A Targeted Strategy to Mitigate Rising U.S. Health Costs

A Targeted Strategy to Mitigate Rising U.S. Health Costs
April 23, 2025 12 mins

A Targeted Strategy to Mitigate Rising U.S. Health Costs

A Targeted Strategy to Mitigate Rising US Health Costs

While medical and pharmacy expenses continue to consume benefit budgets, employers can adopt effective cost-saving strategies that combine predictive analytics with innovative solutions to help control healthcare spend over a multi-year period.

Key Takeaways
  1. Cost drivers vary by company; understanding specifically what they are is key to keeping costs down.
  2. It’s tempting to take an all-encompassing approach to mitigate costs, but using the right one targeted to meet the unique needs of your population will pay dividends.
  3. Mitigating key drivers of cost increases will take time. Plan sponsors should be prepared to measure the effectiveness of their mitigation strategies with data and analytics and adjust accordingly.

The U.S. medical trend rate is forecast to rise 9.5 percent in 2025 — a seemingly unsustainable trend, but one that is predicted to persist for several years. As a result of these dynamics, employers must proactively manage healthcare budgets to prevent these costs from eating into other areas of total rewards and avoid passing more financial burden onto employees and their families. With the frequency and severity of high-cost claimants on the rise, use of expensive drugs like GLP-1s skyrocketing, and improved but increasingly more expensive treatments under continuous development, this is an urgent and important issue facing many companies. 

To keep costs under control, plan sponsors need to understand the key cost drivers facing their organization, proactively review data and use predictive analytics to sharpen their cost mitigation strategies, and then select the right approach to effectively manage these costs.

Understanding an Organization’s Unique Cost Drivers

Not all organizations have the same cost drivers. They often vary based on disease burden, prevalence of these diseases in the population, geographic location, demographics and social determinants of health (SDoH) factors such as race and ethnicity, food insecurity and healthcare accessibility. That’s why it is critical for employers to collect and understand their own data. If collecting company-specific data is too difficult, organizations should leverage public information and market trends to help them understand key cost containment opportunity areas.  

For most organizations, main cost drivers can be bucketed as follows:  

  • Chronic clinical conditions: Cancer, cardiovascular and musculoskeletal issues continue to grow sizably each year. The increased prevalence and complexity of these conditions have, and will continue to, significantly drive up overall costs. 
  • Emerging clinical conditions: In 2024, the top two emerging clinical categories from a medical claims perspective, according to aggregate information from Aon’s data source, were gastrointestinal issues and neurological disorders. Medical spend for both conditions increased by more than 10 percent on a year-over-year per member per month basis. For gastrointestinal issues, the increase was driven primarily by inflammatory bowel disease spend, as well as earlier and more frequent diagnosis of diverticulitis. While the disease was uncommon in patients under 50 a decade ago, it is now being diagnosed more frequently in individuals in their 20s and 30s. For neurological disorders, the increase is attributable to multiple sclerosis, migraines and seizure disorders.
  • High-cost claimants: Aon’s data shows 5 percent of members account for 60 percent of all medical and pharmacy spend. Frequency and severity of high-cost claimants have also increased in recent years. Between 2020 and 2023, there has been a 50 percent increase in the number of $1 million-plus claimants.
  • GLP-1 usage: With the increase in media attention and more organizations covering GLP-1 drugs for a broader array of conditions, GLP-1 spend has become a major cost driver for many companies. Most U.S. employers cover GLP-1 drugs to treat type 2 diabetes, and nearly half are covering them for weight loss.1 With expanded uses of the medication on the horizon, a lack of price drop despite increases in competition and an increase in consumer demand, this will likely remain a cost driver for many employers in the coming years.
  • External factors: These factors have less to do with the provision of care and more to do with the business of care. Health system consolidation has led to higher costs, as has general inflation. Recent disruptions due to changes in tariff policy are also expected to increase costs. A wide array of products used in healthcare — from durable medical equipment and medical devices to pharmaceutical components — have complex supply chains that will be impacted by economic uncertainty. Because many health systems operate on thin margins, any anticipated cost increases will likely be passed along to consumers and plan sponsors. While there is not much that plan sponsors can do to affect these costs directly, they should still be carefully considered as organizations manage their healthcare spend.

In the future, employers should also monitor developments in gene and cell therapy treatments for complex conditions. Although these therapies have not yet had a direct impact on an organization’s healthcare budget, numerous expensive treatments are currently in the pharmaceutical pipeline and will enter the market over the next few years. These multi-million-dollar treatments will likely impact healthcare spend for many businesses.  

“The key for plan sponsors is to focus on what they can control,” says Neal Mulville, vice president of Health Innovation in the United States. “Focus on managing high-cost claims, maintaining access and getting people to cost-effective, quality providers to achieve financial sustainability that cuts through the volatility.”

32%

of employers are implementing various strategies to manage GLP-1 spend.

Source: Aon 2025 U.S. Health Survey

Using Data, Benchmarking and Predictive Analytics to Identify Risks and Cost Drivers

An organization should explore the following areas to better understand where its risks lie and what its top cost drivers are:  

  1. Gather and analyze company specific data in a sustainable manner. A company should collect data on its population: medical and pharmacy claims, absence and leave data, and demographics relating to SDoH, such as where people are born, where they live, learn and work, and their age. Once companies have this data, analyze the information so there is a clear understanding of the key component(s) driving up the cost. Finally, establish a clear process on who is responsible for accessing and monitoring the data so organizations can continually monitor emerging trends and understand their impact on the overall budget.
  2. Use precision benchmarking to identify gaps. A company should also understand how its cost drivers compare to a benchmark population that is precision-matched to their unique population. When comparing plan members to a more closely benchmarked group, a company can uncover its true cost drivers and areas of cost mitigation opportunity.  
  3. Leverage predictive modeling to analyze the risks. Aon is seeing more employers use advanced machine learning to forecast their future population risk and identify high-cost claimants before they occur. Predictive modeling through tools like Aon’s Health Risk Analyzer can help employers understand and mitigate future costs. It also provides a view into future risk drivers, allowing companies to address needs for their specific population. 
  4. Lean into publicly available data to elevate cost containment strategy. Hospitals and payers are now required to publicly post negotiated rates between payers and providers. Historically, this information was not available to employers who wanted to evaluate different network options and how well carriers were negotiating with their providers. This data now allows employers to review available networks at a more granular level. “While there are many concerns with the consistency of this data, we have seen significant improvements in quality, and we expect data usability to continue to improve over time. Employers can start using transparency data today to identify rate disparities in both their current and alternative carrier networks,” explains Todor Penev, head of Commercial Analytics at Aon. “Price transparency, combined with established network evaluation methods, gives plan sponsors unprecedented new detail when evaluating network arrangements and optimizing choices in each market.”      

Implementing a Targeted Cost Saving Strategy to Meet Unique Needs

Once a company analyzes its own data to understand its cost drivers, it is time to implement an actionable strategy. It seems every provider, network and system have their own definition of quality and set of programs and tools that can be used to drive savings. An organization may be tempted to use an all-encompassing approach when determining the optimal cost savings strategy. However, being intentional on approach and focusing on solutions aligned with company culture and population needs are key to success.  

For example, investing in initiatives focused on steering members to preventive services, screenings and care management programs for specific cancer types can mitigate high-cost cancer claimants down the road. Companies with populations that face unusually high risk for specific clinical conditions can implement solutions that steer members to networks and providers that offer high-quality care at competitive prices. Turning insights gained from the evaluation process into effective action requires knowing which tools and programs will be the right fit for your organization.  

Here are a few additional areas to explore when employers evaluate how to design a targeted and effective cost savings strategy: 

  • Focus on Value-Based Care: Value-led approaches to benefit design and care delivery can effectively help employers mitigate cost increases while ensuring members receive optimal care. These include adopting approaches that guide members to higher quality providers that deliver cost-effective care. In evaluating what solutions to adopt, companies should look for those that make it easier for their members to choose providers with a proven track record of delivering high-quality, cost-efficient care.  
  • Drive Primary Care Utilization: Another thing to consider when evaluating programs is improved access to and affordability of primary care. Investment in primary care reduces downstream costs through early identification of care needs and by offering a more economical and easily accessible location for care when it is needed. Employers can encourage the use of primary care by offering plans that create financial incentives via reduced or even no member cost share for primary care services. Employers may also choose to offer access to on-site or near-site high-value primary care providers, either through a relationship with a local provider or a national direct primary care vendor. Finally, a growing number of employers are evaluating programs that provide access to virtual primary care services. Unlike traditional virtual care for acute or episodic concerns, virtual primary care allows employees to establish a longitudinal relationship with a single primary care provider who only arranges “brick-and-mortar” care when it is needed, driving savings for both the member and the employer.  
  • Review and Optimize Vendor Strategy: Because companies have a fiduciary responsibility to their plan members, the choice and oversight of vendors in their benefit ecosystem become even more important. Vendors should not be selected solely based on price, but rather their overall value to the plan member. This means evaluating and choosing vendors thoughtfully, embedding mechanisms to match the clinical and behavioral needs of the population to the point solution, linking payment to outcomes and establishing a credible way to measure returns on investment.

Exploring Alternative Financing Strategies to Combat High-Cost Claims

Even with a targeted approach implemented, outside factors may still drive costs up. Organizations should consider the following when determining whether they would benefit from alternative financing strategies.

  • Stop-loss reinsurance is the primary tool companies use to transfer high-cost claimant claims risk. However, with claimants growing in both number and cost, there are additional strategies plan sponsors should consider. 
  • Captives are another choice for large claimant protection. Some companies are choosing to insure their stop loss with a captive, as well as implementing employee benefit cell captives. An employee benefit cell captive is an insurance solution that enables businesses to self-insure their employee benefits in a simplified and efficient manner, while taking advantage of the benefits of a captive insurance structure. 
  • Health risk financing provides employers with a new mechanism to protect their budget through credit financing. This allows employers to convert budget hits to steady payment streams over time. Additionally, it can allow employers to fill coverage gaps such as lasers, improve capital efficiency and smooth cash flow by using credit-based solutions that enable organizations to deal with unexpected expenses.
Quote icon

Rather than trying to 'boil the ocean' by using an all-encompassing strategy, understand your unique cost drivers and then implement a targeted strategy. It takes a long-term strategy to address the market trends driving costs, but it can be done.

Charles Smith, MD
Chief Medical Officer, North America

Taking a Long-Term View on Mitigating Costs

Mitigating healthcare costs will take time and a coordinated approach with multiple moving parts. It is unlikely the current high-trend environment will slow significantly in the short term if the underlying cost drivers continue to be a factor.

Focusing on unique cost drivers will provide companies with assurance that the mitigation strategies they employ are relevant to their circumstances. By using predictive analytics and data to develop strategies and implement solutions that effectively control costs, organizations will know what they have done, and what they can continue to do for employees and their families to keep costs down without impacting overall quality.

No matter what strategies are used, regular measurement and evaluation are vital to determine if the company’s efforts are working. Ongoing monitoring of long-term mitigation efforts is the key to success

 

1 Aon’s 2025 U.S. Health Survey

 

Aon’s Thought Leaders

Amitabh Deka, MD 
Medical Director, Health Solutions, North America 

Steve Diemesevich 
Vice President, Pharmacy Consulting, Health Solutions, North America 

Anna Kay Dykes 
Vice President, Delivery System Transformation, Health Solutions, North America 

Dan Manolache 
Senior Vice President, Commercial Analytics, Health Solutions, North America 

Leanne Metcalfe, PhD 
Senior Vice President, Commercial Analytics, Health Solutions, North America 

Neal Mulville 
Vice President, Innovation and Integrated Solutions, Health Solutions, North America 

Todor Penev 
Senior Vice President, Commercial Analytics, Health Solutions, North America 

Meghan Rausch, FSA 
Senior Vice President, Commercial Analytics, Health Solutions, North America 

Charles Smith, MD 
Chief Medical Officer, Health Solutions, North America 

Leo Zhang, ASA 
Senior Vice President, Innovation and Integrated Solutions, Health Solutions, North America   

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, health, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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