LOCKTON'S POV
Cost projections are higher than expected, with little relief in sight
HEALTHCARE TREND REACHED 8.1% IN 2024, & EMPLOYERS SHOULD PREPARE FOR EVEN HIGHER COSTS AHEAD
Trends were previously very volatile and have stabilized at a high level, driven by increases in both the price and utilization of medical services, prescription drug costs, and increased utilization of specialty medication. Now, we're expecting them to trend upwards, with our trend projections increasing 2%.
For the first time in four years, medical trend is being equally driven by price and utilization, without an external "shock" event shaping costs like we saw with the return of care after the pandemic prior to 2022 and broad inflation across the economy in 2022 and 2023.
Meanwhile, the number and cost of newborn deliveries is driving higher inpatient hospital costs, while many conditions, including cancers, diseases of the circulatory system, and mental and behavioral health treatments, continue to impact medical trend.
TOTAL MEDICAL: ALLOWED MEDICAL COST PER UNIT & UTILIZATION
Source: 2025 Trend Study; Lockton’s book of business
Pharmacy costs have been consistently elevated, driven by specialty medications, significant unit cost increases for brand medications year over year, and GLP-1s for weight management and diabetes. Although less than a third of employers cover GLP-1s for weight management, they drive 1.6% of total medical and pharmacy trend across Lockton’s entire book of business.
While drug unit costs have been causing trend increases for years, an increase in pharmacy utilization is now emerging as well.
TOTAL MEDICAL: ALLOWED MEDICAL COST PER UNIT & UTILIZATION
Source: 2025 Trend Study; Lockton’s book of business
Diligent management of costs & employee experience is more important than ever
The combination of market dynamics, new healthcare drugs, and increased utilization means plan sponsors should brace for sustained high costs. With persistent price pressures expected through 2027, disciplined cost management paired with a strategic focus on employee health experiences will be critical. In an environment where inflation, tariff developments, and fiduciary scrutiny continue to create uncertainty, a steady focus on emerging cost pressures will be key to controlling plan spend and staying ahead of potential risk.
