It's becoming an annual event that can cause headaches, make your blood pressure spike and erode your finances: Health care costs and the price of insurance are going up again in 2025.
For private plans bought in the health insurance marketplace through the Affordable Care Act, or ACA, expect a 7% rise in the new year, on average. That brings the cost to a record high of $7,452 per year, or $621 a month, according to a new report from LendingTree's insurance site ValuePenguin.com.
Eight states will see increases of 10% or more. Vermont is expected to see the highest rate increase: 27%.
Health Care Costs Keep Rising
It's the fourth straight year premiums for private health care plans available via so-called Obamacare have risen, says ValuePenguin.com. Premiums are up 15% since 2022, the report found. Nearly 50 million Americans have been covered by the ACA since 2014, according to the U.S. Department of the Treasury.
And if you get coverage through work, expect to pay more also. Costs are rising next year for employer-sponsored plans, too, even though employers pay for the bulk of employees' health care premium.
Total health benefit costs per employee are seen rising 5.8%, on average, in 2025, according to consulting firm Mercer's annual survey. If Mercer's estimates are on target, it would mark the third straight year of 5%-plus cost increases.
"Rising health care costs isn't a new thing, but it's getting more acute with no real solutions in sight," said Divya Sangameshwar, an insurance expert at ValuePenguin.com. "Every type of private health plan will see premiums increase in 2025."
What's Driving Rising Health Care Costs
The sticker shock is being driven by a few factors. Inflation, of course, is a factor. Rising prescription drug costs are another; they rose 7.2% in 2024, according to Mercer. Costly new drugs, such as GLP-1 diabetes and weight-loss drugs, are adding to the overall costs of drugs. Hospital consolidation, an aging population that requires more medical services, and a shortage of health care workers are also pushing costs up.
There are prescriptive steps you can take, however, to either trim health insurance costs or prepare in advance to pay for higher premiums and out-of-pocket expenses.
But the clock is ticking. Open enrollment for the health insurance marketplace ends on Dec. 15 if you want coverage to begin Jan. 1. The final deadline is Jan. 15, 2025, but your coverage won't start until Feb. 1. For employer plans, the deadlines vary by company. But time is running out, so if you haven't selected your health coverage via your benefit plan at work, do so promptly.
Focus First On Your Health Care Needs
It's vital to first take the temperature of what you and your family's health care needs are before evaluating the cost of coverage. "You need to do a really good self-analysis of your own health needs before you start looking at plans," said Sangameshwar.
The next step is to see what type of health care plan and what tier level fits your budget. In general, the more you pay in premiums, the lower your out-of-pocket expenses will be.
To get a gauge of what level of care best suits you, look at this past year's costs. Tally up prescription receipts and doctor co-pays. Make note of any personal or family history of chronic health care issues. And check to see if your care providers are covered by your plan.
Treat Health Care Costs Like Any Other Budget Expense
Build the cost of prescription drugs, doctor co-pays and health insurance premiums into your budget. It's just like you would with the monthly electric and cable bill, mortgage and auto loan, says Tim Steffen, director of advanced planning at Baird Private Wealth Management. "Health care is like any expense that we have on our budget," he said.
Comparison-Shop For Plans
Just as you would shop around for the best price on a new car or home renovation, compare health care plans and prices, says Sangameshwar. In most cases, if you're shopping on the marketplace you'll get a minimum of three plan options to choose from.
"But don't just go for the cheapest option," said Sangameshwar. "Compare the plans. Put them side by side to see what level of coverage they're going to provide."
And if you're unsure if a plan covers your current roster of doctors or medications, pick up the phone and call the insurer to find out.
Take Advantage Of Subsidies
The Obama administration increased subsidies to offset high health care costs and boost affordability for more Americans. In fact, over 90% of ACA health plan enrollees qualify for subsidies, saving roughly $800 per year, on average, according to the ValuePenguin.com study. As of 2024, 80% of individuals enrolled in the ACA marketplace are eligible to obtain health insurance coverage at a cost of just $10 per month or less after subsidies, notes Sangameshwar.
Be aware that these health care premium subsidies are set to expire after 2025. So, keep a close eye on any potential policy changes under the incoming Trump administration that could impact pricing.
Consider A High-Deductible Health Plan
High deductible health plans (HDHP) tend to come with lower premium prices. The trade-off? You'll pay higher co-pays, prescription drug costs and out-of-pocket doctor and hospital visit fees. So, if you're younger or healthy and don't get sick or go to the doctor often, it can be a good monthly money saver.
What's more, signing up for an HDHP plan also gives you the option of opening a health savings account, or HSA, a triple-tax-advantaged account to pay for approved health care expenses.
The money you contribute to an HSA is tax deductible, the money earned grows tax-free, and withdrawals are also tax-free. The maximum contribution for 2025 is $4,300 for single plans and $8,550 for family plans. A family in a 24% tax bracket that maxes out an HSA next year would save $2,052 in taxes.
"You should be availing yourself to tax-advantaged accounts when you can," said Tara Lawson, a senior wealth planner at US Bank Private Wealth Management. Take advantage of flexible spending accounts, too. These accounts, which will have a contribution limit of $3,300 per employee, let you set aside pretax dollars to pay for medical expenses. So, if you expect to have your child get braces next year or are planning a surgery, max out the FSA to get the tax benefit, says Lawson.
And if you don't need to withdraw from your HSA, you can grow your account balance by investing your money in investment funds like you do in your 401(k).
"Savings can accrue," said Sangameshwar. "So, when you really have a medical emergency, you have a little nest egg you can tap."
Control Costs With Preventive Care
Annual wellness visits with your doctor can often help you stay healthy. It's also a way to identify serious potential health issues early on and avoid larger costs later, says Steffen.
"There are a lot of things that can be done now that cost a little bit now but can help diagnose or prevent something later on that could be significantly more expensive," said Steffen.
Build Health Care Into Your Financial Plan
Sticking to a budget is key. "No matter what your net worth or how much you earn, it always comes down to budgeting," said Lawson. "So, understanding what you and your family's health costs are going to be is tremendously helpful in deciding which plan you're going to choose, and how you will budget for it."
The bottom line: Monitor your health care costs and rigorously evaluate your coverage options each annual enrollment season.
"As long as you stay on top of what your health care needs are, and you're doing your research every year during open enrollment, you're not going to be caught off-guard by rising costs or any plan changes," said Sangameshwar.
