Employers are preparing for what could be the steepest annual increase in health care costs in more than a decade, and many are considering plan design changes, including cost-shifting, to buffer the impact, according to a new report.
The “2026 Employer Health Care Strategy Survey,” conducted by the Business Group on Health, found that business executives project a median 9% rise in costs for 2026, but expect a 7.6% increase after making plan design changes to address major cost drivers. Here are the biggest concerns and how surveyed employers plan to address them.
1. Obesity treatments add pharmacy pressure
Pharmacy spending has grown to nearly a quarter of employer health care costs, driven largely by demand for GLP-1 drugs such as Wegovy, Mounjaro and Zepbound. Employers report that 79% have already seen increased use of these medications, and another 15% expect growth in the years ahead as the drugs gain FDA approval for additional conditions.
These treatments, effective for both diabetes and weight loss, often cost more than $1,000 per month. Employers are responding by:
Requiring “step therapy,” which involves trying proven, less expensive methods or medications before prescribing a GLP-1,
Limiting prescriptions to employees with diabetes and a qualifying body mass index,
Requiring prior authorization,
Mandating participation in weight management programs,
Approving prescriptions only from designated providers, and
Reducing GLP-1 coverage altogether.
2. Cancer drives long-term costs
For the fourth straight year, cancer has topped the list of conditions driving employer health care expenses. Rising diagnoses, delayed preventive care during the pandemic and an aging workforce are combining to push treatment costs higher.
In response, more employers are expanding cancer prevention and screening benefits, removing age limits for preventive screenings and covering access to cancer centers of excellence. About half of large employers expect to offer such centers by 2026, with more considering them by 2028.
3. Mental health demand continues to grow
Nearly three-quarters of employers report higher use of mental health and substance use disorder services, with another 17% expecting further increases soon.
While nearly all employers now offer mental health support, the challenge is balancing costs with access to appropriate care. Larger employers with more resources are providing access to centers dedicated to acute mental health conditions.
Cost-shifting and vendor changes
More employers are considering passing some of the health care cost burden onto employees. According to a recent Mercer survey, half of large employers said they will likely:
Increase employee premium cost sharing,
Raise deductibles, and/or
Hike out-of-pocket maximums in 2026.
In the Business Group on Health study, most employers said they would at least consider shifting costs to workers if needed.
At the same time, companies are rethinking vendor relationships. Forty-one percent reported changing or reviewing pharmacy benefit managers, while others are reassessing wellness and medical benefit partners.
Transparent PBM models and alternative health plans are gaining traction as employers look for greater value and predictability.
Recommendations
The Business Group on Health report noted that employers can do more than pass along costs to workers, by:
Assessing the effectiveness of benefit programs and vendors, and eliminating those that deliver limited value.
Helping employees — through training and an open-door policy for questions — use plan resources and navigation tools to find providers that deliver high-value care.
Encouraging staff to stay on top of check-ups, doctor visits, medications, screenings, tests and immunizations.
Requiring vendor partners to adopt transparent and sustainable financial models, particularly for pharmacy benefits.
As the year-end open enrollment period approaches, now is the time to fine-tune your benefits, and that starts with surveying your employees about their views of your current offerings.
There should be more to this effort than checking boxes. It’s important that you elicit an honest assessment from your employees, and once you have their responses you need to process and analyze them with the goal of exploring changes that will benefit your staff.
Surveys are not exercises in futility. A recent study by Aflac found that while four out of five employers think their workers are satisfied with their benefits, only three in five employees say the same. That disconnect can result in employers offering benefits year after year that their staff may not value.
Offering the wrong benefits can be costly, considering that benefits account for between 30% and 40% of total compensation, according to the Bureau of Labor Statistics. That’s a lot to spend on something you don’t know is generating a solid return on investment.
Areas you may want to cover in your survey include:
General satisfaction with benefits and whether there are any they want but you don’t offer.
Health care coverage affordability, coverage depth and network satisfaction.
Participation in wellness programs, satisfaction with mental health support and learning opportunities.
Overall impressions, understanding and usefulness of current benefits.
You may want to dig deeper into views on your most important benefit, group health insurance, by asking questions like:
How well does the current plan cover your needs?
Do you feel the current plan’s deductibles and copayments are fair?
Do you believe the current plan offers good value for the cost?
How easy is it for you to find in-network providers for the health care you need?
Are there any specific types of specialists or facilities you wish were more accessible in our network?
How easy is it to understand your benefits and how to use them?
How can we better communicate information about the health plan?
How satisfied are you with the customer support related to the health plan?
Digging deep
The next step is picking through the answers to identify trends and opportunities. As your health insurance broker, we can help digest the information and develop a plan for you. We can also segment the findings by age, family status (kids or no kids) or job function to better personalize offerings that match your employees’ needs.
Once we do that, you can prioritize which potential actions make the most sense, are feasible and would make the largest impact. We can then make a plan that includes:
Mid-term changes: Plan design or contribution changes
Long-term initiatives: Introducing a new benefit category
Final thoughts
Even small improvements show employees that their voice matters.
Just remember that many people have short attention spans, so ensure the surveys don’t take longer than five or 10 minutes to complete.
Also, arrange for the surveys to be submitted anonymously so your staff will feel free to speak their minds.
Whatever changes you decide to make must also be communicated to the employees, so they understand what’s coming and why the changes are being made. This shows that you took the survey seriously and responded with action.
Your transparency will build credibility, especially if changes take time.
“Operating with a true risk management focus and always in the best interests of the client is very liberating for health plans and employers in terms of the strategies we can provide to benefit plan sponsors and participants…we believe that the fiduciary mindset offers a valuable roadmap for what every organization should expect from all vendors, including their PBM and health plan carriers.”
-Renzo Luzzatti, President, US-Rx Care
It’s true—when facing the realities of just how expensive pharmacy benefits have become, more and more groups are realizing that the traditional PBM model just isn’t working in their favor. For those looking for both savings, integrity, and compliance, the fiduciary model has proven to be nothing short of game changer.
An ‘F’ Word that Packs a Punch
In the health benefits space, the term “fiduciary” carries some serious weight. Under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary is defined as “any person or entity that exercises, administers, or advises discretionary control over plan management and assets.” And this comes with a crucial legal obligation: to act solely in the best interests of the plan and its participants.
In simpler terms, a fiduciary PBM must:
Prioritize the plan and its members above all else
Avoid all conflicts of interest, including third-party incentives
Disclose all financial arrangements
Provide total transparency on costs and utilization
Unlike traditional PBMs that often profit from opaque deals, rebates, and spread pricing, a fiduciary PBM removes these hidden profit centers entirely. This level of transparency enables better decision-making and ensures that cost-saving strategies aren’t just smoke and mirrors—they’re real, measurable, and aligned with your best interests.
Results That Speak for Themselves
Groups who move to a fiduciary PBM model—like US-Rx Care—often experience immediate and significant cost reductions by:
Eliminating wasteful spending
Optimizing drug utilization
Getting back 100% of negotiated savings to plan sponsors
But the true fiduciary advantage is more than just savings. It’s about aligning your company’s values and fiduciary duty with its PBM. It’s about accountability. And ultimately, it’s about doing what’s right for your employees—providing them with access to high-quality, affordable care without compromise.
The result? A sustainable solution that delivers better care for employees and a healthier bottom line for your business.
The US-Rx Care Difference
Have you been told: “You should be happy with annual increases that don’t reach double digits.” This is a myth that has pervaded the industry for years by both PBMs and those hanging onto the status quo. At US-Rx Care, we have never accepted the status quo. We provide self-insured employer and health plan employees with fiduciary compliant, pharmacy benefits risk management services that leverage a level of clinical rigor, administrative tools, perspectives, and approaches that have been honed, perfected, and time-tested for close to three decades. Our clients typically see between a 30-50% reduction in pharmacy benefits spend—with no change in benefit designs and minimal member disruption. Plan participants also typically enjoy a 30% reduction in out-of-pocket costs and are appreciative of the time and effort expended on their behalf to optimize their drug therapy and lower their spend.
What can the fiduciary PBM model deliver for you and your business? Let’s talk! Schedule a meeting at usrxcare.com/contact.
The IRS has significantly increased the group health plan affordability threshold, which is used to determine if an employer’s lowest-premium health plan complies with Affordable Care Act rules, for plan years starting in 2026.
The threshold for next year has been set at 9.96% of an employee’s household income, up from 9.02% this year. The higher threshold will give employers more wiggle room when setting their workers’ health insurance premium cost-sharing level to avoid running afoul of the ACA. In addition, penalties for failing to provide coverage that meets the affordability threshold will rise 15% in 2026.
Under the ACA, “applicable large employers” — those with 50 or more full-time or full-time equivalent employees — are required to offer at least one health plan to their workers that is considered affordable based on a percentage of the lowest-paid employee’s household income.
If an employer’s plan fails this test, it will be deemed non-compliant with the law, resulting in penalties for the employer.
The new threshold will apply to all health plans whenever they incept in 2026. The affordability test applies only to the portion of premiums for self-only coverage, not family coverage. If an employer offers multiple health plans, the affordability test applies only to the lowest-cost option.
Calculating
Employers can rely on one or more safe harbors when determining if coverage is affordable:
The employee’s most recent W-2 wages.
The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month.
The federal poverty level.
Penalties
Failure to provide affordable coverage can result in a penalty of $5,010 per affected employee in 2026, up 15% from $4,350 in 2025.
Another penalty, known as the Employer Shared Responsibility Payment, will also increase. This penalty applies to employers that fail to offer minimum essential coverage to at least 95% of full-time employees and their dependents, and when at least one full-time employee purchases exchange coverage and receives a premium tax credit.
This penalty, which applies to the total number of full-time employees (minus the first 30), will rise to $3,340 per employee in 2026, also up 15%.
The above penalties are both indexed to inflation.
The takeaway
As 2026 approaches, it is important to review health plan costs and premium-sharing to ensure your lowest-cost option complies with the ACA affordability requirement.
We can help assess affordability and confirm your plans meet the standard, so your firm stays compliant.
While traditional benefits like group health insurance and 401(k) plans remain foundational, employers who limit themselves to the same offerings year after year may find themselves outpaced in the competition for talent.
Regularly evaluating your benefits package ensures it stays relevant, competitive and cost-effective — and ultimately supports your efforts to attract, retain and engage employees.
Doing this is increasingly important as the last of the Baby Boomers exit the workforce and more Gen Z workers are hired and put to work. Besides generational changes, workers’ needs may shift due to social trends, medical advances and lifestyle changes.
When employers fail to update their offerings, they risk wasting resources on underused benefits or losing valued employees to competitors with more relevant and supportive programs. Conversely, a dynamic, well-calibrated package signals that you care about your employees’ well-being and are in touch with what they value.
How to assess effectiveness
Measuring the success of a benefits program isn’t always straightforward, but several tools can help:
Employee surveys: Poll your workers about which benefits they use, which they value most and what they wish was included. Use both structured and open-ended questions to gather insights. Consider segmenting responses by demographics to detect differing needs.
Utilization data: Track how often employees take advantage of each benefit. Low utilization may mean a benefit is poorly communicated, difficult to access or simply not valued. High usage, especially when tied to positive outcomes, signals success.
Key performance indicators: Monitor metrics such as employee productivity, engagement scores, absenteeism and turnover. Improvements in these areas may be tied to the effectiveness of certain benefits. There might also be no correlation, but they’re still worth tracking.
Turnover trends: If your organization is experiencing higher-than-usual turnover, especially among high performers, your benefits package may not be meeting employee expectations.
Regular feedback loops: Consider holding periodic focus groups or one-on-one discussions. These offer valuable information that goes beyond survey numbers.
Benchmarking keeps you competitive
Employers should also compare their benefits to industry peers. Resources such as SHRM’s Employee Benefits Survey, consulting firm whitepapers and insurance agency reports can reveal trends and standards in your sector.
For example, more than 90% of employers now offer telehealth options, and an increasing number are extending mental health resources, menopause support and caregiving benefits.
Cost-effectiveness and impact
Not all benefits need to be expensive to make a difference. For instance, flexible scheduling, expanded telehealth access or a wellness allowance may deliver high perceived value at a manageable cost.
For example, a wellness allowance is a fixed amount of money provided by the employer that staff can spend on their health and well-being like gym memberships, fitness classes, mental health apps and more.
Review spending against usage and satisfaction levels, and consider whether reallocating dollars could deliver better outcomes.
We can also help you identify underused or high-cost benefits that may be ripe for replacement — or negotiate better vendor terms.
Takeaway for employers
Just like you measure your business’s performance, ROI, profits and more, you should take time, at least annually, to evaluate your benefits package.
If, based on your evaluation, you plan to make changes to your benefits lineup, including eliminating a benefit, there will always be some staff who won’t be happy about it.
Make sure to be transparent about why and how the decision supports employee needs. This builds trust and demonstrates a responsive, employee-first mindset.
The sweeping One Big Beautiful Bill Act signed into law by President Trump on July 4, 2025, makes permanent the ability of high-deductible health plans to offer pre-deductible coverage for telehealth and other remote care services without compromising employees’ eligibility to contribute to health savings accounts.
This change, effective for plan years beginning after Dec. 31, 2024, restores a popular pandemic-era flexibility that had otherwise expired at the end of 2024. For employers that offer HDHPs with HSA options, they can now choose whether to incorporate first-dollar telehealth coverage to enhance their plan’s value, reduce employee costs and improve access to care.
Brief background
Under longstanding federal law, to qualify for HSA contributions, a participant must be enrolled in a qualified HDHP and have no other “impermissible” health coverage — meaning no coverage that pays for non-preventive care before the deductible is met. Historically, this included most telehealth services.
That changed temporarily with the CARES Act in 2020, which allowed HDHPs to cover telehealth on a first-dollar basis without affecting HSA eligibility. Congress extended this relief several times, but the last extension expired on Dec. 31, 2024, for calendar-year plans.
What it means for employees
Telehealth services benefit plan enrollees in many ways:
Convenience: Workers in rural or remote areas, or those juggling caregiving responsibilities, no longer need to take time off work or travel to see a provider for routine care that can be handled virtually.
Lower costs: First-dollar coverage for virtual visits can eliminate out-of-pocket expenses for common services like check-ups, prescription renewals or managing chronic conditions.
Chronic care support: Individuals managing ongoing conditions such as diabetes or hypertension may find it easier to stay on top of treatment plans with telehealth check-ins.
What was not included in the final law
While the law’s inclusion of the telehealth safe harbor was celebrated, many other pandemic-era telehealth waivers were left out of the final package. These excluded provisions include:
Lifting geographic and originating site restrictions on telehealth under Medicare.
Allowing audio-only services to qualify for reimbursement.
Extending telehealth coverage by federally qualified health centers and rural health clinics.
Eliminating in-person visit requirements for telemental health services.
Unless further legislative action is taken, those waivers will expire by the end of September 2025, limiting broader telehealth expansion — especially for Medicare and rural populations.
Takeaway for employers
Employers looking to implement or reinstate telehealth coverage to their HDHPs should coordinate with their insurance carriers or third-party administrators and update plan documents, summary plan documents and employee communications accordingly.
If your 2025 plan has already started, you may need to send your enrollees special notices informing them of the change.
