Employers expect healthcare costs to rise 9%

Employers predict that healthcare cost trend increases for 2026 will come in at a median of 9%, which means they'll need to take a hard look at the benefits they're offering employees, according to Business Group on Health's 2026 Employer Health Care Strategy Survey.

This forecast comes as more employees use GLP-1s for obesity, receive cancer diagnoses and use mental health services, the survey showed. On a compounded basis, costs in 2026 are likely to be 62% higher than 2017 levels.

Analysts said employers will need to make bold and strategic moves to contain costs, even if it means disrupting existing healthcare models.

"For instance, we will see them rigorously evaluating benefit offerings, vendor performance and patient outcomes," said Ellen Kelsay, president and CEO of Business Group on Health. "We will also see more employers exploring nontraditional health plan and pharmacy benefit manager models. And as employers urge workforces to use health plan resources and navigation tools to find high-value care, we'll see more people using primary care and getting recommended screenings and immunizations."

Other, related priorities for employers in the coming year are affordability for both their businesses and workforces; a greater reliance on utilization management and weight management programs, in concert with GLP-1s to ensure optimal outcomes in obesity treatment; and assessment of mental health access and appropriateness of care.

WHAT'S THE IMPACT

In response to these cost concerns, more than 4 out of 10 employers (41%) are either changing pharmacy benefit managers or conducting a request for proposal, while 51% are either changing or conducting an RFP for other health and well-being vendor relationships, data showed.

Fully 79% of employers have seen an uptick in the use of GLP-1s, while an additional 15% anticipate seeing such an increase in the future. And analysts said the percentage of employers covering GLP-1s for conditions other than diabetes will stagnate as employers try to stabilize their healthcare costs. More of those that cover these medications for weight loss will require utilization management, prescriptions from specific providers, participation in a weight management program, and higher expectations from vendor partners to deliver sustainable financial models for these medications.

Employers see several approaches as having promise to improve quality of care: navigation to higher-quality providers (selected by 82% of employers), greater transparency of quality data (82%) and coordination of integrated care teams (79%). Employer strategies also include creative methods of deploying center of excellence programs and expanding the use of COEs to cover conditions that are highly prevalent across a broader segment of the population.

In 2026, 58% of employers will expand preventive care for women, an increase of 22 percentage points in just two years, while an additional 25% said they planned to expand programs for menopause by 2028.

Almost all employers – 99% – said protecting and affirming the Employee Retirement Income Security Act, or ERISA, was a key policy imperative. When employers were asked to rank their top priorities for the U.S. government, 85% responded with protection of tax-free status as one of their top five, followed closely by protection of ERISA preemption (81%). In addition, more than 6 in 10 employers (62%) said they would also prioritize pharmacy supply chain reform.

THE LARGER TREND

A Mercer survey released last week determined that employers will likely reduce benefits in 2026 to control benefit costs.

More than half (51%) of large employers, those with 500 or more employees, 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.