Various data was already pointing to a large hike in health care costs next year. Now, another survey has now brought a new warning for organizations: The increase in health benefits costs for 2026 may be the biggest in 15 years.
That's the takeaway from a new survey of some 1,700 companies by benefits consultant firm Mercer. The survey found that the total health benefit cost per employee is expected to rise 6.5% on average in 2026 — the highest increase since 2010 — even after accounting for planned cost-reduction measures. If employers do not make any changes to their current plans, the overall average increase would reach nearly 9% on average.
That's a similar finding to other recent data from the International Foundation of Employee Benefit Plans (IFEBP), a nonprofit organization based in Brookfield, Wis., with 31,000 employer members. IFEBP found that organizations are projecting a 10% hike in health care costs in 2026 — a rise fueled by catastrophic claims and costly specialty and prescription drugs including popular GLP-1 injectable medications.
"It's definitely a concern," Kimberly Landry, associate research director at LIMRA, an insurance industry trade association based in Windsor, Conn., said of the new health care cost estimates for next year. "We had a couple years where the health care cost trend wasn't as high, and now it's shooting up again. It's clearly a huge challenge for employers and employees."
Indeed, 2026 will mark the fourth consecutive year of higher health benefit cost growth following a decade of moderate annual increases averaging around just 3%, Mercer said. The projection for 2026 signals mounting pressure on employers' health care budgets and will likely cause them to shift more costs to employees, among other cost-cutting strategies, experts said.
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Higher prices and utilization are both driving up health care costs, said Sunit Patel, Mercer's U.S. chief actuary for health and benefits in Montville, N.J. "Right now, both are rising," he said.
Costly but popular GLP-1 drugs and better cancer treatments are one of the main factors driving up costs. Although those treatments generally produce better outcomes, they typically cost more than the treatments they replace. The continuing consolidation of providers into fewer, larger health systems has given them greater ability to work with insurers in setting reimbursement levels, according to Mercer.
Health care utilization is also up, especially as people catch up on delayed or missed care from the pandemic and embrace virtual care, Patel said. "The rise of virtual health care — and growing consumer acceptance of it, particularly in behavioral health — is also affecting utilization patterns because it removes geographic barriers to care and can be a more convenient option for patients," he said.
As a result of the health care cost spike, nearly 6 in 10 employers (59%) said they will make cost-cutting changes to their plans in 2026, up from the 48% that made changes in 2025 and 44% in 2024, the Mercer survey found. A main tactic will be to shift more costs to employees by raising deductibles, copays, premiums, or out-of-pocket maximums.
That's a finding reiterated by previous data from Mercer, which recently found that roughly half of large employers (51%) — defined as organizations with 500 or more employees — said they are likely or very likely to make design changes to their benefits plans in 2026 that would shift more costs to employees, such as raising deductibles or out-of-pocket maximums. That's up from 45% who said the same about 2025 strategies.
Employees could expect paycheck deductions for health coverage to rise 6% to 7% on average in 2026, as their share of the premium typically increases proportionally with overall plan cost, Patel said.
Employers will also eye other cost-cutting measures, especially as shifting costs with employees comes with risks. The Mercer survey found that employers will put a greater focus on managing high-cost claims and measuring the performance of health programs to ensure they provide value.
"Those deductibles can't get much higher at this point. [Employees] will start to question the value of their coverage," Landry said. "Plus, wages and salaries haven't been keeping up."