New Study Predicts Higher Group Benefits Inflation

Employers are preparing for what could be the steepest annual increase in health care costs in more than a decade, and many are considering plan design changes, including cost-shifting, to buffer the impact, according to a new report.

The “2026 Employer Health Care Strategy Survey,” conducted by the Business Group on Health, found that business executives project a median 9% rise in costs for 2026, but expect a 7.6% increase after making plan design changes to address major cost drivers. Here are the biggest concerns and how surveyed employers plan to address them. 

1. Obesity treatments add pharmacy pressure

Pharmacy spending has grown to nearly a quarter of employer health care costs, driven largely by demand for GLP-1 drugs such as Wegovy, Mounjaro and Zepbound. Employers report that 79% have already seen increased use of these medications, and another 15% expect growth in the years ahead as the drugs gain FDA approval for additional conditions.

These treatments, effective for both diabetes and weight loss, often cost more than $1,000 per month. Employers are responding by:

• Requiring “step therapy,” which involves trying proven, less expensive methods or medications before prescribing a GLP-1,
• Limiting prescriptions to employees with diabetes and a qualifying body mass index,
• Requiring prior authorization,
• Mandating participation in weight management programs,
• Approving prescriptions only from designated providers, and
• Reducing GLP-1 coverage altogether.

2. Cancer drives long-term costs

For the fourth straight year, cancer has topped the list of conditions driving employer health care expenses. Rising diagnoses, delayed preventive care during the pandemic and an aging workforce are combining to push treatment costs higher.

In response, more employers are expanding cancer prevention and screening benefits, removing age limits for preventive screenings and covering access to cancer centers of excellence. About half of large employers expect to offer such centers by 2026, with more considering them by 2028.

3. Mental health demand continues to grow

Nearly three-quarters of employers report higher use of mental health and substance use disorder services, with another 17% expecting further increases soon.

While nearly all employers now offer mental health support, the challenge is balancing costs with access to appropriate care. Larger employers with more resources are providing access to centers dedicated to acute mental health conditions.

Cost-shifting and vendor changes

More employers are considering passing some of the health care cost burden onto employees. According to a recent Mercer survey, half of large employers said they will likely:

• Increase employee premium cost sharing,
• Raise deductibles, and/or
• Hike out-of-pocket maximums in 2026.

In the Business Group on Health study, most employers said they would at least consider shifting costs to workers if needed.

At the same time, companies are rethinking vendor relationships. Forty-one percent reported changing or reviewing pharmacy benefit managers, while others are reassessing wellness and medical benefit partners.

Transparent PBM models and alternative health plans are gaining traction as employers look for greater value and predictability.

Recommendations

The Business Group on Health report noted that employers can do more than pass along costs to workers, by:

• Assessing the effectiveness of benefit programs and vendors, and eliminating those that deliver limited value.
• Helping employees — through training and an open-door policy for questions — use plan resources and navigation tools to find providers that deliver high-value care.
• Encouraging staff to stay on top of check-ups, doctor visits, medications, screenings, tests and immunizations.
• Requiring vendor partners to adopt transparent and sustainable financial models, particularly for pharmacy benefits.