Employers brace for biggest health cost increase in 15 years

Employers are anticipating healthcare costs to increase substantially in 2026.

A new Mercer study adds evidence to this projection, predicting that health benefit costs per employee will rise by an average of 6.5% next year.

That’s the biggest price increase since 2010, the data showed. Employers estimate that plan cost would increase by nearly 9%, on average, if there was no action to lower costs. These projections are based on over 1,700 U.S. employers that responded to Mercer’s 2025 National Survey of Employer-Sponsored Health Plans by Aug. 12.

Based on the projections, 2026 will be the fourth consecutive year of elevated health benefit cost growth following a decade of moderate annual increases averaging only about 3%.

Survey results indicate that while the majority of employers will make changes to reduce cost increases in 2026, many are pursuing longer-term strategies to slow cost growth. 

WHAT’S THE IMPACT

The health benefit cost trend is due principally to the price of healthcare services and the rate of utilization, with the former rising faster than many had anticipated, found Mercer.

Some price pressures are ongoing, such as advances in diagnostics and therapeutics, which can include cancer treatments and weight loss drugs. These typically produce better outcomes, but cost more than the treatments they replace. 

More recently, inflation across the general economy, including higher wages in the healthcare sector, has contributed to price increases. And artificial intelligence-based technologies, such as those that help providers optimize billing, may be be another source of pressure on health spending, the report found.

The survey found that 59% of employers will make cost-cutting changes to their plans in 2026 – up from 48% making changes in 2025 and 44% in 2024. Generally, these involve raising deductibles and other cost-sharing provisions, which can lead to higher out-of-pocket costs for plan members when they seek care.

But many employers said they will also pursue strategies to slow cost growth without shifting cost to employees. When employers were asked to identify top priorities for managing health programs over the next few years, the two most common were cost management strategies: “Greater focus on managing high-cost claims,” followed by “Measuring the performance of health programs to ensure they provide value.”

The third-highest priority that employers identified is a benefit enhancement: “Making behavioral healthcare more accessible,” with about two-thirds of large employers (those with 500 or more employees) planning to prioritize this strategy.

Typically, the employee share of the premium increases proportionally with overall plan cost, which means employees could expect their paycheck deductions for health coverage to rise by about 6% to 7% on average. At the same time, because many employers will raise deductibles and copays to limit premium increases, higher out-of-pocket spending may also be a factor for some employees, Mercer found.  

THE LARGER TREND

The findings are in line with Business Group on Health's 2026 Employer Health Care Strategy Survey, in which employers predicted that healthcare cost trend increases for 2026 will come in at a median of 9%.

An earlier Mercer survey, published in August, determined that employers will likely reduce benefits in 2026 to control benefit costs. More than half of large employers say they are likely or very likely to make plan design changes in 2026, such as offering plans with narrow networks, or raising deductibles or out-of-pocket maximums. That's up from 45% in last year's survey.

Some employers will pursue nontraditional strategies. Thirty-five percent of large employers say they will offer a medical plan option in 2026, such as a variable copay plan. These plans offer no or low deductibles and set copayments for services based on individual providers' fees. These copays are fixed and communicated upfront, giving members the opportunity to select lower-cost providers, Mercer said.

The survey found that among the 6% of large employers currently offering a variable copay plan, 28% of their employees chose to enroll.