Understanding cost drivers: laying the foundation for smarter health strategies
Healthcare costs are projected to rise above 5% in 2025 for the third consecutive year, according to Mercer. Before developing and implementing cost-cutting strategies, employers first need to understand what's driving the increasing expenditures.
A key finding in Marsh McLennan Agency’s 2025 Employee Health & Benefits Trends report is the growing burden of chronic conditions—most notably mental health issues among millennials and Gen Z employees—that’s adding further strain.
Compounding this are the increasing costs of hospital operations, where labor expenses alone account for 60% of costs, according to the American Hospital Association. Prior authorizations and automatic claim denials from insurers have further weighed down hospital staff and driven up the cost of care for employers and employees.
To combat this, employers can implement preventive care programs that identify and address chronic conditions early, helping to reduce long-term costs.
In the meantime, companies can invest in mental health resources to support younger employees, improve overall well-being, and mitigate the growing number of behavioral health claims. Greenwald Research conducted a workplace wellness survey that found 51% of Gen Z and 40% of millennials have expressed more interest in expanded mental health benefits compared to Gen X (28%) and baby boomers (23%).
These expanded benefits include free counseling sessions with a mental health therapist or coach. Gen Z and millennials also reported a stronger interest in access to health coaches, employee assistance programs, and other resources to improve their mental health.
Partnering with health carriers that offer comprehensive reporting and data insights allows employers to pinpoint cost-driving health issues within their workforce, making it easier to tailor coverage for employees today and in the future.
