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By Jasmine Laws
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Employer health benefit plans are expected to soar in cost next year, with employees predicted to see a 6.5 percent increase in their total health benefit costs on average in 2026, a new report by the consulting firm Mercer has found.
This marks the largest hike in health benefit costs since 2010, and will be the fourth consecutive year of elevated prices.
Why It Matters
Employer health benefit costs have been ramping up in recent years. Before the larger increases over the last four years, there had been a decade of moderate annual rises averaging only about 3 percent, according to Mercer.
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The recent jump in health benefit costs is being driven by a number of factors, including the increased cost and use of health care services.
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What To Know
The data was collected via Mercer's 2025 National Survey of Employer-Sponsored Health Plans, and more than 1,700 U.S. employers responded by August 12.
The findings showed that if employers did not take any measures to lower the costs of health benefit plans, employees could see a 9 percent increase on average in the deductible taken from their paychecks for their health benefits.
However, if employers do implement strategies to reduce costs, that figure could be between 6 to 7 percent.
"For many households, it will be hard to absorb these costs without cutting back elsewhere," Christopher Whaley, a professor in the Department of Health Services, Policy and Practice at Brown University, told Newsweek.
Because of the high costs, "some may stop taking up employer coverage altogether, while others may move to less expensive plans," Jonathan Gruber, a professor of economics at Massachusetts Institute of Technology (MIT), told Newsweek.
"This is unfortunate timing since other options for coverage like Medicaid and the ACA are being cut back by the Trump Administration," he said.
Gruber added that this could result in a "rising number of uninsured, more underinsured, and growing dissatisfaction with our health care system."
The survey revealed that 59 percent of employers intend to implement cost-cutting strategies for 2026 plans, which was up from 48 percent saying they would make changes in 2025 and 44 percent in 2024.
When asked in the survey what their top priorities were for managing health programs over the next few years, employers most commonly chose: "greater focus on managing high-cost claims," followed by "measuring the performance of health programs to ensure they provide value."
Around two thirds of large employers (with 500 or more employees) said they were also planning on prioritizing "making behavioral health care more accessible."
There are many reasons why 2026 will have particularly notable increases in health benefit costs, with one being that "2025 premiums were too low relative to the underpredicted jump in demand for health care services," Daniel Polsky, a professor of health policy and economics, and director of the Hopkins Business of Health Initiative at Johns Hopkins University, told Newsweek.
"Many attribute this unexpected demand to be a result of care that was deferred during the COVID years," he said. "So 2026 is a catch up year that will hopefully be a blip, but if high demand for care continues, we may see continued jumps in premiums."
Other big drivers include GLP-1 costs, higher prices of specialty drugs and the "higher provider prices who have more market power due to consolidation, but are also demanding higher reimbursement due to jumps in labor costs from a tight labor market over the past couple years," Polsky added.
What People Are Saying
Christopher Whaley, a professor at Brown University, told Newsweek: "There are several factors, including increased provider rates following the pandemic, broader use of high-cost treatments and medications, such as GLP-1s, and rapid consolidation of the provider delivery system. In recent years, a growing number of health care providers have been acquired by health system conglomerates or private equity. These types of consolidation substantially increase costs, often with worse quality."
He added: "The factors leading to these large increases in health care costs are still continuing. Thus, these large increases in costs may be the new normal. Regulators should address the extreme levels of consolidation among U.S. health care providers. Some states, such as recent legislation in Oregon, Indiana, and Vermont, have elected to limit the rates providers can charge to patients with commercial insurance."
Daniel Polsky, a professor at the Hopkins Business of Health Initiative at Johns Hopkins University, told Newsweek: "The rising costs of health care are often hidden from the consumer which allows suppliers and providers to continue driving up costs with little accountability and few policies addressing the many underlying factors that drive up health care costs. Consumers just expect health care to be free since insurance picks up the bill. When this is - on occasion - noticed by consumers via the burden hitting their paychecks from the cost of premiums, this creates the pressure to address high health care costs. Frankly, this pressure is needed.
"Every part of the health care system should be looking to reduce health care costs, particularly the parts of health care spending that don't drive health."
Jonathan Gruber, a professor of economics at MIT, told Newsweek: "A number of significant changes since the early 2000s significantly slowed health care cost growth, in particular the growth of high deductible plans and narrow network plans. In addition, there were a number of cost saving innovations in the Affordable Care Act. These seem to be reaching a natural limit – deductibles can only go so high and networks can only get so narrow."
He added: "Ultimately the government needs to recognize that the free market cannot appropriately set health prices and more regulation is needed. Drug price regulation under the Inflation Reduction Act was a good start but the current administration is weakening that – we need to go the other direction."
What Happens Next
Mercer found in its survey that the majority of employers said they intend to make changes to reduce cost increases in 2026, and many are also hoping to implement bigger, longer-term strategies to slow cost growth.
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