Soaring Health Costs May Be the New Norm. Employers Must Adapt

No one can argue that it’s an easy time for benefits. Healthcare costs continue to soar, with consulting firm Aon projecting that employer healthcare costs will jump 9.5% in 2027.

And those high costs may not be a one-time problem.

“Our sense is that this is the new norm,” SHRM President and CEO Johnny C. Taylor, SHRM-SCP, said Oct. 14 during a panel at the 2026 EBRI–SHRM Health Benefits Symposium. There are a few reasons for that, he said, citing an aging workforce, the increased use of mental health services, and rising pharmaceutical costs, including from GLP-1 drugs.

Those factors are leaving employers caught between keeping benefits affordable for workers, who are dealing with their own sky-high financial stress, and managing increasingly expensive coverage. Figuring out how to absorb the high healthcare cost hikes — and not simply pass off all the hikes to employees — is a “nightmare” situation for HR and benefits leaders, Taylor said.  

“How do you solve this? How do you give your employees the protection of benefits without breaking the bank for the employer? These are real issues,” he said.

Simply “spending more on benefits” is not an option, Taylor said. “It’s [about] getting more value from every dollar that we actually invest.”

Rethinking Investments

One major challenge for employers now is the pricy yet popular GLP-1 medications, notably for weight loss. A stunning number of employees are now using the drugs — KFF finds that 1 in 8 adults are currently taking a GLP-1 — and the medications have drawn considerable attention for their ability to treat obesity and potentially reduce the risk of related conditions. 

For employers, it’s a development that illustrates the challenge of balancing immediate costs with potential long-term savings. Expanding coverage can add substantial costs to employer health plans, particularly when large numbers of eligible employees seek treatment. Although scores of employers offer GLP-1 coverage for weight management, recent data has found that some employers are eliminating weight-loss GLP-1 coverage. Starbucks is one notable example.

Related Article: Growing Number of Employers Dropping GLP-1 Coverage

Panelist Kevin Hern, senior vice president of Lilly Employer at Indianapolis-based Lilly USA, argued that the financial impact depends partly on patients’ health at the start of treatment. People with more advanced obesity-related conditions may see medical costs decline relatively quickly, while healthier patients may initially generate additional costs as they seek more preventive care and routine checkups.

For employers, the timing creates a practical problem: They must pay for treatment now, while any financial return may arrive years later. Employee turnover adds another complication, as workers could leave before their employer realizes the potential savings, Taylor said. 

Hern agreed, acknowledging the challenge of financing these treatments before the benefits become clear. “The challenge is the investment up front,” he said.

Flexible benefit designs and greater transparency in drug pricing could help employers make better-informed decisions. Hern, for example, cited Lilly’s Employer Connect platform, which is designed to give employers more pricing transparency and flexibility in structuring coverage.

Honest Conversations in the Midst of Workers’ Financial Strains

While employers weigh the financial implications of new treatments, workers face a more immediate question: Can they afford the care they need? 

During the panel, moderator Rodney Bolden, head of Workplace Benefits Insights at Morgan Stanley at Work, in New York City, cited Gallagher research finding that 44% of employees expect to delay or limit healthcare in the coming year because of costs. Delaying care can have consequences for workers’ health and financial security, and potentially increase costs if conditions worsen.

Taylor said that healthcare benefits and financial well-being are increasingly intertwined. Employees choosing between plans need to understand not only their premiums but also their deductibles, prescription expenses, and potential out-of-pocket costs when they or a family member gets sick.

There need to be more conversations about the importance of getting care — but also about making other spending sacrifices, if need be.

That puts additional responsibility on HR teams to communicate benefits in ways employees can understand and use. Rather than simply presenting a menu of plans during open enrollment, employers may need to help workers evaluate how different options fit their health needs and household budgets. 

“As a part of open enrollment, we’re having real, honest, and transparent conversations with our employees about their financial decisions,” Taylor said. 

Related Article: Key to Open Enrollment Success? Incentives, Frequent Communication

As an example, Taylor said, if “someone is complaining about $7 a gallon gas, but they’re spending $6 on a Starbucks coffee regularly, they aren’t spending their money wisely. So, he said, if they have to spend more on their benefits costs, they will have to make practical changes to their spending as well.

“You’ve got to have honest conversations because I’m picking up [more costs] as an employer too,” he said. 

Now is also a good time for employers to be clear with their workforce about what they are spending on their benefits, as many employees don’t understand that employers’ benefits bills are rising too. 

Taylor said employees may not realize how much their employers contribute to their healthcare coverage or how much the total plan costs have increased. Better communication could help workers understand the full value of their benefits. 

“We’re back to the point of beginning to explain to employees the financial contributions of the employer to their health,” Taylor said.