If your health insurance premiums feel like they're climbing faster than ever, you're not imagining things. New research from Mercer and the Business Group on Health confirms what many workers have suspected: 2026 is shaping up to be the most expensive year for employer health benefits in a decade and a half.

According to Mercer's analysis of more than 1,700 U.S. employers, total health benefit costs per employee are expected to rise 6.5% in 2026—the largest single-year increase since 2010. Without cost-cutting measures, the underlying trend would have pushed increases to nearly 9%.

For the typical worker, this translates to higher paycheck deductions, bigger deductibles, and more expensive trips to the doctor. Here's what's driving the surge and what you can do about it.

The Numbers Behind the Crisis

The 6.5% projected increase marks the fourth consecutive year of elevated health benefit cost growth, following a decade of moderate annual increases that averaged just 3%. On a compounded basis, health costs in 2026 are likely to be 62% higher than 2017 levels.

The Business Group on Health's survey found that employers project even steeper increases for 2027, with some forecasting double-digit growth in certain cost categories.

"We are in a fundamentally different health cost environment than we were five years ago. The factors driving these increases—expensive specialty drugs, rising chronic disease prevalence, and healthcare workforce shortages—aren't going away anytime soon."

— Mercer health benefits consultant

What's Driving the Surge

The GLP-1 Drug Explosion

Perhaps the single biggest factor in rising costs is the widespread adoption of GLP-1 drugs for obesity—medications like Ozempic, Wegovy, and Zepbound. These drugs are transformatively effective for weight loss, but they're also extraordinarily expensive, often costing $1,000 or more per month per patient.

Employers are caught in a difficult position. Employees desperately want access to these medications, and there's compelling evidence they reduce long-term health costs by preventing diabetes, heart disease, and other obesity-related conditions. But the immediate price tag is staggering.

The Business Group on Health reports that employer spending on GLP-1s has more than tripled in the past two years, with no plateau in sight as demand continues to surge.

Rising Cancer Diagnoses

Cancer remains the top condition driving employer health costs for the fourth consecutive year, exacerbated by both rising diagnoses and escalating treatment costs. Breakthroughs in cancer therapy—including immunotherapies and targeted treatments—have improved outcomes but come with price tags that can exceed $100,000 per year per patient.

Troublingly, cancer diagnoses are increasing among younger workers, expanding the population requiring expensive treatment. Some employers report that a single employee's cancer diagnosis can meaningfully impact their overall benefits costs.

Pharmacy Cost Spiral

In 2024, nearly a quarter of all employer health care spending—24%—went to pharmacy expenses. Employers see no relief on the horizon, forecasting 11% to 12% pharmacy cost increases heading into 2026.

The culprits extend beyond GLP-1 drugs to include specialty medications for rare diseases, gene therapies, and cell-based treatments. These breakthrough drugs offer hope to patients with previously untreatable conditions, but their prices reflect monopoly power rather than manufacturing costs.

Mental Health Utilization

The pandemic's long tail continues to affect mental health utilization. Employees are using mental health services at record rates, and the shortage of psychiatrists and therapists has pushed prices higher. Teletherapy has improved access but hasn't meaningfully reduced costs.

What Employers Are Doing

Faced with unsustainable cost increases, employers are responding with a combination of strategies—some helpful to workers, others less so.

Higher Cost-Sharing

The most common response is shifting more costs to employees. The Mercer survey found that 59% of employers will make cost-cutting changes to their plans in 2026, up from 48% in 2025 and 44% in 2024.

These changes typically include:

  • Higher deductibles before insurance kicks in
  • Increased copays for doctor visits and prescriptions
  • Larger employee contributions to premiums
  • Narrower provider networks that limit choice

Workers can expect paycheck deductions for health coverage to rise 6% to 7% on average in 2026, as their share of premiums typically increases proportionally with overall costs.

GLP-1 Management Programs

Rather than excluding GLP-1 drugs entirely—which would be deeply unpopular with employees—many employers are implementing management programs that require patients to meet certain criteria before getting coverage. These may include:

  • Minimum BMI requirements
  • Documented attempts at lifestyle modification
  • Participation in weight management counseling
  • Step therapy requiring cheaper alternatives first

Center of Excellence Programs

For expensive procedures like joint replacements and cancer treatment, some employers are steering employees toward "centers of excellence"—facilities with track records of better outcomes and lower costs. Employees who use these facilities may face lower cost-sharing as an incentive.

What This Means for Your Money

For workers, rising health costs represent a hidden pay cut. Every dollar your employer spends on health insurance is a dollar that isn't going into your wages. Economists estimate that the rapid rise in health care costs has suppressed wage growth by 1% to 2% annually over the past decade.

The Paycheck Impact

A typical worker enrolled in family health coverage might see their premium contributions rise from $6,000 to $6,400 per year—$400 that comes directly out of take-home pay. Add higher deductibles and copays, and the total impact could approach $1,000 or more for a family with significant health care needs.

The Coverage Trade-off

Some workers may be tempted to switch to high-deductible health plans (HDHPs) with lower premiums to reduce paycheck deductions. While this can save money for healthy individuals, it exposes workers to significant financial risk if they face unexpected medical needs.

Before switching to a high-deductible plan, consider:

  • Can you afford the deductible (often $3,000+ for families) if someone gets sick?
  • Does your employer contribute to a Health Savings Account (HSA) that helps offset the deductible?
  • Do you have chronic conditions that would quickly exhaust your out-of-pocket maximum?

Strategies to Protect Yourself

Maximize HSA Contributions

If you're enrolled in a high-deductible plan, contributing to a Health Savings Account is one of the best financial moves available. HSA contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses aren't taxed. The 2026 contribution limits are $4,300 for individuals and $8,550 for families.

Shop Your Options During Open Enrollment

Don't automatically re-enroll in the same plan each year. Compare options carefully—the cheapest premium isn't always the best value when you factor in deductibles, copays, and provider networks.

Use Preventive Care

Most employer plans cover preventive services—annual physicals, screenings, immunizations—at 100% with no cost-sharing. Using these services can catch problems early before they become expensive to treat.

Question High-Cost Care

Before accepting expensive treatments or procedures, ask about alternatives and costs. The same procedure can vary by thousands of dollars depending on where it's performed. Price transparency tools, now required by federal law, can help you compare costs across providers.

The Bottom Line

Rising health care costs are an uncomfortable reality that won't resolve itself anytime soon. The combination of breakthrough but expensive drugs, rising chronic disease prevalence, and health care workforce shortages creates a perfect storm for continued cost increases.

For workers, the best defense is awareness and preparation. Understand your plan options, maximize tax-advantaged savings vehicles, and advocate for yourself when navigating the health care system.

The era of moderate health cost increases is over. The 6.5% increase in 2026 may be just the beginning of a new, more expensive normal for American workers and their families.