5 reasons medical costs are rising – and what employers can do about it

Insurers are predicting higher medical costs across the globe which means employers are facing rising costs, but they have some mitigating options open to them.

Whether it’s how AI will change the workplace or if we’ll all end up back in offices one day, it can be hard for employers to know what’s ahead.

However, one thing looks very likely: their private medical insurance costs are set to rise.

WTW’s Global Medical Trends Survey (2025) found that in the UK, private medical insurance costs are expected to increase by 12.6% in 2024.

The trend is also apparent across the globe, and over the longer term.

In fact, over the next three years, 64% of insurers anticipate higher or significantly higher medical trends globally, the same survey found.

This projection is even higher in Asia Pacific, where over three-quarters (76%) of insurers anticipate higher or significantly higher costs.

From changes in the way we live our lives to structural shifts in how we access healthcare support, five key factors are contributing to higher medical costs:

1. Pressure on private healthcare providers

Across the world there’s continued pressure being placed on private healthcare providers as public healthcare systems are overwhelmed.

The shift is most pronounced in Europe, with 75% of insurers explaining that the decline in public health systems is the main reason for cost increases. But it isn’t just Europe. In the Americas, half of insurers (46%), and in Asia Pacific, 41% gave this as a top reason.

2. New technologies changing healthcare

Technology is transforming every aspect of society, and private healthcare is no exception.

Insurers are feeling pressure to continually fund and improve medical technology – as well as how it is delivered.

While this may be more expensive for employers, ultimately, it will benefit everyone. Investing in medical technology will make healthcare more cost-efficient and sustainable over the long term.

Technology also has the potential to improve patient care.

3. The rise of virtual healthcare

What’s the biggest change observable in medical portfolios in 2024? It’s the addition of telehealth, like video calls and messaging apps, as well as virtual wellbeing services.

Almost half of insurers added new telehealth services and features in 2024.

These features will improve the support on offer to people – but do ultimately come at a cost.

And also unintended consequences as this pathway is, in some instances, leading to higher follow on diagnostics and care.

4. Changing behaviour among healthcare users and practitioners

A top factor driving cost increases for almost three quarters (72%) of insurers is overuse or misuse of care by healthcare practitioners, who are recommending too many services.

This is an increase from 59% in 2023 and is the top behavioural driver of costs in all regions but the Americas.

More employees are using their healthcare plans, too.

Members are greatly invested in their health, using wearable technology to track their exercise, sleep and heart health, to name just a few.

However, obesity, stress and other preventable diseases rates remain high – showing that many find it hard to maintain healthy lifestyles.

WTW’s Global Benefits Attitudes Survey (2024) shows that only two in five employees surveyed are maintaining good lifestyle habits.

Globally, almost half of insurers cite members’ poor health habits (45%) and the underuse of preventative services (43%) as significant drivers of medical costs in WTW’s Global Medical Trends Survey (2025).

People are also struggling with their mental health.

While it’s great that many are seeking help, the rise in demand for mental health services is also pushing up the cost of insurance.

A third (33%) of insurers expect increases of 15% or more in costs per person for mental health services over the next three years.

This is highest in Europe, where 44% of insurers expect such increases, followed by a quarter of insurers in Asia Pacific (25%) and MEA (23%).

5. Rising pharmacy costs

Many advancements are being made in the pharmaceutical sector.

Over half (55%) of insurers in MEA and the Americas cite this as a significant factor driving medical costs.

Looking ahead, one in five insurers expects substantial increases of 15% or more in pharmacy costs, while almost half (46%) expect moderate growth (a 5% to 15% increase).

How can employers manage rising costs?

In this case, rising costs should create better value: While costs rising is never good news for employers’ bottom line, some of the increases we outline above could be good news.

Improving how we communicate with people remotely, better mental health support and even innovations in the medicine available could save employers money by boosting productivity and reducing absenteeism.

Support people’s wellbeing, so they are less likely to need health insurance: To reduce healthcare costs, employers should support their people’s health and wellbeing.

If employees are happy and healthy, they are less likely to need to use their private medical insurance.

Review your insurer regularly: Insurers are evolving their propositions all the time.

Employers should regularly check they are still receiving the best possible price for the services they are receiving from their insurer.

Use data analytics to drive spending decisions: Using data analytics, machine learning and modelling can help employers to interpret large volumes of data and analyse health risks.

This will provide them with meaningful and actionable insights to build a sustainable healthcare strategy.