Rising Healthcare Benefit Costs: Impact on Employers and Employees

Healthcare benefit expenses in the U.S. are projected to continue their upward trend, imposing financial challenges on both employers and employees, according to a recent report by Mercer. The analysis projects health benefit costs per employee to rise by 6.7% in 2026, surpassing $18,500. This marks the highest annual increase in the past 15 years.

Health insurers are expected to implement price increases on employer group plans exceeding 6% for the fourth consecutive year. Nearly half of large U.S. employers are gearing up to increase deductibles, copays, or other out-of-pocket expenses in 2027, impacting the overall cost structure for employees.

The Kobeissi Letter highlighted that about 66% of major companies in the U.S. might raise monthly premium contributions for employees next year. Those frequently accessing medical services or prescriptions could see an 8% year-over-year increase in healthcare costs. "U.S. healthcare costs have never been higher," noted The Kobeissi Letter.

Responding to Rising Costs

In response to escalating costs, employers are redesigning health plans to better manage expenditures. Approximately 31% of large employers are considering or planning to adopt non-traditional plans by 2027. These include high-performance networks or variable copay models, which incentivize employees to use approved providers, potentially reducing costs.

High-priced prescription drugs like specialty medications and gene therapies are primary cost drivers. Prescription drug benefits costs are projected to climb by approximately 9% in 2026. Notably, 6% of large employers have ceased coverage for weight-loss GLP-1 drugs, while 27% have tightened control due to financial pressures.

Simon Camaj, U.S. Health Leader at Mercer, noted that employers are using a mix of traditional cost-sharing and innovative care strategies to address rising health benefit costs, aiming to limit the financial burden on employees. Policy discussions focus on prescription drug cost inflation, with government estimates predicting savings of $529 billion from recent drug-pricing agreements.

Insurance coverage continues to face challenges beyond the employer market. Data from the CDC shows the U.S. uninsured rate remained steady at 8.3% in 2025, with about 28 million Americans without health coverage. Furthermore, many insured individuals remain underinsured, prompting broader calls for healthcare reform.