Healthcare Costs Are Unsustainable. Employers Need to Think Differently

Rising healthcare costs aren’t new. But in today’s economic climate — marked by rising inflation, economic pressure and uncertainty, and high prescription drug costs — employers are facing a more urgent reckoning.  

The old playbook of shifting costs to employees is still in use — in fact, nearly half of employers say they intend to shift more costs to employees. But that’s not the only option that HR leaders can, or should, employ, said John Tournet, the U.S. CEO of Gallagher’s benefits and HR consulting division in Charlotte. 

“It’s unsustainable,” he said of rising health care costs. Just as unsustainable are the “old ways of doing things,” which includes raising both premiums and deductibles each year for employees. 

The average health benefit cost per employee is expected to top $18,500 this year, Mercer has reported, roughly a 15-year high. 

SHRM recently spoke with Tournet on what’s changing, what’s at stake, and where employers should focus now. 

SHRM: How much are economic conditions intensifying the healthcare cost problem right now? 

Tournet: Completely. Controlling healthcare costs is always a top concern for employers, typically in the top three or so, according to [Gallagher’s National Benchmark Survey]. It’s number one this year. [The number of employers citing it as their top concern] is actually up five percentage points from 2025, so HR leaders are saying, ‘This is not sustainable. We have to figure out how to control costs.’ 

Three out of four employers are saying they expect their healthcare costs to either be somewhat or significantly higher. 

SHRM: What’s driving these cost increases in the first place? 

Tournet: The advancements in pharmacy have been phenomenal, but they come at a cost. GLP-1 [medications] are one. Very expensive infusion therapy drugs are another. 

I would say that 10% of the population is driving up 80% to 90% of cost. It’s typically because of these chronic illnesses. 

SHRM: Roughly half of employers say they plan to pass along more healthcare costs to their employees this year. Why is that approach becoming less viable? 

Tournet: You have upset employees who are already dealing with extremely difficult financial times — not only what comes out of their paycheck, but at point of care, when they have to fork out this much more. 

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[Employers have] got to look at this through the lens of [employees]. They’re going, ‘Oh my god, I’m getting increases on the premiums I pay, then every time I’m going to the doctor, I’m paying more.’ 

SHRM: So what needs to change in how employers approach benefits? 

Tournet: The old ways of doing things is just not sustainable. We just keep pushing employers to look at this completely different. It really does start with data like never before. 

The two main problems with healthcare in our country is complexity and confusion. An example of complexity is, say I’m an employer with predominantly women that live in a metropolitan area, versus one with mostly male employees who live in an urban area. Those are completely different approaches to healthcare design. You have to look at how you set up your entire plan from networks to what you cover, and the same holds true with various health issues for the population. So if you have major cancers in a certain population and musculoskeletal issues based on your data, it allows you to set up a plan design that’s going to be more tailored to your population. You have to collect data in order to dig into how to set up that plan.  

Then there’s confusion. Most have experienced it themselves, or have had a family member experience it, when they get hit with a diagnosis, and [they question]: What do I do? How do I find a provider in the area? Sometimes you may go to the wrong provider. It’s an absolute mess of trying to navigate healthcare.  

SHRM: How can employers address that complexity and confusion? 

Tournet: Employers that are really moving the needle are those that are obsessed with communication and care navigation. It’s really about that peer navigation and designing a plan that really meets [employee] needs, versus just grabbing something off the shelf and saying, ‘Oh, I guess I’ll go with this plan.’ 

Point solutions can help, too. There are point solutions being developed every day. And sometimes you can partner with those different vendors and they have even better contracts than even the big insurance carriers do. Point solutions exist for almost all chronic health issues — diabetes, musculoskeletal, cancer, you name it. And employers can pick the best ones that would be appropriate for their employees. 

SHRM: For employers trying to get a handle on healthcare costs, where do you recommend they start? 

Tournet: They have got to look through it with a different lens. I would tell them to go to their consultant and tell them you need all the data that shows them the top cost drivers, and data that shows the top procedures, the top drugs, the top diseases, the programs that are being used and not being used. Then, really line that up against the art of the possible. Are you getting the biggest bang for your buck? Is there a better way to design a plan targeting your population? 

SHRM: What about speaking to employees? 

Tournet: Yes, it’s really important to talk to employees and survey them and have focus groups. Talk about benefits that they might be in need of; talk about the issues that they are having. 

SHRM: What’s at risk if employers don’t rethink their approach to health benefits? 

Tournet: Some companies could be bankrupt if they don't get [rising healthcare costs] under control. Some, especially smaller businesses, can really be looking at doing away with their healthcare plan all together. And a healthcare plan is a huge vehicle of retention. Employers might experience employee turnover, they will experience soaring financial stress from workers. People are going to look for a job elsewhere.