Employers Eye Disruptive Changes to Rein in Health Costs

With employers bracing for another steep rise in health care expenses, many are preparing “disruptive” changes, according to a new report.

Employers surveyed for the “WTW 2025 Best Practices in Healthcare Survey” said they anticipate their health care costs will increase by 9% in 2026. They told researchers they can’t absorb the increases or pass them on in full to employees, and instead hope to chip away at costs through a multi-pronged approach.

Since your are likely experiencing cost pressures as well, here’s a look at what your peers are experiencing and doing about it.

Where employers will focus

Managing vendor contracts — Survey results show 46% of employers are actively evaluating vendor performance.

Pharmacy benefit managers are under particular scrutiny, with three-quarters of employers either bidding out or planning to rebid their PBM. Many are also exploring more transparent, pass-through contract models.

Conducting audits — One-third of employers already conduct medical claims audits, and nearly half plan to add them. Another 22% have reviewed prior authorization or out-of-network payments, with 34% planning to.

These audits help uncover overpayments, billing errors or inappropriate authorizations. By increasing oversight, employers can identify waste, enforce contract terms and make sure vendor processes align with plan rules.

Preventing overutilization and abuse — Unchecked use of services remains a top cost driver, especially for specialty drugs, imaging and inpatient procedures.

Employers are taking a closer look at utilization controls, including stricter prior authorization, step therapy for high-cost drugs and site-of-care management to steer members toward lower-cost outpatient settings.

Note: Step therapy involves trying other lower-cost methods first, such as other proven medicines that aren’t as costly as new medications.

Alternative plan designs — Currently used by 41% of companies, alternative plan designs are expected to grow rapidly, with adoption potentially reaching 87% within two years.

These designs may include:

• Tiered or narrow networks,
• Transparent cost tools, and
• High-performance primary care models.

Employers are also using technology and enhanced navigation to guide employees when choosing providers. By structuring benefits to reward use of cost-effective, high-quality providers, employers told WTW they hope to chip away at growing costs while improving the employee experience.

The takeaway

If you are are concerned about rate hikes, talk to us about steps you can take to get a better handle on your health plan by incorporating some of the steps listed above.