Health plan costs in the United States have continued to rise over the past few years, increasing by over 6% to hit a double-digit high in 2023, with a blended medical and pharmacy trend rate of 10.2%. This level of trend hadn’t been seen for decades, excluding the post-COVID ‘shock’ year.
But our data shows promising signs of stability, with a mix of decreasing and increasing cost drivers. The significant trend inflators that drove 2023 highs—pharmacy and inpatient facility costs —are still driving an inflated trend now, outpatient facility costs are decreasing, and trend rates show promising signs of emerging stability.
High healthcare costs are expected to continue throughout 2025 and 2026. However, analysis indicates still-elevated trend levels are not projected to return to 2023 heights, which is a promising, positive sign of future stability on the horizon for employers.
Medical and pharmacy trend rate dropped to 8.4% in 2024
According to data from Lockton’s book of business through June 2024, employer-sponsored health plan trend dropped to 8.4% allowed per-member, per-month, an almost 2% drop from 2023.
The overall rate reflected several, conflicting cost drivers:
Deflators
Outpatient facility cost trend continues to decline, with the rate of change now almost half of what it was a year ago.
Inflators
Brand drug costs were the biggest driver of pharmacy trend and increased over $125 per script over the past year.
Inpatient facility cost trends continued to increase after the 2023 year-end throughout the first quarter of 2024 but leveled off around 5.5% for the second quarter. Treatments for the digestive system show increases in both cost and utilization.
Unchanging
Over the last year, there has been little change in the number of pharmacy scripts fulfilled.
Lockton’s book of business, rolling 12 months incurred with two months runout.
The comparison basis for current trend includes the first half of 2023, when trend increased rapidly. The rate at which costs and utilization are increasing in the current year is not as rapid, bringing overall trend down. This is expected to continue throughout 2024, driving overall medical and pharmacy trend down.
What employers can expect: Lockton’s trend projections for 2025 and 2026
Future trend levels are forecasted to stay below 2023 levels but remain elevated compared to historical standards.
Lockton projects that medical costs will grow steadily between 5% and 7% in 2025, while pharmacy costs will outpace other coverage lines significantly at 9.5% to 11.5%. In contrast, dental and vision trends are expected to remain stable.
Looking even further ahead to 2026, medical costs are projected to maintain their growth rate, pharmacy costs are expected to accelerate slightly to 10% to 12%, dental trend will remain stable, and vision trend is expected to have a small increase in range but remain minimal.
The projected pharmacy trend range does not include the potential impact of a plan offering coverage for GLP-1 medications for weight loss along. Pharmacy costs do not include drug rebates. Trend ranges are based on allowed amounts, not factoring in plan design changes. There is potential variation from these ranges due to geographic and demographic differences.
Lockton’s extensive book of business data, deep understanding of macro and microeconomic factors, and collaboration with carrier partners, provider partners, and clients surfaced these key themes guiding projected growth rates:
Medical trend
There is widespread agreement in the industry that medical trend will continue to drop slightly and become more stable. While this decrease will not bring rates back to pre-pandemic levels, it is a step in the right direction, with an expected reduction in variability. Unit cost increases are still anticipated to drive most of the trend. Lockton has maintained the projected trend for 2026 at the same level as 2025, aligning with carrier expectations.
Pharmacy trend
The consensus on pharmacy is that trend will continue to run as high as low double digits for the next several years. Whether GLP1s are covered for weight loss will impact this expected trend. Although this is lower than what the industry experienced in 2023, it is still not ideal. There is hope that biosimilars will bring some relief for expensive specialty drugs like Humira, but an extensive list of new drugs could offset any savings. Discussions around gene therapy drugs continue, but their utilization remains very low.
While employers may not yet be experiencing immediate relief from high healthcare costs, projections for a leveling trend line mean they can anticipate a more predictable and less volatile environment to implement targeted interventions and cost-saving strategies.
Though some cost pressures, such as rising pharmacy expenses, are expected to persist, a steady medical and pharmacy trend will provide employers with a clearer path to help contain costs while supporting the health and well-being of their employees.
