Employers prepare for the highest health benefit cost increase in 15 years 

If employer health plan sponsors hoped that 2026 would bring some relief from the recent upward trend in cost growth, they are now having to face up to a very different reality. The total health benefit cost per employee is expected to rise 6.5% on average in 2026 — the highest increase since 2010 — even after accounting for planned cost-reduction measures. Employers estimated that plan cost would increase by nearly 9%, on average, if they took no action to lower cost. 

These projections are based on over 1,700 US employers that responded to Mercer’s 2025 National Survey of Employer-Sponsored Health Plans by August 12. (Ultimately, over 2,000 organizations submitted surveys, and complete results will be released later this year.)

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%. With pressure mounting on their healthcare budgets, the 2026 cost spike has been a call to action for many employers.  Survey results indicate that while the majority of employers will make changes to reduce cost increases in 2026, many are pursuing longer-term — even disruptive — strategies to slow cost growth. 

Behind the health benefit cost increase

Health benefit cost trend has two primary components — the price of healthcare services and the rate of utilization — and right now, both are rising.

Some price pressures are ongoing. Advances in diagnostics and therapeutics, such as cancer treatments and weight-loss drugs, produce better outcomes. However, they typically cost more than the treatments they replace. In addition, the continuing consolidation of providers into fewer, larger health systems has improved their ability to work with insurers in setting reimbursement levels. More recently, inflation across the general economy, including higher wages in the healthcare sector, has contributed to price increases. In addition, according to industry reports, the introduction and buildout of AI-based platforms that help providers optimize billing may be another source of pressure on healthcare spending.

Utilization rates for various health services have been rising over the past two years. The lingering effect of delayed or missed care due to the COVID-19 pandemic is likely a factor. Constraints on the healthcare labor supply have eased, including through the use of AI in provider offices, which saves time and increases capacity. At the same time, the rise of virtual healthcare — and growing consumer acceptance of it, particularly in behavioral health — is also affecting utilization patterns because it removes geographic barriers to care and can be a more convenient option for patients.  

Employers’ response to faster cost growth

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.

However, many employers 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.”  Addressing high-cost claims through enhanced case management and other means goes to the source of the greatest spending, without impacting healthcare affordability. The second priority demonstrates a stronger focus on ensuring that programs designed to support members with chronic conditions and other health needs deliver meaningful results.

Interestingly, 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. Employers have demonstrated strong commitment to supporting employees’ mental health since the early days of the pandemic, recognizing that it’s essential for employee well-being and overall business performance. Most recently, we have seen employers add on-site resources, engage managers in training and provide apps to support worker well-being.

Supporting employees’ enrollment decisions may be especially important this year

Employees are likely to see higher costs for their health coverage in 2026. 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.  

This might be a good year to really help employees to understand the value of the lower-cost options. If, like most employers, you offer more than one medical plan option, you may want to reinforce the need for employees carefully weigh the trade-offs between premium cost and cost-sharing provisions to determine which plan is best for them. This will be especially important if you have made substantial plan design changes or have recently added a non-traditional, high-performance network plan that employees may be less familiar with (in a recent survey, over one-third of large employers said they will offer some type of non-traditional plan in 2026). Typically, HPN plans are designed to help patients access providers pre-selected on the basis of quality and cost and often offer lower out-of-pocket costs in exchange for using a more limited provider network – a win for the member and the plan sponsor. Variable copay plans, another non-traditional medical plan, typically don’t require deductibles but charge different copayments for services based on rates negotiated with individual providers. This way, employees can consider cost in selecting a provider.

These few early results from our 2025 survey provide a good indication of the size of the challenge facing employer health plan sponsors. When we release the complete results later this year, we’ll provide a fuller picture of the actions they are taking and the state of health programs today.