Employers likely to reduce benefits to combat healthcare costs

More employers will likely reduce benefits in 2026 as they try to control fast-growing health benefit costs, with more than half (51%) of large employers (those with 500 or more employees) saying they’re likely or very likely to shift costs to employees for their 2026 plans.

That’s according to Mercer’s Survey on Health and Benefit Strategies for 2026, which found employers are more likely to take measures such as raising deductibles or out-of-pocket premiums. The 51% is an increase from the 45% of employers who signaled willingness to engage in these measures in last year’s survey.

Some employers will pursue other strategies to slow cost growth. According to the survey, 35% of large employers will offer a non-traditional medical plan option in 2026 that seeks to provide employees with higher-quality, more cost-efficient care. Employers offer these alternative plans to provide choices to employees with a range of medical and financial needs.

Variable copay plans are one example, and typically offer no or low deductibles and set copayments for services based on individual providers’ fees. These copays are fixed and communicated up front, giving members the opportunity to select lower-cost providers.

The survey found that among the 6% of large employers currently offering a variable copay plan, 28% of their covered employees, on average, chose to enroll in them in 2025.

WHAT’S THE IMPACT

Sharp growth in the utilization of glucagon-like peptide 1 (GLP-1) drugs for the treatment of diabetes and obesity is having a significant impact on prescription drug benefit costs, the survey found. While employers have long covered GLP-1 drugs for diabetes, fewer than half (44%) of large employers cover the drugs specifically approved to treat obesity.

Given the high cost of these drugs (about $1,000 per month per patient, not counting manufacturers’ rebates, which vary) and the large number of plan members that could potentially benefit from them, managing this cost is by far the top priority in pharmacy benefits among survey respondents, with 77% saying it is extremely or very important.

More broadly, some employers are evaluating new approaches to providing and managing the costs of pharmacy benefits. Well over half of large employers (61%) are now actively exploring some type of alternative to standard pharmacy benefit contracts that would potentially provide greater clarity about the cost of drugs or specific services offered by pharmacy benefit managers.

Employers have also signaled a commitment to mental health. More than 75% of large employers will offer digital stress management or resiliency resources in 2026, such as mindfulness and meditation apps, or apps grounded in cognitive behavioral therapy. Half (51%) will offer in-person or live online resources for stress management and resiliency, such as individual or group training sessions or coaching.

Employers are also providing training for managers on how to recognize employees who are struggling with their mental health, offer support and direct them to resources. Nearly 40% of all large employers surveyed – and 60% of those with 20,000 or more employees – conduct mental health training for managers.

These efforts may be a response to a growing need. According to Mercer’s research, nearly half (45%) of U.S. employees feel stressed most days at work.

THE LARGER TREND

Mercer’s 2024 survey predicted that health benefit cost per employee will rise 5.8% on average this year, even after accounting for planned cost-reduction measures.

Employers estimate their cost would rise by about 7%, on average, if they take no action to lower cost. Smaller employers (those with 50-499 employees), which typically have fully insured health plans, have been hit the hardest. They reported that cost would rise by about 9% on average if they took no action.