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Newsweek – Saturday, February 1, 2025
By Jasmine Laws
Health care premiums are forecast to go up this year, a number of health care experts have told Newsweek.
Why It Matters
Health insurance premiums are typically paid monthly by the policyholders to cover health care for adults and children.
Costs for employer-provided health care coverage are becomingly increasingly difficult for small and midsize employers to fund, which can pose problems for those companies attracting and retaining employees, U.S. Retirement and Benefits Partners reported.
What To Know
According to the investment news site investors.com, it was expected that private health insurance plans bought through the Affordable Care Act (ACA) would go up by 7 percent on average, with eight states seeing a 10 percent increases and Vermont seeing the highest increase at 27 percent.
Health care costs and insurance premiums have been increasing over the years, but, according to the Society for Human Resource Management, the predicted rise in costs this year surpassed those in 2023 and 2024.
There are a number of factors behind the increase, including the country’s aging demographic, which requires greater medical resources, the rising costs of drug prescriptions and changes to the health care market, according to U.S. Retirement and Benefits Partners.
What People Are Saying
Northwestern University Professor Lindsay Allen told Newsweek that “absolutely, undoubtedly, premiums will go up in 2025,” adding that she “rarely” used absolute language when talking to reporters.
“We’re likely looking at another 7 percent rise in Employer Sponsored Insurance premiums this year, same as 2024,” she said.
Allen said that specialty drugs like GLP-1s, which are used to treat type II diabetes and obesity, are a “major driver” in cost, as they are not only expensive but are also being much more widely used.
“Behavioral health demand is also up. It’s great that more people are getting care, but it’s putting more strain on costs. Plus, a lot of new demand stems from how rough things are right now—mental health and substance use in the U.S. are taking a big hit,” she said.
Allen added that in rural areas, “premiums tend to jump more because of limited options.”
“At the same time, virtual care is expanding as a cost-saving tool, but broadband and digital literacy gaps leave some people behind,” she said.
Allen said that affordability of health care isn’t just about premiums, it’s the “out-of-pocket costs too,” adding that employers might hold premium costs steady by tweaking plan designs, which can shift more costs to employees due to higher deductibles.
Professor Nadereh Pourat, associate director of the UCLA Center for Health Policy Research, told Newsweek that she had “seen instances of increasing premiums for 2025,” adding that the data to determine any increase would not likely be available until later this year.
She said that “health care market consolidation is usually associated with increasing costs and subsequent increases in premiums.”
Health care market consolidation refers to when two or more companies combine, which may previously have competed with each other or could have been in a competitive position.
Consolidation in this market is commonly down to companies’ “desire to gain negotiating power, to offset fixed costs and to navigate the uncertainty surrounding the future of healthcare,” according to the health news website Healthcare Value Hub.
Pourat saidthat another “commonly believed cause of higher premiums is the increasing cost of prescription medications, often for new and expensive biologics.”
Northwestern University Professor Anna Chorniy, who is also a member of the Buehler Center for Health Policy and Economics, told Newsweek that prescription drugs “are only getting more expensive, as new ones come out replacing cheaper old ones.”
In addition, when commenting on whether premiums will increase this year, she said that not only has inflation been high, but also “every year the shortage of medical providers is only getting worse.”
“The population is also not getting any healthier, and hence it is costlier for insurers to cover,” she added.
Referring to consolidation in the market, Chorniy said that “there has been little antitrust involvement in blocking either insurer or provider/hospital mergers, hence the industry keeps getting more consolidated and thus, more able to keep driving premiums.”
What Happens Next
While rising health costs are a concern nationally and 42 states have seen an increase in their health insurance rates, according to insurance information website valuepenguin.com, rates dropped in six states, most significantly in Iowa and South Dakota.