Employer-sponsored health insurance plans are about to see their biggest cost increases in 15 years, and companies are preparing for the impact. Even after employers take steps to control expenses, the total cost of health benefits per employee is expected to increase by an average of 6.5% in 2026, according to Mercer’s 2025 National Survey of Employer-Sponsored Health Plans. If they don’t make any changes, costs will approach 9%. (1)
This is the steepest projected increase since 2010 and the fourth year of above-average growth in a decade, following an average annual increase of 3 percent. With inflation falling in other parts of the economy, many employers were hoping for relief from healthcare costs; but the survey shows that the opposite is true. The cost increase has become a “call to action” prompting 59% of employers to implement cost-cutting measures for 2026; This rate was 48% last year. (2)
Here’s why prices are expected to rise, how employers and employees are reacting, and how to prepare for a more expensive year.
There are two main factors behind the increase: high prices and increased utilization of healthcare services; both of these are accelerating at the same time. This means employees can expect higher pay cuts, higher deductibles, and more limited plan options as companies look for ways to balance their budgets. (3)
Much of the pressure comes from expensive new treatments and technologies. Advanced diagnostics, cancer treatments and weight-loss drugs are improving outcomes but increasing pharmacy and treatment costs. (4)
Strong patient demand for products like Ozempic, which costs an eye-watering $11,971 per year at list price, has also contributed to higher insurance costs. (5) Meanwhile, continued consolidation among hospitals and clinics has kept costs high by giving large health systems greater leverage in negotiating higher reimbursement rates.
Employers are responding by shifting costs and rethinking plan design. When plan costs increase, workers’ health insurance contributions typically increase at the same rate; This means that many workers’ pay cuts could increase by roughly 6 to 7% next year. (6)
To offset the cost of coverage, 59% of employers say they will increase deductibles and co-pays, which would increase their employees’ out-of-pocket costs, while others say they will offer nontraditional plans, such as high-performance networks and variable co-pay plans that limit provider choice in exchange for lower costs. (7)
A report from the Bureau of Labor Statistics shows that healthcare spending fell from 2019 to 2020 as people delayed in-person visits to their doctors for regular checkups. (8) But as vaccines became available in 2021, medical spending rebounded significantly, including a massive 23.8 percent increase in medical services spending.
Throughout 2020 and 2021, many employers have focused on access and stability. Telemedicine coverage has been expanded, cost sharing for virtual care has mostly been reduced, and mental health benefits have been increased. Pent-up demand has created shortages in limited resources, similar to what the hospitality industry is experiencing as airfares and hotel prices soar in 2021.
Although tariffs are a tax on imported goods and are not directly linked to health insurance, they can ripple through the economy, increasing the prices of supplies, drugs, and devices that health systems rely on.
The Congressional Budget Office estimates that the current tariff package will increase inflation by an average of about 0.4 percentage points in 2025 and 2026. (9) Higher inflation is seeping into hospital supply chains and benefits budgets, which can put pressure on overall plan costs.
American Hospital Association President and CEO Rick Pollack warned that tariffs on medical devices and drugs risk increasing costs and creating shortages, which would cause providers to pay more for supplies and equipment, and those costs would often be passed on to insurers and ultimately plan owners. (10)
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Rather than focusing solely on monthly costs, enrollees in workplace plans should consider the full picture of health insurance, including deductibles, co-insurance out-of-pocket maximums, and the structure of their provider network. Some employers are expanding high-deductible health plans paired with Health Savings Accounts (HSAs), while others are directing employees to narrower or tiered networks that reward lower-cost providers.
Employers can sweeten certain options with HSA contributions or expanded preventive care benefits, but employees need to understand where cost shifting will occur. A few strategies can help:
Do the math on your health insurance needs. Estimate how much you’ll likely spend out of pocket next year, then combine that with what you’ll pay in monthly contributions to see your true annual cost. For example, if your contributions total $3,000 per year and you expect another $1,000 for doctor visits or prescriptions, your actual annual cost will be about $4,000. You can compare this with other plan options to see which one offers the best value.
**Increase contributions to an FSA or HSA or consider opening one. **These tax benefits are often offered through your employer during open enrollment and can help you save on health care costs throughout the year. It allows you to pay for eligible medical expenses with pre-tax dollars. Even a small monthly contribution (say, $75) can create a $900 buffer in a year, easing the pain of an unexpected bill.
HSA funds also roll over annually, making them ideal for people who anticipate future health care needs. If your employer doesn’t offer these accounts, you can open an HSA on your own through a bank or financial institution; this may be worth investigating if you expect regular out-of-pocket medical expenses.
In a year (11) where health care inflation outpaces wage growth, the best defense is preparation. Understanding your plan, using tax-advantaged accounts, and factoring future medical needs into your budget can help you get through what’s shaping up to be the most expensive year for health insurance in more than a decade.
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Mercer (1), (2), (3), (4), (6), (7); Drugs.com (5); Bureau of Labor Statistics (8), (11); Reuters (9); American Hospital Association (10)
This article provides information only and should not be construed as advice. It is provided without any warranty.
