Quick Takeaway
The headline is alarming:
Healthcare costs are approaching a 9% trend.
But employers should understand exactly what that number means.
Mercer’s employer survey projects the average total health-benefit cost per employee to rise 6.7% in 2026, after employers’ planned cost-management actions. Earlier projections found costs would have risen nearly 9% without employer intervention.
Meanwhile, PwC’s latest medical-cost analysis has revised its 2026 group medical cost trend to 9.0% and projects another 9% trend for 2027.
Those numbers don’t mean every company’s insurance renewal will increase exactly 9%.
Your renewal depends on factors including:
Claims experience, workforce demographics, geography, plan design, carrier pricing, pharmacy utilization and funding arrangement.
But the message is clear:
Employers can no longer rely on annual carrier negotiations alone.
Controlling costs in 2026 increasingly means changing where employees receive care, how they pay for it, how expensive claims are managed and how the plan itself is financed.
Why Group Health Insurance Is Getting More Expensive
Health-insurance costs aren’t rising because of one single problem.
Mercer points to both higher healthcare prices and greater utilization, while expensive advances in areas such as cancer treatment and weight-management drugs are adding additional pressure.
PwC highlights several additional cost drivers, including:
Hospital inflation
Provider consolidation
Pharmacy spending
Behavioral-health utilization
and:
Higher reimbursement pressures.
Employers therefore face a difficult equation:
Higher medical prices + more utilization + expensive therapies = higher claims
and ultimately:
higher employer health-plan costs.
The Old Solution: Increase the Deductible
For years, one of the easiest ways to control employer premiums was:
Raise the deductible.
For example:
Old deductible: $1,500
New deductible: $2,500
The insurer takes less first-dollar risk, potentially reducing premium pressure.
But employees take on more financial exposure.
Employers can also increase:
Copays
Coinsurance
Employee premium contributions
or:
Out-of-pocket maximums.
These tactics can reduce employer spending.
But they don’t necessarily reduce the underlying cost of healthcare.
They frequently just change:
who pays the bill.
Cost Shifting Is Returning—but It Has Limits
Mercer’s 2026 benefits-strategy research found 51% of large employers were likely or very likely to make plan-design changes that shift more costs to employees, such as higher deductibles or out-of-pocket limits.
That’s understandable during a difficult renewal.
But repeatedly increasing employee costs creates another problem:
Healthcare affordability.
Employees may delay:
Doctor visits
Prescriptions
Diagnostic testing
or:
Follow-up treatment
because they can’t comfortably afford their share.
That can create larger health and financial problems later.
A more sustainable strategy tries to reduce the price and unnecessary utilization of healthcare, rather than simply transferring costs.
Strategy #1: High-Performance Provider Networks
Not every hospital or physician delivers identical:
Quality
or:
Cost efficiency.
High-performance networks attempt to direct employees toward providers that demonstrate better combinations of:
quality + outcomes + cost.
Instead of giving every provider identical financial treatment, employers can design benefits that encourage employees to use higher-value providers.
Mercer reports that roughly a third of employers offer nontraditional medical-plan strategies, including high-performance networks, while additional employers are considering them.
This represents a fundamental change.
Old strategy:
“Use healthcare wherever you want.”
New strategy:
“We’ll make higher-value healthcare financially easier to use.”
Strategy #2: Consider a Narrow-Network Option
Broad networks sound attractive.
Employees like knowing they can access a huge number of providers.
But broad networks may include:
very expensive hospitals
and:
providers with widely varying efficiency.
A carefully constructed narrower network may negotiate better economics by concentrating utilization among selected providers.
The trade-off is:
Lower potential cost vs. reduced provider choice.
That’s why employers don’t necessarily need to replace every plan.
They might offer:
Broad-network PPO
plus:
Lower-cost narrow-network option.
Employees can then decide whether provider flexibility is worth the additional premium.
Strategy #3: Variable Copay Plans
This is one of the more interesting developments in employer health benefits.
Instead of employees facing:
Deductible + coinsurance + uncertain final costs,
a variable-copay plan can assign more predictable copays to different providers or services.
Higher-value providers may carry:
Lower copays.
Higher-cost providers may carry:
Higher copays.
Mercer specifically identifies variable-copay plans as one of the nontraditional plan approaches gaining employer interest.
This creates a direct financial incentive:
Choose better-value care → pay less.
Strategy #4: Centers of Excellence
Some medical procedures are:
Expensive
complex
and:
highly variable in quality.
Examples can include:
Joint replacement
Spine surgery
Cancer care
Cardiac procedures
and certain other specialty treatments.
A Centers of Excellence strategy directs qualifying patients toward carefully selected facilities or provider organizations.
The employer may provide incentives such as:
Reduced cost-sharing
Travel reimbursement
or:
Dedicated care coordination.
Why?
Because a successful procedure performed correctly the first time can potentially be much less expensive than:
poor outcome → complications → readmission → revision procedure.
Strategy #5: Attack High-Cost Claims Directly
One employee with a complicated medical condition can generate hundreds of thousands—or occasionally millions—of dollars in claims.
That’s why high-cost claim management deserves attention.
Mercer’s research identifies managing high-cost claims as one of employers’ top health-program priorities.
Potential strategies include:
Specialty case management
Centers of Excellence
Second-opinion programs
Care navigation
Specialty-pharmacy management
and:
Stop-loss optimization for self-funded employers.
The objective isn’t denying necessary treatment.
It’s making sure expensive treatment is:
appropriate + coordinated + delivered efficiently.
Strategy #6: Reevaluate Your Pharmacy Benefit
Prescription drugs have become one of the most important employer cost-management areas.
Mercer says prescription-drug benefit costs are rising around 9% in 2026, with expensive GLP-1 utilization among the factors contributing to pharmacy spending growth.
Employers should understand:
PBM contract terms
Rebate arrangements
Specialty-drug pricing
Formulary strategy
Prior authorization
Site-of-care rules
and:
Manufacturer assistance where legally appropriate.
Don’t treat pharmacy as a small component of the medical plan anymore.
For many employers, it’s a major cost center.
Strategy #7: Manage GLP-1 Coverage Instead of Automatically Cutting It
GLP-1 medications create a difficult benefits problem.
Completely excluding them can reduce immediate spending.
But these drugs may be clinically important for some employees and have expanding medical uses.
Unlimited access without appropriate clinical management can create substantial costs.
A middle-ground strategy might include:
Evidence-based eligibility criteria
Prior authorization
Clinical monitoring
Appropriate prescribing
and:
Ongoing evaluation of outcomes.
The objective should be:
Pay for appropriate care—not simply more care.
Strategy #8: Encourage High-Value Primary Care
Emergency rooms are expensive.
Many urgent-care encounters are also more expensive than ordinary primary care.
Meanwhile, employees who lack convenient access to primary care may delay treatment until a problem becomes worse.
Employers can investigate:
Virtual primary care
Advanced primary-care models
On-site/near-site clinics
Direct primary care
or:
Enhanced telehealth access.
The economic theory is straightforward:
Better early intervention may prevent some expensive downstream care.
But employers should evaluate actual utilization and outcomes rather than assuming every wellness or primary-care vendor automatically saves money.
Strategy #9: Virtual Care—But Don’t Buy Five Overlapping Apps
Employers have accumulated digital health vendors rapidly.
You may already provide:
Telemedicine
Mental-health app
Musculoskeletal program
Diabetes program
Weight-management program
Sleep program
and:
Care-navigation platform.
Individually, each may sound valuable.
Collectively, you might be paying multiple vendors to reach the same employees.
Conduct a:
Vendor-overlap audit.
Ask:
How many employees actually use this program?
What does it cost per engaged member?
Does another vendor already provide the same function?
Is there measurable healthcare-cost impact?
A benefit doesn’t create value simply because it’s available.
Strategy #10: Invest in Behavioral Health Strategically
Cutting mental-health coverage to reduce premiums can be shortsighted.
Mercer reports that improving access to behavioral healthcare remains a major employer priority even amid rising healthcare costs.
Employers can evaluate:
Virtual behavioral health
Employee Assistance Programs
Therapy networks
Psychiatric access
and:
Substance-use support.
But again:
Measure results.
Look at:
Utilization
access times
employee satisfaction
clinical outcomes where appropriately measured
and:
total program cost.
Strategy #11: Use an HSA-Compatible Plan More Strategically
HSA-compatible health plans can reduce premium costs compared with richer traditional plans in some situations.
For 2026, the IRS HSA contribution limits are:
Self-only: $4,400
Family: $8,750.
The general 2026 HDHP minimum deductibles are:
$1,700 self-only
$3,400 family.
The applicable maximum out-of-pocket limits under the general HDHP rules are:
$8,500 self-only
$17,000 family.
But don’t simply introduce a high deductible and call it innovation.
Consider using some employer savings to fund employees’ HSAs.
Example: Premium Savings + HSA Contribution
Suppose:
Traditional PPO
Employer annual premium cost per employee:
$12,000
HSA-Compatible Option
Employer premium cost:
$10,000
Potential premium difference:
$2,000
Instead of keeping all $2,000, the employer could hypothetically contribute:
$1,000
to the employee’s HSA.
Employer still potentially saves:
$1,000
while the employee receives money to help manage the deductible.
This can produce a more balanced strategy than simply increasing employee cost exposure.
Strategy #12: Consider Self-Funding
Traditionally, many small and midsize employers purchase:
Fully insured coverage.
The employer pays a fixed premium and the insurer bears the claims risk according to the policy.
Larger employers often use:
Self-funded plans.
The employer pays claims while typically purchasing stop-loss insurance to protect against catastrophic exposure.
Potential advantages include:
Greater claims-data visibility
More plan-design control
Greater vendor flexibility
and potentially:
Reduced insurer risk/profit charges.
But self-funding introduces genuine financial risk.
It isn’t automatically cheaper.
Strategy #13: Level Funding Can Be a Middle Ground
Smaller businesses interested in self-funding may investigate:
Level-funded arrangements.
These typically combine elements such as:
Expected claims funding
Administrative fees
and:
Stop-loss protection
into relatively predictable monthly payments.
Depending on the arrangement, favorable claims experience may provide financial advantages compared with conventional fully insured coverage.
But contracts vary significantly.
Employers need to understand:
Maximum liability
Stop-loss attachment points
Run-out claims
renewal methodology
and:
surplus/refund provisions.
Never buy level funding based solely on a low first-year quote.
Strategy #14: Review Stop-Loss Insurance Carefully
For self-funded employers, stop-loss insurance can protect against catastrophic claims.
But the cheapest stop-loss premium isn’t automatically the best deal.
Review:
Specific deductible
Aggregate protection
Contract basis
Lasers
Exclusions
Renewal terms
and:
Claims reimbursement procedures.
A badly structured stop-loss contract can create significant financial exposure.
Strategy #15: Consider ICHRA for the Right Workforce
Some employers—particularly smaller or geographically distributed companies—may consider moving away from traditional group coverage toward an:
Individual Coverage Health Reimbursement Arrangement (ICHRA).
The employer establishes a reimbursement allowance while employees obtain qualifying individual health coverage.
This can provide:
More predictable employer contributions
and:
Greater employee plan choice.
But it isn’t automatically cheaper.
Employers need to model:
Individual-market premiums
employee locations
ACA affordability
employee demographics
and:
administrative requirements.
ICHRA should be evaluated as an alternative benefits structure—not a guaranteed savings hack.
Strategy #16: Audit Spousal Coverage
Some employers subsidize family coverage heavily even when an employee’s spouse has access to employer-sponsored insurance elsewhere.
Businesses sometimes use:
Spousal surcharges
or:
Spousal carve-outs
when alternative employer coverage is available.
But these policies can create employee-relations and compliance considerations.
Analyze:
actual savings
versus:
workforce impact
before implementing them.
Strategy #17: Dependent Eligibility Audits
Employers occasionally continue paying for people who no longer meet their plan’s dependent-eligibility requirements.
Periodic eligibility verification can identify situations such as:
Ineligible former spouses
or:
Dependents who no longer satisfy applicable plan rules.
This should be handled carefully and consistently.
The objective isn’t aggressive claim denial.
It’s ensuring the employer pays only for people legitimately enrolled under the plan’s terms.
Strategy #18: Make Employees Better Healthcare Shoppers
Employees often have no idea that the same service can cost dramatically different amounts depending on:
Hospital
Imaging center
Laboratory
or:
Site of care.
Benefits navigation tools can help employees compare:
Cost
Quality
Network status
and:
Provider options.
But information alone isn’t enough.
Employees need an incentive to use it.
For example:
Lower employee cost-sharing for higher-value providers.
That’s where transparency can begin affecting behavior.
Strategy #19: Move Care to the Right Site
Some healthcare services can be provided in different settings.
Depending on clinical appropriateness, an employer’s plan may pay very different prices for care delivered through:
Hospital outpatient departments
versus:
Independent facilities
or other settings.
This can apply to services such as:
Imaging
Infusions
Lab work
and certain:
Outpatient procedures.
Site-of-care management can therefore be a meaningful cost strategy.
Clinical appropriateness must remain central.
Strategy #20: Stop Paying for Benefits Employees Don’t Value
Benefits packages grow over time.
Companies add:
Apps
Programs
discount platforms
wellness tools
and:
voluntary benefits.
Few benefits ever disappear.
Eventually the employer may have:
25 programs employees barely understand.
Conduct a benefits inventory.
For every program ask:
What does it cost?
How many employees use it?
Does it duplicate another benefit?
What outcome does it produce?
Mercer notes that voluntary benefits can be useful when aligned to employees’ actual life-stage needs rather than broad demographic assumptions.
Redirecting low-value spending toward:
medical premiums
HSA contributions
or:
high-value healthcare programs
may produce more employee value.
Don’t Automatically Cut Benefits
Suppose your renewal comes back:
+9%.
The instinctive response may be:
Raise deductible.
Increase employee contributions.
Cut benefits.
But first ask:
Where is the increase actually coming from?
Is it:
Pharmacy?
Hospital claims?
A few catastrophic cases?
Specialty medications?
Emergency-room utilization?
Out-of-network care?
Behavioral health?
Cancer treatment?
Without that information, you’re solving:
“healthcare costs are high”
instead of solving:
the specific reason your healthcare costs are high.
A Better 2026 Cost-Management Framework
Consider dividing spending into four categories.
1. Unit Price
What are you paying for healthcare services?
Possible tools:
Network negotiation + high-performance networks + Centers of Excellence.
2. Utilization
How much healthcare is being consumed?
Possible tools:
Primary care + navigation + clinical management.
3. High-Cost Claims
Where are catastrophic expenses coming from?
Possible tools:
Case management + specialty care + stop-loss.
4. Pharmacy
What’s driving prescription spending?
Possible tools:
PBM review + formulary management + specialty-pharmacy strategy + GLP-1 management.
Now your cost strategy becomes much more targeted.
Example: A 100-Employee Company
Suppose the company’s current annual healthcare spending is:
$1,500,000
A hypothetical 9% increase would add:
$135,000
bringing projected cost to:
$1,635,000.
Management could simply pass a large portion to employees.
But instead, imagine the company identifies potential savings through:
Network strategy: $35,000
Pharmacy management: $30,000
Vendor consolidation: $15,000
Site-of-care management: $20,000
Plan-design changes: $20,000
Hypothetical total:
$120,000
That would offset most of the projected increase.
These numbers are purely illustrative—not guaranteed savings.
The point is that:
Multiple smaller strategies can sometimes be more sustainable than one giant deductible increase.
Measure Cost Per Employee, Not Just Premium
Employers should track:
Total health-benefit cost per employee.
That includes more than the insurance premium.
Consider:
Employer premiums
Employer HSA funding
Vendor fees
Claims
Pharmacy spending
Administrative costs
and:
Stop-loss premiums.
A program that increases one budget line might still lower overall healthcare spending.
The Employee Affordability Test Still Matters
Cost management doesn’t exist in isolation from ACA requirements.
For 2026, the ACA employer-sponsored coverage affordability percentage is 9.96%, up from 9.02% in 2025.
Applicable employers need to consider ACA employer shared-responsibility rules when determining employee contributions.
Simply transferring large premium increases to employees can create:
affordability
as well as:
retention
problems.
What Small Businesses Should Do Before Renewal
Start earlier than you think.
Ideally, don’t wait until:
30 days before renewal.
Give yourself time to evaluate:
Claims
Pharmacy
Alternative carriers
Network options
Funding arrangements
ICHRA
HSA strategies
and:
Plan-design alternatives.
Once renewal deadlines are close, your negotiating options shrink dramatically.
Questions to Ask Your Broker or Benefits Consultant
Ask:
What’s driving our increase?
How much is medical versus pharmacy?
What are our largest claim categories?
Are expensive hospitals driving our claims?
What network alternatives exist?
Can we evaluate high-performance networks?
What would self-funding or level funding look like?
How would stop-loss work?
Should we consider an ICHRA?
What is our PBM actually earning?
Which vendors have measurable ROI?
What happens if we make no changes?
That final question is particularly important.
You want to know the:
unmanaged trend.
2026 Group Health Cost Checklist
Before accepting your renewal:
- Obtain the renewal increase.
- Ask for the underlying cost drivers.
- Separate medical from pharmacy spending.
- Analyze high-cost claims.
- Review hospital utilization.
- Review specialty-drug spending.
- Examine GLP-1 utilization.
- Compare network alternatives.
- Consider high-performance networks.
- Evaluate Centers of Excellence.
- Investigate variable-copay options.
- Review telehealth utilization.
- Audit overlapping digital-health vendors.
- Review PBM terms.
- Evaluate HSA-compatible options.
- Consider employer HSA contributions.
- Model fully insured vs. level funded.
- Consider self-funding where appropriate.
- Review stop-loss protection.
- Model ICHRA if appropriate.
- Audit dependent eligibility.
- Review employee affordability.
- Measure total cost per employee.
- Model employee impact before increasing cost-sharing.
- Get competitive proposals.
- Start renewal planning early.
Frequently Asked Questions
Are group health-insurance costs really increasing 9% in 2026?
The exact number depends on the measurement. Mercer projects average employer health-benefit cost growth of 6.7% in 2026 after planned cost-reduction measures, while its earlier analysis estimated costs would rise nearly 9% if employers made no changes. PwC’s latest analysis has revised the 2026 group medical cost trend to 9.0%.
Does a 9% medical trend mean my premium will rise 9%?
No. Medical-cost trend isn’t the same as an individual employer’s renewal increase. Your result depends on claims, carrier, geography, workforce, plan design and other factors.
What’s the easiest way to reduce premiums?
Increasing employee cost-sharing can sometimes reduce employer premiums, but it mainly transfers financial exposure. Longer-term strategies focus more on provider prices, networks, pharmacy spending, utilization and high-cost claims.
Are narrow networks worth considering?
Potentially. A well-designed network may steer members toward higher-value providers in exchange for reduced provider choice. Employers should evaluate both savings and employee access.
Can an HSA plan reduce employer costs?
Potentially. HSA-compatible plans can have lower premiums than richer plans in some situations. Employers may also contribute part of the savings to employee HSAs.
What are the 2026 HSA contribution limits?
The IRS limits are $4,400 for self-only coverage and $8,750 for family coverage.
Should a small business consider an ICHRA?
Potentially, particularly when employees are geographically distributed or individual-market options are competitive. But ICHRA isn’t automatically cheaper than group insurance and should be modeled carefully.
Is self-funded health insurance cheaper?
It can be, but it isn’t guaranteed. Self-funding gives employers greater control and access to claims information while exposing them to claims risk. Stop-loss protection is therefore an important consideration.
Final Thoughts
The 9% trend isn’t a 9% destiny.
Healthcare inflation is real, and employers face one of the toughest benefits environments in years. Mercer reports that 2026 employer health-benefit cost growth is running at a 15-year high even after planned cost-management actions.
But simply responding with:
higher deductible + higher employee contribution
isn’t the only option.
The strongest 2026 strategies increasingly combine:
Better networks
Smarter pharmacy management
High-cost claim intervention
HSA strategies
Alternative plan designs
Funding-model analysis
Care navigation
and:
Benefits measurement.
The objective shouldn’t merely be:
“How do we make employees pay more?”
It should be:
“How do we purchase healthcare more intelligently?”
Employers that answer that question have a much better chance of bending the cost curve while maintaining benefits employees actually value.