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Diving:

• Almost three quarters of employers think so rising health care costs lead to trade-offs with salary or wage increases and could require a greater cost shift to employees, according to new survey by the National Alliance of Healthcare Buyer Coalitions.
• The biggest perceived threat to healthcare affordability is drug prices, with 99% of employers agreeing it is a significant threat, followed by high-cost claims and hospital prices, the survey found.
• It’s the latest survey to show employers are bracing for rising health care costs, including by reconsidering arrangements with pharmacy benefit managers that could inflate costs.

Diving Perspective:

Employers expect health care spending to rise in 2025, with specific growth estimates ranging from around 8% to 9%. Companies are rushing to adopt strategies to mitigate the situation, according to NAHPC, a nonprofit representing employer groups, which surveyed nearly 190 U.S. employers this fall.

“It’s not just about controlling costs anymore; it’s about survival,” said one survey respondent. Another deemed rising costs “an existential threat.”

Much of the cost increase is driven by pharmaceuticals, including rising demand for GLP-1, or glucagon-like peptide-1 receptor agonists, according to other research. The drugs, which have traditionally been used to treat diabetes, have proven effective in combating a variety of conditions, but are especially in demand for weight loss.

Due to the sky-high list prices of GLP-1, employers struggled with whether should cover the drugs. About 46 percent of employers said they cover GLP-1 for obesity, while another 21 percent said they are considering coverage in the next three years. NAHPC found.

Among employers offering or considering short-term GLP-1 coverage, many are considering steps to mitigate the cost of coverage, such as limiting access to certain populations, such as those with chronic conditions or a body mass index over 30. Employers are also considering tying coverage to lifestyle changes or covering copycat combination versions of the drug, a strategy that is faced backlash from drug companies.

Employers are also looking to reshape their pharmacy benefits to reduce costs, according to the report NAHPC.

Seventy-two percent of employers surveyed contract with one of the “Big Three” pharmacy benefit managers: Caremark, Express Scripts or OptumRx. The drug brokers, which are owned by CVS, Cigna and UnitedHealth respectively, have faced criticism for hidden fees, proprietary trading and complex black box contracts that health insurers and employers say to leave them in the dark about where their money goes.

More than half of employers are considering switching PBMs in the next one to three years, according to the survey. Buyers said they are looking for more transparent contracts and pricing and to reduce conflicts of interest.

Major PBMs are often reimbursed in a way that incentivizes them to prioritize high-cost drugs on lists of covered drugs called formularies, which can contribute to higher drug spending. In addition to the goal of having more control over their formularies, most employers surveyed said they are including more biosimilars to unlock savings.

PBMs have found themselves at the center of public scrutiny of drug costs, including from Congress and Federal Trade Commission. The FTC sued CaremarkExpress Scripts and Optum Rx in September over business practices that antitrust regulators say helped drive up the cost of insulin.

To address costly claims, more than half of employers are taking steps such as prior authorization, purchasing drugs through non-traditional channels and contracting directly with providers, the survey found.

Fewer employers are shifting care delivery to cheaper sites such as the home, promoting precision cancer medicine or reducing the risk of neonatal ICU claims through more generous fertility benefits. However, there is interest in these strategies, according to NAHPC.