A new Mercer report projects a 6.5% average increase in total health benefit costs per employee for 2026, the largest jump since 2010. Over the past decade, annual increases averaged just 3%. Without plan changes, the 2026 increase would have approached 9%.
With health care costs remaining high, 59% of employers plan to reduce health plan expenses in 2026, up from 44% in 2024. As more employers are unable to absorb rising costs, employees are expected to pay 6–7% more in premiums, with some organizations also increasing deductibles and copays.
Industry experts are sounding the alarm for 2026, with forecasts from the Business Group on Health pointing to a 7.6% jump in costs and PwC predicting medical expenses will surge 8.5% for a third year running. No matter the exact percentage, both employers and employees should prepare for another significant climb in health care costs next year.
Why Are Costs Rising?
Rising utilization is only part of the story, employers cite several additional factors driving the 2026 increase:
- Rising cancer rates and escalating treatment costs
- Higher pharmacy costs, especially increased use of expensive GLP-1 drugs for weight loss
- Increasing cases of chronic and complex conditions
- Greater use of mental health services as employers improve access and reduce stigma
What It Means
Mercer anticipates more employers will offer a wider range of health plan options, including tiered networks with varied out-of-pocket costs. Employers should closely track cost trends as open enrollment approaches. Download the bulletin for more details.
