Employers Are Bracing for the Highest Health Benefit Cost Increase in 15 Years, a Projected 6.5% Increase in 2026, According to Mercer
Today, Mercer, a business of Marsh McLennan (NYSE:MMC) and a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people, released preliminary results from its 2025 National Survey of Employer-Sponsored Health Plans.
According to Mercer's analysis of survey responses from over 1,700 US employers, 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 did not make any changes to their current plans, the overall average increase would have been nearly 9%.
Based on the projections, 2026 will be the fourth consecutive year of elevated health benefit cost growth following a decade of moderate annual increases averaging only about 3%, signaling mounting pressure on employers' healthcare budgets.
Mercer is an advisor to employers, helping them improve employee health and well-being and manage the overall cost of healthcare coverage through benefits strategy, consulting, analytics, management and program design.
Higher prices and higher utilization are converging to drive up cost
According to Sunit Patel, Mercer's US Chief Actuary for Health and Benefits, this period of faster cost growth stems from a convergence of factors. "Health benefit cost trend has two primary components –healthcare price and utilization. Right now, both are rising."
Some price pressures are ongoing. Advances in diagnostics and therapeutics, such as cancer treatments and weight-loss drugs, produce better outcomes. However, they typically cost more than the treatments they replace. In addition, the continuing consolidation of providers into fewer, larger health systems has given them greater ability to work with insurers in setting reimbursement levels.
More recently, inflation across the general economy, including higher wages in the healthcare sector, has contributed to price increases.
Virtual services make it easier to seek care, which may contribute to higher utilization
Utilization rates for various health services have been rising over the past two years, according to Mr. Patel. The lingering effect of delayed or missed care due to the COVID-19 pandemic is likely a factor, along with the easing of healthcare labor supply constraints. "The rise of virtual healthcare – 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," said Mr. Patel.
Employers' response to faster cost growth
The survey indicates that 59% of employers will make cost-cutting changes to their plans in 2026 – up from 48% making changes in 2025 and 44% in 2024. Generally, these involve raising deductibles and other cost-sharing provisions, which can lead to higher out-of-pocket costs for plan members when they seek care. But many will also pursue strategies to slow cost growth without shifting cost to employees.
When employers were asked to identify top priorities for managing health programs over the next few years, the two most common were cost management strategies: "Greater focus on managing high-cost claims," followed by "Measuring the performance of health programs to ensure they provide value." However, third on the list was a benefit enhancement: "Making behavioral healthcare more accessible," with about two-thirds of large employers (those with 500 or more employees) planning to prioritize this strategy.
"Employers have been unwavering in their commitment to supporting employees' mental health since the early days of the pandemic," says Ed Lehman, Mercer's US Health and Benefits Leader. "They recognize it's essential for employee well-being and overall business performance."
Considerations for employees during open enrollment this year
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, according to Mr. Patel. However, many employers will raise deductibles and copays to limit premium increases, which could mean higher out-of-pocket spending for some employees.
Since most employers offer more than one medical plan option, employees should carefully weigh premium cost and cost-sharing provisions to determine which plan best meets their needs. If available, employees may also consider a non-traditional, high-performance network plan designed to help patients access providers pre-selected on the basis of quality and cost, which may offer lower out-of-pocket costs. A recent survey revealed that over one-third of large employers will offer some type of non-traditional plan in 2026.
About Mercer's National Survey on Employer-Sponsored Health Plan
The 2025 National Survey of Employer-Sponsored Health Plans launched on June 11, 2025. These preliminary results are based on responses from over 1,700 employers through August 12. The final survey results will be released later this year.
About Mercer
Mercer, a business of Marsh McLennan (NYSE:MMC), is a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of over $24 billion and more than 90,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit mercer.com, or follow on LinkedIn and X.
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Media contact:
Ashleigh Jang
Mercer
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