Healthcare costs continue to climb, placing growing pressure on employers, brokers and insurers to reassess how benefits are structured and funded, according to a report from Stealth Partner Group.
In its most recent State of the Market report, the company said that ongoing changes in the healthcare system, including staffing shortages, rising prescription drug use and increased reliance on high-cost therapies are reshaping how risk is predicted and managed.
Employers are responding by seeking greater flexibility in plan design and exploring self-funded strategies that offer more control over spending. But with that control comes greater exposure to financial risk. A single high-cost claim, such as a neonatal intensive care case or an extended inpatient stay, can significantly affect group health plans without adequate protections in place, according to the report.
Stop loss coverage remains a key tool for mitigating those risks. Despite market headwinds, demand for stop loss continues to grow, supported by data transparency requirements, evolving fiduciary standards and rising prescription drug costs.
Medical inflation, which had slowed between 2020 and 2023, began to rise again in 2024. According to recent data, healthcare spending increased 7.5% from 2022 to 2023. While healthcare now accounts for an estimated 17.6% of total US economic activity, utilization remains below pre-pandemic levels.
Workforce shortages, particularly among physicians and nurses, continue to affect healthcare access and cost, especially in rural areas. Provider contract renegotiations and a shifting payer mix are further influencing the cost and delivery of care.
Utilization of hospital-based surgical procedures has not yet returned to pre-COVID levels. Industry analysts anticipate continued growth in outpatient and in-home care, which may reduce pressure on inpatient facilities over the longer term.
Prescription drug spending also remains a major cost driver. A surge in use of GLP-1 medications, specialty therapies and biologics is contributing to sharp increases. While pandemic-era disruptions slowed drug development and FDA approvals, activity has since picked up. A wave of new treatments is expected to test the system’s capacity for adoption and funding over the next several years, according to the report.
Group health coverage also remains a significant expense for employers. Data from the Kaiser Family Foundation puts the average annual cost for individual coverage at $8,435, and family coverage at $23,968. Spending growth by private insurers per enrollee is outpacing that of Medicare and Medicaid, with employers bearing a larger share of rising costs than employees.
Private health insurance represented about 30% of the $4.9 trillion spent on healthcare in the US in 2023, according to the most recent National Health Expenditure Accounts data.
Federal healthcare policy remains in flux, with potential implications for employer-sponsored insurance. In a March 2025 address to Congress, the President identified rising childhood cancer and autism rates as priorities, along with broader goals to address inflation and reduce federal spending.
Among the proposals under consideration is a change to the longstanding tax exclusion for employer-sponsored insurance. Currently, employer contributions to health coverage are exempt from federal income and payroll taxes, a benefit estimated to cost the federal government more than $300 billion annually.
The Congressional Budget Office has suggested capping this exclusion beginning in 2026, a move that could affect employer decisions on offering coverage. Analysts are continuing to model how such a change could impact tax revenues, employment, and access to insurance.
Employers and brokers are also monitoring regulatory developments related to the Employee Retirement Income Security Act (ERISA), particularly around fiduciary responsibilities, fee transparency, and disclosure requirements. These areas are expected to remain in focus as the benefits landscape evolves.
