Businesses are preparing for steep increases in employee health care costs next year, with a new survey projecting a 9% rise in 2026—the largest single-year forecast in more than a decade.
According to the Business Group on Health annual survey of 121 large employers, covering more than 7.4 million U.S. workers and 11.6 million employees worldwide, costs are expected to climb even after companies adjust their health plans. Following plan changes, employers anticipate a 7.6% net increase in costs.
“This is the highest single-year forecast in more than a decade,” said Ellen Kelsay, president and CEO of the Business Group on Health. “It underscores the urgent need for bold and decisive actions by employers and industry stakeholders.”
Rising Pressures
Health care costs are projected to be 62% higher in 2026 than in 2017. Employers cite cancer as the top driver of expenses, followed by musculoskeletal conditions and cardiovascular disease. Nearly three-quarters (74%) report seeing more cancer diagnoses, particularly among younger populations, fueling concerns about future costs.
Prescription drug spending is another major pressure point. Employers now allocate nearly a quarter (24%) of their healthcare spending to prescription drugs, up from 21% in 2021. GLP-1 medications for diabetes and obesity are especially costly: 99% of employers cover GLP-1s for diabetes, and 73% cover them for obesity, but nearly half say they may reduce coverage if costs don’t stabilize.
Vendor Accountability and Medicaid Concerns
Employers are also demanding more from their health care vendors. The survey found 85% would consider replacing underperforming partners that fail to show measurable value in outcomes, cost control, and data transparency.
Meanwhile, two-thirds of employers expressed concern about Medicaid policy changes that could shift costs onto employer-sponsored health plans.
Mental Health
Employers are also grappling with increased demand for mental health and substance use services. Nearly three in four (73%) reported higher utilization, with over 40% citing mental health as a moderate or major driver of rising costs.
With health care costs at the top of employers’ priority lists for 2026, the Business Group on Health says the findings highlight the growing urgency for cost management strategies and workforce health innovation.