Why Employers Are Passing More Healthcare Costs to Workers

Employer-sponsored insurance continues to cover the majority of Americans, but employers are facing mounting cost pressures driven by several converging trends across pharmaceuticals, healthcare services, and provider economics, according to Philip Sclafani, PwC’s pharmaceutical and life sciences lead.

One of the most significant cost inflators on the commercial side is prescription drugs, particularly the rapid growth and uptake of new therapies. GLP-1 medications stand out as a major driver of per-member-per-month (PMPM) costs. Although manufacturers have begun lowering prices through public announcements and negotiated deals, utilization is expanding rapidly as more Americans initiate treatment. This dynamic echoes an earlier era of mass-market primary care drugs: therapies priced under $500 per month but prescribed to tens of millions of patients, resulting in a substantial aggregate cost burden for employers.

Beyond GLP-1s, specialty drugs remain a persistent pressure point. While they account for roughly 2% of prescriptions, they represent about 50% of total drug spending. Growth in rare disease treatments—including cell and gene therapies with multimillion-dollar price tags—is accelerating, shifting what was once an occasional expense into a more regular budget concern. At the same time, continued innovation in areas such as oncology, central nervous system disorders, and depression is adding incremental costs across a broader patient population.

Outside of pharmaceuticals, behavioral and mental health services are another major contributor to rising employer costs. Health plans are projecting annual trend increases of 10% to 20% in this category alone, reflecting higher utilization and expanding access expectations.

Structural healthcare inflation compounds these pressures. Labor and infrastructure account for roughly two-thirds of health system costs, both of which have risen sharply in recent years. Industry consolidation—through hospital mergers and private equity–driven physician group acquisitions—further increases market power and commercial reimbursement rates.

Finally, improvements in hospital revenue cycle management, supported in part by AI, are enabling providers to bill more accurately and efficiently, increasing overall payments from commercial payers and adding yet another layer to employer cost growth.

Sclafani also describes how he sees the interaction between public programs and employer-sponsored coverage affecting overall healthcare affordability; the structural factors that are responsible for employers absorbing fewer healthcare cost increases and shifting more responsibility to employees; and much more.

A transcript of his conversation with PC can be found below.

PC: Several analyses suggest that employers are absorbing fewer healthcare cost increases and shifting more responsibility to employees. What structural factors—such as drug pricing, provider consolidation, or utilization trends—are most responsible for this?

Sclafani: The traditional benefit design is an employee signs up for their low, mid, or high- deductible health plan side, and the employer has selected either one or more partners for their benefits. So it could be, they've chosen somebody for the medical benefit health plan side and the PBM separately, or they could choose integrated from the same companies and patients sign up and have those costs depending on the benefit they've chosen.

That then arrives in there's a certain amount that the employer is paying for the patient. Let's say it's $1,000 per member, and the employee then has their premiums that are deducted out-of-pocket costs. So that's still the market today, where plans are trying to manage, depending if it's a fully insured or self-insured employer, but they're trying to manage within that, and it costs $1,000 a month—just making up numbers—for insurance. As those costs increase, they—for a self-insured employer—in this example, get passed directly to the self- insured employer, and it depends on the actuarial part, how well they forecast the care, and what that is, but they're essentially paying dollar for dollar, and again, that shows when you look at the overall financial results of the company, have they spent more or less on their benefits?

And then they think about that next year, how much can we absorb, or how much do we have to pass through to our employees and their benefits? When it comes to annual enrollment time, they'll see those costs either stay flat or increase a little or a lot. For many years, employers, especially coming out of the pandemic, have tried to absorb those costs as much as possible, across both the medical and pharmacy side. This is the third or fourth year in a row of sustained 8.5/10ish percent medical cost inflation.

It’s getting really tough to absorb those costs, so we are expecting more pass-through to patients. I think back to part of your question. On the prescription drug side, we are starting to see some interesting trends where things are getting sort of fragmented a little bit, so more of a pay-as-you-go GLP-1 strategy. Or if you want the obesity weight loss package, it can be paid for separately.

It's almost like an option in the health plan or services coming up. And then, along with that separately, we do see patients not necessarily even using their insurance where it's covered, and going directly to manufacturer's websites, or the third parties that have popped up to do that. So it's a bit of an interesting trend.

For decades, it’s been you have your health plan and you're using it, and it's counting towards a deductible and out of pocket max and things like that as a patient. But now, we do see a little bit more disaggregation of that. Up to now, employers have been up to trying to absorb as much of that cost as possible. Patients have borne more costs, and in some cases, for those that are almost more consumer-driven, going directly to buy some of those drugs that they want access to and can't get. The next step will be to see what that means. Does it continue to cost the employer $1,000 per member per month, or do things get split into different pieces?