Health-benefit costs are expected to exceed salary increases despite the Biden-Harris administration claiming to have helped redress the issue, a study from advisory firm Mercer found.

Employer-provided health insurance expenses rose 7% in 2024 and are expected to rise 5.8% in 2025, with over half of the 1,800 employers surveyed telling Mercer they plan to cut insurance plan costs in the new year, often through increasing out-of-pocket costs for employees. The increase in healthcare expenses is expected to outpace salary growth, with performance-based raises and total salary budgets predicted to rise just 3.3% and 3.6% next year, respectively.

Prescription drug spending is the fastest-growing component of the surge in health-benefit costs, rising 7.2% in 2024 and expected to continue increasing in 2025 due to new high-cost gene and cellular therapies, according to Mercer. Rising healthcare costs are also largely driven by a growing disparity between the supply of healthcare workers and a rising demand for medical services as older Americans become an increasingly large segment of the population.

The Biden-Harris administration claimed it would address rising healthcare costs, vowing in March to reduce premiums by an average of $800 a year for millions of Americans by expanding Affordable Care Act tax credits. The White House also capped prescription drug costs at $2,000 per year for Medicare beneficiaries starting in 2025 — a move that experts told the Daily Caller News Foundation would have caused a spike in Medicare premiums if not for the administration providing billions in subsidies for insurers in a ploy to buy votes.

“The $2,000 dollar cap [on Medicare out-of-pocket prescription drug costs] as well as other Inflation Reduction Act (IRA) provisions were slated to triple the cost of Part D,” Michael Cannon, director of health policy studies at the Cato Institute, previously told the DCNF. “If millions of senior citizens see their premiums triple, they’d go to the polls and vote out those responsible… The White House isn’t lowering premiums by lowering costs, they are doing it by passing the cost on to taxpayers rather than enrollees.”

If the increase in health benefit costs meets Mercer’s 5.8% prediction, it would mark the third consecutive year the increase exceeded 5% after nearly a decade of health benefit cost increases averaging just 3%, the firm reported.

The White House did not immediately respond to a request for comment.

Featured Image Credit: Adam Schultz

 


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