Steady Premium Hikes Continue: Employer Health Costs Rise Another 7% in 2024

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The cost of family health insurance premiums for employer-sponsored plans rose by 7% in 2024, matching the increase seen last year.¹ According to KFF’s annual Employer Health Benefits Survey, the average premium for family coverage now stands at $25,572, with workers contributing an average of $6296 annually.

Total premiums for family coverage have increased by 24% over the past 5 years, almost aligning with inflation and wage growth. However, workers' contributions toward their health insurance premiums have remained relatively stable. On the other hand, deductibles for single coverage have increased by 8% since 2019, reaching an average of $1787. Workers at smaller firms face particularly high deductibles, with an average of $2575 compared to $1538 at larger companies.

The survey of more than 2100 employers highlights efforts by large firms with more than 5000 employees to cushion lower-wage workers from the full impact of rising premiums. Nearly a third of these firms have implemented programs to reduce premiums for lower-wage employees, while others offer reduced-benefit plans to make coverage more affordable.

“Employers are shelling out the equivalent of buying an economy car for every worker every year to pay for family coverage,” Drew Altman, KFF President and CEO, said in a statement. “In the tight labor market in recent years, they have not been able to continue offloading costs onto workers who are already struggling with health care bills.”

Trends of Health Care Services

The survey also highlights trends in fertility benefits, PBM rebates, and mental health services among large employers. About a quarter of companies offer coverage for in-vitro fertilization (27%) and artificial insemination (26%), with 37% covering fertility medications, though fewer provide coverage for egg or sperm freezing (12%). Regarding pharmacy benefit manager (PBM) rebates, 34% of large firms report receiving the majority of negotiated rebates from drug manufacturers, but many employers remain uncertain about how much they benefit from these arrangements.

Mental health services also face challenges, as about a quarter of large employers report narrower networks for mental health and substance abuse services compared to general services. To address rising demand, 48% of large companies have expanded counseling resources through employee assistance programs or third-party vendors like Headspace or Lyra Health.

Limited Coverage of GLP-1 Drugs for Weight Loss

As interest in GLP-1 drugs like Wegovy for weight loss surges, the survey found that coverage of these expensive treatments remains limited in employer-sponsored health plans. Among large employers offering health benefits, only 18% cover GLP-1 drugs for weight loss, while 52% do not, and the remainder are uncertain.

Even among the largest firms, only 28% provide coverage for these drugs. Among those that do, about half impose conditions, such as requiring consultations with dietitians or participation in weight-loss programs, potentially making access more challenging. Given that nearly 50 million adults with employer-sponsored coverage meet the clinical criteria for GLP-1 drugs, offering this coverage could significantly impact employers’ prescription drug spending.

Another survey published in Health Affairs noted that the lack of transparency in prescription drug costs has raised concerns among stakeholders.² Pharmacy benefit managers negotiate rebates with pharmaceutical manufacturers, but the extent to which these rebates benefit employers varies. In 2024, 18% of large firms covered GLP-1 agonists for weight loss, with 53% imposing conditions for approval.

Employers recognized that covering these medications could impact spending, with 33% expecting a significant impact. Additionally, 16% of employers considered covering these medications very important for employees' satisfaction. However, most employers not covering GLP-1 agonists for weight loss did not plan to do so in the next 12 months, with 62% deeming it not likely.

Barriers to Abortion Coverage

The survey data indicates that after the 2022 Dobbs vs Jackson ruling, there has been significant variation in the coverage of abortion services by employers. According to the Health Affairs survey, 8% of firms with 200 or more workers reported that legally provided abortions were not covered under any circumstance, 18% covered abortions only under limited circumstances, 29% covered abortions in most or all circumstances, and 45% responded with "don't know." This uncertainty was particularly prevalent among firms with 200–999 employees. Additionally, 81% of firms that reported not covering legally provided abortions confirmed that their largest plan would not cover abortion under any circumstance.

Workers and their dependents living in states where abortion is banned or restricted often have to travel to another state for an abortion, leading some employers to consider offering financial assistance for travel expenses. Overall, 5% of firms with 200 or more workers offered or planned to offer financial assistance for travel expenses for enrollees who travel out of state to obtain an abortion when the service is not available near their home.

In 2024, there was relatively low growth in many key cost-sharing features of employer-sponsored health insurance, including deductibles, according to the report.² The average deductible for single coverage has grown at an average of 2% over the past 5 years, which is less than inflation over the same period. However, 32% of covered workers faced a deductible of $2000 or more for single coverage in 2024, which may not provide much relief to many workers who already face high levels of cost sharing. Average family premiums grew by 7% for the second consecutive year.

Looking ahead to 2025, the development of new drug therapies has the potential to affect employer costs, with employers adapting their coverage for these treatments, the authors concluded. Employers are considering tailored approaches to network design to manage costs.

References

1. Annual family premiums for employer coverage rise 7% to average $25,572 in 2024, Benchmark survey finds, after also rising 7% last year. News release. KFF. October 9, 2024. Accessed October 9, 2024. https://www.kff.org/health-costs/press-release/annual-family-premiums-for-employer-coverage-rise-7-to-average-25572-in-2024-benchmark-survey-finds-after-also-rising-7-last-year/

2. Claxton G, Rae M, Damico A, Winger A. Health benefits in 2024: higher premiums persist, employer strategies for GLP-1 coverage and family-building benefits. Health Aff (Millwood). October 9, 2024. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2024.01006