Employers anticipate 2026 to see biggest healthcare cost increase in over a decade

The historic increase in employer healthcare costs in 2025 is expected to continue in 2026, according to a leader in the area.

Heading into 2025, U.S. employers’ expected their healthcare costs to jump 8%, which was the largest increase in more than a decade, according to a BGH survey. The 2025 cost surge was before plan design changes but it was the highest rate forecasted in more than a decade.

“We do not anticipate trend abatement for 2026,” Ellen Kelsay, president and CEO of Business Group on Health (BGH), a nonprofit employer adviser on healthcare cost and policy, said recently to FastFinanace.

Drivers for the 2025 increase included:

• Increasing disease prevalence — particularly among younger generations
• Aging workforce and their related treatment and drug needs
• Increasing cost shifts from public payers

Looking ahead to 2026, employers will be dealing with those, plus additional factors.

“In addition to long-standing factors fueling healthcare trend, emerging macroeconomic factors will likely exacerbate trend in the near-midterm, including the overall economy, the impact of tariffs on healthcare, government-spending reductions on Medicare/Medicaid, and possibly a cost shift to the employer market,” Kelsay said.

The 2026 cost expectations came as employees — especially lower-paid ones — report increasing concerns about their ability to afford healthcare. Only 63% of hourly workers report being able to afford the healthcare their families need without financial hardship, compared to 83% of salaried employees, according to a survey by Mercer, a health benefit consulting firm.

For hourly workers, the share who were confident in their ability to afford healthcare included:

• 55% in retail and hospitality
• 61% in healthcare
• 62% in insurance and financial services

General plans

Kelsay said most Americans who receive healthcare from their employer report satisfaction with those offerings. She emphasized that healthcare coverage by employers is the most robust and comprehensive among U.S. insurance offerings.

“However, healthcare costs for all markets are unsustainable, and affordability has long been a challenge,” Kelsay said.

Employers have relied on a multipronged approach to address costs, Kelsay said. Their efforts include:

• Steerage toward quality providers/clinicians, such as centers of excellence and high-performance networks
• Focus on primary care, including prevention, immunizations, cancer screenings
• Robust pharmacy management strategies
• Vendor accountability, including increased use of requests for proposals

However, she said broad-based and sustained cost reduction “must fundamentally come from the delivery system itself and is not isolated only to the commercial/employer market.”

Specific approaches

In December, Aon, a benefits consultant, also found employers expected accelerating healthcare costs this year — a 7.3% increase, even after benefit changes to control costs.

The leading employer response, by far, was to increase employee premium contributions to healthcare costs. Four out of five employers planned an average of 5.9% increase in employee contributions.

Other leading steps planned by employers included:

• 32.4% managing the cost of GLP-1s
• 30.8% wellness programs
• 26.2% increasing employee out-of-pocket
• 21.6% condition management; other clinical solutions
• 17.6% adjusting plan design or costs for employee affordability
• 17.6% plan design or network changes to steer patients (such as through differential cost sharing)

Network approaches

Changes in provider networks have gained increasing interest from employers. For instance, the latest WTW survey found 51% of companies it surveyed planned to adopt plan design and network strategies that steer to lower-cost, higher-quality providers and sites of care.

The narrow network approach has raised concerns from some hospitals and health systems over concerns local or regional employers could exclude them based on cost or quality.

A 2023 meta-analysis of published research found both narrow and tiered networks were associated with reduced overall healthcare costs for most, but not all, cost-related measures.

Although the existing research on the quality and access for enrollees in tiered or narrow networks was weaker, they did not appear worse in either narrow or tiered networks.