Rising Health Insurance Costs: What to Expect in 2026

Workers in the United States can anticipate significant increases in their health insurance costs in 2026, with average premiums expected to rise by 6% to 7%. This forecast, based on Mercer’s National Survey of Employer-Sponsored Health Plans, indicates that employers are facing the steepest increase in health benefit costs in 15 years, with an overall projected rise of 6.5% in health plan costs. If employers do not implement any changes to their plans, costs could soar by nearly 9% on average.

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Several factors contribute to these rising costs. The increasing prices of specialty drugs, particularly GLP-1 medications for diabetes and weight management, are significant contributors. Additionally, the growing demand for medical services, including mental health care, has led to higher utilization rates. The Business Group on Health has identified cancer care as a primary driver of employer cost increases, with a notable rise in both diagnoses and treatment expenses.

Employers prepare for the highest health benefit cost increase in 15 years

Economic inflation and higher wages in the healthcare sector further exacerbate these trends. Employers are responding to these pressures by adjusting their health plans, often shifting more costs onto employees through higher deductibles and out-of-pocket expenses. A survey revealed that 59% of employers plan to implement cost-cutting measures, up from 44% in 2024.

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The impact of rising healthcare costs varies by region. For instance, in New Jersey, public workers are facing premium hikes of nearly 20% for state employees and as high as 36.9% for local government workers. In Alabama, the Public Education Employees’ Health Insurance Plan is projected to need an additional $380 million by 2027 to cover rising costs, with hospital care being a major driver.

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Critics argue that these rising costs place an undue burden on employees, effectively reducing their take-home pay and potentially leading to decreased job satisfaction and productivity. Ellen Kelsay, CEO of the Business Group on Health, emphasized that affordability is becoming a significant issue for the workforce. Furthermore, concerns have been raised regarding the long-term sustainability of health insurance plans if costs continue to escalate without adequate adjustments in funding or benefits.

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Sunit Patel, Mercer’s US chief actuary for health and benefits, noted that employers are increasingly focused on managing higher-cost claims and assessing the value of healthcare programs. He stated, “The rise of virtual healthcare... is also affecting utilization patterns because it removes geographic barriers to care.” Meanwhile, Diane Scott, CFO of the Retirement Systems of Alabama, highlighted the challenges posed by rising costs, stating, “We are in charge of an insurance program, yet we are in control of nothing.”

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As open enrollment approaches, employees will receive more information about their 2026 health care coverage options. Employers are expected to offer a variety of plans, some with lower costs, but these may come with higher deductibles and copays. The ongoing economic climate and potential policy changes, including tariffs on imported medications proposed by President Donald Trump, could further influence healthcare costs in the coming years.

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In summary, the landscape of employer-sponsored health insurance is set for significant changes in 2026, with rising costs affecting both employers and employees alike.

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