Skyrocketing employee healthcare rates ‘a new normal’

Employers are facing tough decisions about how they and their workers can afford health insurance, as the total cost of health benefits per employee is expected to rise by 8.2% on average in 2027 — the highest increase since 2003.

These spiking health insurance rates have become “a new normal,” said Johnny C. Taylor Jr., president and CEO of the Society for Human Resource Management, said. Taylor’s remarks were made during the 2026 EBRI-SHRM Health Benefits Symposium, sponsored by the Employee Benefit Research Institute and SHRM.

Taylor listed three reasons he believes employer-based health care rates will keep skyrocketing. The first reason is demographics.

“We’re becoming an older country,” he said. “The fastest-growing segment of the workforce is people age 75 and older. As you age, things start to not feel so great. The reality is that people are living longer and they are working longer. This is a significant shift in our workplace.”

Mental health is the second reason for rising rates, he said.

“We’re seeing a significant uptick in utilization of mental wellness and mental health benefits. I’m glad we’ve destigmatized mental health, but that has cost us.”

Taylor said the third reason is increased use of GLP-1 drugs and that employers are debating how much they will cover the cost of these expensive prescriptions.

'An unsustainable trend'

Rising workplace health insurance rates are “an unsustainable trend,” said Kevin Hern, senior vice president at Lilly Employer, Lilly USA.

“We need to kind of rethink healthcare,” he said.

Hern said that as Medicare and Medicaid receive less funding, “employers get stuck with a larger bill across that entire spectrum. That’s a huge crisis in general as we look into the next decade.”

As Medicare beneficiaries live longer, he said the challenge will be to make the program more sustainable for older Americans.

“When we look at someone potentially being on Medicare for 30 or even 40 years, it’s daunting,” he said.

Another challenge to the healthcare system, Hern said, is that “we have an entire system based on acute care.

“Until the last few years, there was no treatment for a chronic condition such as obesity. If you have a fixed budget and you add a big preventive treatment, it’s great, but how do you pay for it in the short term? It’s a huge challenge for employers.”

More workers are asking employers to provide holistic benefits, benefits that combine healthcare with financial well-being, Taylor said.

“Employees are telling us that financial stress is one of their top concerns,” he said. “We’ve been unwilling to have conversations with employees about their financial decisions. And we’re paying the price for that.”

The impact of GLP-1s on healthcare costs

Taylor said SHRM research found that 15% of employers cover GLP-1 drugs for weight loss only, not in conjunction with another condition such as diabetes or hypertension.

“Obesity is a disease of diseases; we’re already paying a lot for obesity and its complications,” Hern said. “The question is how do we change the way we pay for it and how do we get some offsets in medical costs.”

For GLP-1 users with one or no comorbidities, employers won’t see much of an offset in medical costs, he said. GLP-1 users who are younger and healthier and in an earlier part of their disease may spend more on healthcare as they engage more with the medical system, but they don’t get sicker. Those with two or more comorbidities usually see their healthcare costs go down after about 12 months on a GLP-1.

“This is probably our best chance at bending the curve in human health,” Hern said. “We have the ability to transform health, but it’s a challenge to find that right level of investment.”

Hern said obesity rates in the U.S. tripled over the past 50 years, but are now declining, and he credited that decline to GLP-1s.

“Figuring out how to leverage these innovative medicines and how to build that sustainable access is critical,” he said.

The “sandwich generation” has a unique set of needs that employee benefits are not addressing, Taylor said.

“It’s real and we have to sort this out,” he said. “When you think about the current employee benefit model, it’s the employee, the employee and spouse, the employee and kids, but it’s not about older parents. Because people are living longer, we have an increasing number of workers taking care of their kids and their parents. Employees are really stressed about this right now.”

Taylor called on employers to help their workforces manage the responsibility of caring for two generations.

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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 susan.rupe@innfeedback.com.