US Employers Brace for Steepest Health Benefit Cost Increase Since 2010

American employers and the roughly 154 million workers who rely on employer-sponsored health coverage are confronting the sharpest run-up in health insurance costs in 15 years. According to Mercer's 2025 National Survey of Employer-Sponsored Health Plans — drawing on responses from more than 1,700 US employers — total health benefit cost per employee is projected to rise 6.5% on average in 2026, the highest increase since 2010. Without any cost-reduction measures, employers estimated the increase would have approached 9%.

The 2026 spike marks the fourth consecutive year of elevated health benefit cost growth, following a decade in which annual increases averaged only about 3%. Other industry forecasts point to even steeper trends: the Business Group on Health projects a 7.6% increase, while PwC has predicted medical cost trends surging 8.5% for a third consecutive year, and the International Foundation of Employee Benefit Plans projected as much as a 10% jump.

Several converging forces are driving the surge. Rising prices across the healthcare system — fueled by general inflation and the consolidation of providers into fewer, larger health systems with greater negotiating leverage — are a primary factor. Utilization rates have also been climbing over the past two years, partly reflecting care that was delayed during the COVID-19 pandemic, the easing of healthcare labor constraints, and the growth of virtual care, which removes geographic barriers and increases access. High-cost specialty drugs, particularly GLP-1 medications for weight loss and cardiometabolic conditions, are a significant and growing cost driver, with about 60% of employers offering GLP-1 coverage in 2025 reporting that costs exceeded expectations.

For workers, the implications are direct. Mercer found that 59% of employers will make cost-cutting changes to their plans in 2026 — up from 48% in 2025 and 44% in 2024 — generally involving higher deductibles and cost-sharing provisions that increase out-of-pocket spending. Employee paycheck deductions for health coverage are expected to rise roughly 6-7% on average, as the employee share of premiums typically increases proportionally with overall plan cost. The trend matters beyond healthcare: a growing body of economic research suggests that rising health costs continue to depress wages and contribute to inequality, since money spent on benefits is money not available for take-home pay.