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.
www.mercer.com
“… 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.
… 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.…”
