurance costs, while keeping costs affordable for employees, is intensifying for benefits managers. The average annual premium for single coverage increased by 6% and the average family premium increased by 7% in 2024.1
By 2025, employer costs are projected to be 50% higher than they were in 2017.2
On average, workers contribute 16% of the premium for single coverage and 25% of the premium for family coverage.1
What’s causing the jump in costs, and will it continue?
Many factors—such as health care labor shortages and increased benefit utilization post-pandemic—will continue impacting unit costs in health care, which drive higher benefit costs.
Employers’ top drivers of health care costs include:3
- GLP-1s
- High-cost therapies
- Mental health conditions
- Cancer
- Chronic conditions
Another issue that will impact costs in the coming years is the expiration of health plan contracts with provider organizations. Many plan sponsors had been insulated from health plan cost increases due to the plans’ multi-year contracts already in place with providers. But those contracts are expiring. So, employers are starting to experience the full effect of inflation, and the other factors mentioned above, as contracts are being renegotiated in a different economic environment than the last time.4
Inflation also affects employees’ ability to afford health care, which can force them to pick and choose among necessities like rent, mortgage payments, groceries, gasoline, and health needs. In fact, one in four adults say that in the past 12 months they have skipped or postponed getting health care they needed because of the cost.4 Skipped treatments can worsen conditions. Missed checkups can mean late diagnoses of critical illnesses. Both issues can result in expensive treatments that may have been avoided.
Another reason people skip or delay health care is fear of unknown costs.
74% of Americans are worried about being able to afford unexpected medical bills.5
49% of Americans would be unable to pay an unexpected $500 medical bill in full.5
What to consider when evaluating health plan options
All the factors impacting unit costs in health care create price unpredictability and ambiguity for employers and employees. Increasing predictability with a health plan offering cost clarity may lower unit costs, and the company and members may find opportunities to save.
The price transparency and $0 deductible of the Surest health plan have propelled it to the fastest growing UnitedHealthcare plan. Companies all over the country are realizing the Surest plan’s clear, upfront pricing can lead to improved member decision-making. When members choose wisely, unit costs are lowered, and the company and members keep more money in their pockets.
By searching for a health condition or need on the mobile app or website, Surest members can see a choice of care options (health care professionals and sites of care) with copay prices clearly listed. Prices are lower for providers evaluated as high value based on historical effectiveness and cost efficiency. When members make informed decisions, they may find opportunities to save. And when members have opportunities to save, employers can save as well.
How the Surest plan can save money for employers and members
- Up to 15% employer savings6
- Members had 54% lower out-of-pocket costs7
What’s driving the savings? Members are making good care decisions. Surest members chose high-value providers 17% more compared to those with traditional plans.8 And these quality providers are likely to recommend more efficient treatment paths.
In addition to provider choice, the place of service significantly impacts the costs. Surest data show a shift in sites and types of care resulting in lower costs:8
- 17% fewer surgeries
- 14% fewer emergency room visits
- 14% fewer urgent care visits
- 4% less complex imaging (MRI/CT)
- 698% more virtual visits
- 584% more virtual mental health visits
- 8% more preventive care visits
- 19% more physical therapy
Why costs are so unpredictable
72% of CFOs surveyed said health care expenses are less predictable relative to other expenses9
Pricing for the same procedure can vary tremendously depending on where it’s performed. And cost is not linked to quality. For example, Surest has seen average costs for knee arthroscopy and repair ranging from a little over $6,000 to more than $25,000.
Avg. encounter cost by copay quintile
Surest claims incurred and paid Jan – July 2023
An “encounter” is otherwise known as a day-or-stay and includes the surgery and related services.
Most consumers are not aware of the price variability in health care. Actual costs in traditional plans with a deductible are not visible to the member. Surest changed that. The Surest app or website illuminates the cost variances, giving members the information they need to make informed decisions. Choice of care impacts members’ out-of-pocket costs (copay) and what the employer or plan sponsor subsidizes on the back end.
How you benefit from price predictability
The Surest plan not only makes it easier for members to plan expenses, but employers can see a similar benefit. Because the Surest plan has no deductible or coinsurance, there’s less seasonal impact compared to traditional health plans. When members meet their deductibles on high-deductible plans, they typically pursue more health services because out-of-pocket expenses are vastly reduced. But this behavior can increase costs for employers.
The price visibility and care options of the Surest plan have improved members’ decision making and care choices. The effect of these decisions can decrease costs for members and employers, thereby reducing unit costs in health care. When unit costs go down, cost pressures on health benefits are mitigated and can make health care more affordable for employers and employees. A win-win!
1 Kaiser Family Foundation 2024 Employer Health Benefits Survey https://www.kff.org/report-section/ehbs-2024-summary-of-findings/.
2 National Survey of Employer-Sponsored Health Plans https://www.mercer.com/en-us/solutions/health-and-benefits/research/national-survey-of-employer-sponsored-health-plans/.
3 2025 Employer Health Care Strategy Survey, Business Group on Health, Aug 2024.
5 American’s Challenges with Health Care Costs, KFF, March 2024.
6 Surest actuarial results through 2024.
7 Comparison of 2022 medical out-of-pocket spend for members who migrated to a Surest plan in 2022 compared to members from the same employers in a non-Surest plan.
8 Study comparing Surest financial and utilization outcomes to a matched control group composed of non-Surest members from the same employers, using the same network. Members were matched on age, gender, geography, and chronic conditions.
9 2023 National Survey of Employer-Sponsored Health Plans, Mercer webinar, 3/28/24.