Employers brace for more steep health care increases in 2025, 2026

For the second consecutive year, employers found their health care costs were higher than projected, with increases in 2023 and 2024 and forecasted increase of 8% for 2025 and 9% for 2026.

Those were among the findings of the Business Group on Health’s annual survey of 121 employers. The findings were released during a recent webinar.

“Employers started 2025 at a considerable cost disadvantage, which will impact how their 2026 costs will shake out,” said Ellen Kelsay, Business Group on Health president and CEO. “This highlights the need for bold and decisive actions from employers and other industry stakeholders.”

Prescription drugs are a major driver of costs, representing 24% of employers’ total health care spending in 2024, she said. This increased from 21% in 2021.

Nearly all of employers surveyed (95%) said they were concerned about their prescription drug costs. Increased use of GLP-1 drugs, along with concerns over tariffs, were top contributors to high prescription drug costs.

Cancer was the most reported condition driving employer health care costs in 2025, followed by musculoskeletal conditions, cardiovascular conditions, diabetes and mental health. Kelsay predicted employers will double down on employee cancer screenings in the coming years as a way to diagnose the disease in its early stages and potentially save money on treatment. In addition, she said autoimmune disorders are emerging as a condition becoming more prevalent among workers and potentially will be another major driver of costs.

Costs are top priorities for employers

Employers’ top priorities for 2026 will revolve around costs. The survey showed employers are most concerned about overall costs, affordability for the organization, affordability for employees and overall pharmacy costs.

Employers also are seeing a number of trends emerge, including increased use of obesity treatments, higher occurrences of cancer and increased use of mental health services.

If pressed to keep costs flat year over year, employers would most likely target vendors first – whether by securing better pricing, eliminating programs or replacing low-performing vendors. Reducing or eliminating GLP-1 coverage and asking employees to increase their cost-sharing are two other strategies that would be in play.

Primary care strategies are growing

A majority of employers will adopt at least one advanced primary care strategy in 2026. More than 40% will use virtual primary care while 35% will provide primary care at one-site health centers. In addition, employers are adopting centers of excellence to provide specialized care at lower costs. Some conditions treated at centers of excellence include bariatric surgery, musculoskeletal disorders and fertility/family forming treatment.

The percentage of employers offering nontraditional or alternative model health plans will grow from 17% in 2025 to 24% in 2026, with another 36% considering doing so for 2027-28.

Protecting the tax treatment of employer health coverage and address prescription drug coverage through pharmacy supply chain reforms were among the top priorities that employers want the federal government to address. Supporting increased health care transparency and competitiveness, enacting uniform federal paid family and medical leave policies, and protecting access to immunizations were other government priorities favored by employers.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].