Employers Predict 9% Health Care Cost Jump in 2026

Employers expect to continue facing a health care cost crunch in the year ahead, according to the Business Group on Health, a nonprofit group supporting companies’ interests in health care.

According to the organization’s 2026 Employer Health Care Strategy Survey, released today, employers predicted health care cost increases for 2026 will come at a median of 9% greater than current levels, offset against 7.6% savings stemming from plan design changes. These forecasts developed as more employees used glucagon-like peptide medications for obesity; received cancer diagnoses; and used mental health services, the survey found.

“In this challenging environment, employers remain firmly committed to an ongoing investment in employee health and well-being,” said Ellen Kelsay, president and CEO of the Business Group on Health, in a statement. “Yet they will need to make bold and strategic moves to contain costs, sometimes disrupting health care models along the way.”

For two consecutive years, actual health care costs outpaced employers’ anticipated costs. Employers predicted health costs would increase by 6.6% in 2023, while costs actually increased by 0.2 percentage points more (6.8%). In 2024, a 7.1% prediction was outpaced by the actual increase of 7.5%.

The predicted cost increase in 2025 was 8.0%, and actual costs remain to be seen. Looking ahead to 2026, the prediction is one full percentage point higher than it was last year. On a compounded basis, costs in 2026 are likely to be 62% higher than 2017 levels.

Survey respondents said other interrelated health care priorities for the coming year are affordability for both their businesses and workforces; a greater reliance on utilization management, such as prior authorization; weight management programs, in concert with GLP-1 medications; and assessment of mental health access and appropriateness of care.

Curtailing Pharmacy Costs

Employer respondents to the survey reported they are considering making changes to their benefit offerings to offset rising costs—especially in the pharmacy portion of their coverage. For example, 41% of employers stated they were either changing pharmacy benefit managers or conducting a request for proposals to secure more advantageous pricing for their pharmacy benefit. Employers’ pharmacy spending was 24% of their overall health spending in 2024, up from 21% in 2021.

Overall pharmacy costs; the affordability for patients and their benefit plans of higher-cost drugs; and the appropriate use and long-term cost implications of GLP-1s were employers’ top pharmacy concerns for 2025. Of employer respondents, 84% said they were “very concerned” about overall pharmacy costs, while 73% and 66%, respectively, said they were just as concerned about the latter two items.

GLP-1 drugs and other high-cost therapies were reported to be driving most employers’ health care costs to either a “great” or “very great” extent in 2025, the report showed. Among factors driving costs up, 72% of employers cited GLP-1s, and 61% mentioned high-cost therapies.

According to Mercer’s Survey on Health Benefits Strategies for 2026, 51% of large U.S. employers surveyed said they are likely to increase health benefit cost sharing with their employees next year, in conjunction with weight loss drug pricing surges. More than 2% of Americans were taking one of the drugs to manage weight or obesity in 2024—up nearly 600% from six years ago, according to a May report from nonprofit health data provider FAIR Health.

While nearly all employers (99%) covered GLP-1 drugs for treatment of diabetes, 73% said they would cover the condition for the treatment of obesity in 2026. In an attempt to stabilize their health care costs, employers cited utilization management techniques such as prior authorization; requiring participation in a weight-management program and meeting a particular body mass index threshold; and/or having other conditions making weight loss necessary, beyond the Food and Drug Administration’s indication.

The Business Group on Health’s survey revealed that if pressed to keep costs flat year to year, 22% of employers said they would immediately limit or reduce coverage for GLP-1s and related medications. Twenty-three percent would strongly consider doing so, indicating employers would not just target vendors when cutting costs—even if that is what comes first.

Cancer Diagnoses Escalate, Costs of Treatment Rise

While the prices of pharmacy benefits—specifically GLP-1 drugs—are clear talking points for employers, the most-reported condition driving health care costs in 2025 was cancer: 8% more employers cited it among their top three conditions than did so last year. Among respondents, 74% said they are currently seeing the impact on their expenses of a higher prevalence of cancer in the U.S. population than in previous years. An additional 17% said they anticipated seeing the impact of increased cancer diagnoses in coming years.

Meanwhile, nearly every cancer screening approach is expected to be utilized by more employers in 2026. Expanded coverage of breast cancer screening and removing age limits for preventive screenings may see the steepest growth—to 43% from 25% and to 29% from 12%, respectively.

About half of employers also said that they would cover access to a cancer center for excellence—a dedicated team or organizational structure focused on research and support of the condition—in 2026. Another 23% said they would consider doing so by 2028.

Mental Health Services Also Cost Drivers

In 2025, 73% of employers reported they were currently seeing an impact from an increase in the use of services to treat mental health and substance use disorders. Meanwhile, an increase in the prevalence of mental health conditions drove 42% of employers’ costs to a moderate extent, according to the survey. Relatedly, 34% of employers stated they will have adopted access to a center for care for acute mental health conditions by 2026.

Notably, 98% of employers stated they already had mental health support services in place in 2025. An additional 1% said they were considering adding it by 2027 or 2028.

Employers were also surveyed on how they thought the U.S. government should address various health priorities in 2025. Thirty-two percent of employers said addressing the shortage of mental and general health care professionals who are not part of employer-sponsored plan networks was a top-five priority.

Protecting the tax treatment of employer health coverage was a top-five priority for 85% of employers, and protecting and affirming Employee Retirement Income Security Act preemption of state laws came in next, at 81%.

About two-thirds of employers (66%) cited being “concerned” or “very concerned” that changes to government insurance coverage programs, such as Medicare and Medicaid, would result in cost shifting to employer-sponsored health plans. The Congressional Budget Office has estimated that reduced federal support for Medicaid and the Affordable Care Act marketplace will cause 11.8 million people to lose their health insurance coverage by 2034 as a result of health care landscape modifications under the “One Big Beautiful Budget Act,” signed by President Donald Trump on July 4.

The survey was conducted with 121 employers across various industries in June and July, representing 7.4 million Americans covered by employer health benefit plans.