Several factors will cause a 9% increase in healthcare costs, according to the Business Group on Health’s 2026 Employer Healthcare Strategy Survey, released on August 19. The increased use of GLP-1 medications for obesity, as well as increased services used for cancer and mental health, are the leading causes for the increase.
Employer Actions to Manage Increase
“In this challenging environment, employers remain firmly committed to an ongoing investment in employee health and well-being,” said Ellen Kelsay, president and CEO of Business Group on Health, in a statement. “Yet they will need to make bold and strategic moves to contain costs, sometimes disrupting health care models along the way.”
Kelsay added, “For instance, we will see them rigorously evaluating benefit offerings, vendor performance and patient outcomes. We will also see more employers exploring non-traditional health plan and pharmacy benefit manager (PBM) models. And as employers urge workforces to use health plan resources and navigation tools to find high-value care, we’ll see more people using primary care and getting recommended screenings and immunizations.”
The survey found that employers noted other interrelated priorities for the coming year were affordability for both their businesses and workforces; a greater reliance on utilization management and weight management programs in concert with GLP-1s to ensure optimal outcomes in obesity treatment; and assessment of mental health access and appropriateness of care.
Top Areas of Concern
Additional details on employers’ top areas of concern, according to the survey:
Employers now face steeper healthcare cost increases, exacerbated by actual healthcare costs greatly exceeding employer forecasts for the second year in a row.
In 2023 and 2024, employers experienced the highest back-to-back increases in a decade, beyond forecasted levels. As a result, employers started 2025 at a major cost disadvantage; further, employers predicted that healthcare cost increases for 2026 will come in at a median of 9%, which employers will manage down to 7.6% with plan design changes.
Both the unit cost and utilization of health care services have surged, and employers and employees must together address affordability.
Employers must take a hard look at benefit offerings and eliminate those that do not deliver value. In response to these cost concerns, more than four out of 10 employers (41%) are either changing PBMs or conducting a request for proposal (RFP), while 51% are either changing or conducting an RFP for other health and well-being vendor relationships.
Expensive obesity medications play a significant role in overall healthcare cost increases, and they will continue to be a challenge.
Fully 79% of employers have seen an uptick in the use of GLP-1s, while an additional 15% anticipate seeing such an increase in the future.
In addition, the percent of employers covering GLP-1s for conditions other than diabetes will stagnate as employers try to stabilize their healthcare costs, while more of those that cover these medications for weight loss will require utilization management, prescriptions from specific providers, participation in a weight management program and higher expectations from vendor partners to deliver sustainable, cost-effective financial models for this class of medications.
A systemic overhaul of the pharmacy supply chain is essential to address pharmaceutical costs for both employers and employees.
While most employers use plan design approaches and other strategies offered by their PBMs, pharmacy cost pressures also have resulted from rising prices, a robust pipeline of expensive therapies and cost-shifting from proposed changes to Medicare and Medicaid. In 2024, nearly a quarter of all employer healthcare spend (24%) went to pharmacy expenses.
Further, employers see no relief on the horizon, with a forecast of an 11% to 12% increase in pharmacy costs heading into 2026. This cannot be remedied by plan design changes, and employers need to explore PBM models that champion transparency and rely less on rebates.
American healthcare costs have hampered multinational employers’ ability to execute their health benefits strategy outside the United States, making global healthcare costs a growing concern.
When asked about the impact of U.S. healthcare costs on global benefits, 67% of multinational employers said it affected worldwide offerings.
Moreover, when asked about controlling healthcare costs outside the United States, three-quarters of multinational employers indicated some level of concern, with 34% expressing the strongest levels of concern.
Cancer, musculoskeletal conditions, cardiovascular issues and diabetes were again identified as the top cost drivers of concern worldwide.
Employers need to continue to innovate and drive change to optimize the care that their employees receive.
Crucial to this effort is employers holding vendors more accountable for value and challenging them to present bold ideas to improve care and the employee healthcare experience.
Against this backdrop of rising costs and the need for increased value, employers see several approaches as having promise to improve quality of care: navigation to higher-quality providers (selected by 82% of employers), greater transparency of quality data (82%) and coordination of integrated care teams (79%). However, these actions are dependent on partners’ ability to bring forward bold ways to promote, enable and demonstrate quality.
Appropriate site-of-care selection can link quality to lowered cost. Employer strategies also include creative methods of deploying center of excellence (COE) programs and expanding the use of COEs to cover conditions that are highly prevalent across a broader segment of the population.
Cancer is the top condition driving employer healthcare costs for the fourth year in a row, made worse by a growing prevalence of cancer diagnoses and the escalating costs of treatment.
Accordingly, employers will have a greater focus on cancer prevention and screening coverage, including alternatives to colonoscopies, expanding coverage of breast cancer screenings and removing age restrictions on preventive care coverage. Employers also recognize that access to high-value treatments is essential, with about half offering a cancer COE in 2026, and another 23% considering doing so by 2028.
Most employers have seen an increase in the use of mental health services, making it an emerging cost driver.
As employers continue to seek ways to expand access to mental health services, they want to ensure that offerings are high-quality and appropriate. Fully 73% of employers reported an increase in mental health and substance use disorder services, while another 17% anticipate a future increase.
Women’s preventive care, menopause and enhanced maternity support will continue to expand as employers boost their recognition of women’s unique health needs.
In 2026, 58% of employers will expand preventive care for women, an increase of 22 percentage points in just two years. While 58% of employers will provide menopause support programs, an additional 25% of employers said they planned to expand programs for menopause by 2028.
This is a noteworthy change from 2024, when only 28% of employers had programs in place to support employees going through menopause. In addition, enhancements on the rise include employer coverage of doula services (36%), services to treat postpartum depression (55%), initiatives to support high-risk pregnancies in under-resourced populations (43%) and group-based prenatal care (30%).
ERISA and the favorable tax treatment of benefit plans remain central to employers’ ability to offer comprehensive, high-quality and affordable coverage.
Almost all employers – 99% – said protecting and affirming ERISA was a key policy imperative. When employers were asked to rank their top priorities for the U.S. government, 85% responded with protection of tax-free status as one of their top five, followed closely by protection of ERISA preemption (81%). In addition, more than six in 10 employers (62%) said they would also prioritize pharmacy supply chain reform.