Your health insurance is set to cost your employer even more in 2026 — but you may be the one feeling the pinch

Employer sponsored health insurance plans are about to see the biggest increases in cost in 15 years, and companies are bracing for impact. According to Mercer’s 2025 National Survey of Employer-Sponsored Health Plans, total health benefit cost per employee is expected to rise by an average of 6.5% in 2026 — even after employers take steps to control expenses. If they made no changes, costs would climb closer to 9%. (1)

That’s the steepest projected increase since 2010 and the fourth straight year of above-average growth, following a decade of moderate 3% annual gains. With inflation cooling in other parts of the economy, many employers had hoped for relief on health costs — but the survey shows the opposite is true. The cost spike has become a “call to action,” prompting 59% of employers to implement cost-cutting measures for 2026, up from 48% last year. (2)

Here’s why prices are expected to increase, how employers and employees are responding, and how to prepare for a pricier year.

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Why health benefit costs are poised to jump, and what employers are doing

Behind the rise are two main forces: higher prices for health care services and a growing rate of utilization — both of which are accelerating at once. That means employees can expect higher paycheck deductions, steeper deductibles and more limited plan choices as companies search for ways to balance their budgets. (3)

Much of the pressure stems from expensive new treatments and technologies. Advanced diagnostics, cancer therapies and weight-loss drugs are improving outcomes but driving up pharmacy and treatment costs. (4)

Strong patient demand for products like Ozempic, which costs an eye-watering $11,971 per year at its list price, have also contributed to higher insurance costs. (5) Meanwhile, continued consolidation among hospitals and clinics has given large health systems greater leverage to negotiate higher reimbursement rates, keeping costs elevated.

Employers are responding by shifting costs and rethinking plan design. When plan costs rise, the workers’ share of health coverage contributions typically rises at the same rate, which means many employees could see paycheck deductions increase roughly 6 to 7% next year. (6)

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To offset the cost of coverage, 59% of employers say they will raise deductibles and copays, which will increase out-of-pocket costs for their employees, while others will introduce non-traditional plans like high-performance networks and variable copay plans that limit provider choice in exchange for lower costs. (7)

How the pandemic contributed to medical inflation

A report from the Bureau of Labor Statistics shows that health care spending dropped from 2019 to 2020 as people delayed in-person visits to their doctors for regular check ups. (8) But as vaccines became available in 2021, medical spending rebounded significantly, including a massive 23.8 increase in spending on medical services.

During 2020 and 2021, many employers focused on access and stability. Telemedicine coverage expanded, cost sharing for virtual care was often reduced and mental health benefits were enhanced. Pent up demand created scarcity for limited resources, similar to what the hospitality industry experienced as plane fares and hotel prices increased in 2021.

Can tariffs make health insurance costs go up?

While tariffs are a tax on imported goods and not directly linked to health insurance, they can ripple through the economy — raising prices for the materials, medicines and devices that health care systems rely on.

The Congressional Budget Office estimates the current tariff package will lift inflation on average by about 0.4 percentage points in 2025 and 2026. (9) Higher inflation filters into hospital supply chains and benefit budgets, which can add pressure to overall plan costs.

American Hospital Association President and CEO Rick Pollack has warned that tariffs on medical devices and pharmaceuticals risk raising costs and creating shortages, which would leave providers paying more for supplies and equipment — costs that tend to pass through to insurers and, ultimately, to plan holders. (10)

Read more: US car insurance costs have surged 50% from 2020 to 2024 — this simple 2-minute check could put hundreds back in your pocket

How to prepare for a pricier 2026

Instead of focusing only on the monthly costs, enrollees in workplace plans should evaluate the full picture of health coverage, including deductibles, coinsurance out-of-pocket maximums and the structure of provider networks. Some employers are expanding high-deductible health plans paired with Health Savings Accounts (HSAs), while others are steering workers into narrower or tiered networks that reward lower-cost providers.

Employers may sweeten certain options with HSA contributions or expanded preventive care benefits, but workers need to understand where cost-shifting is likely to occur. A few strategies can help:

Do the math on your health insurance needs. Estimate how much you’ll likely spend out of pocket next year, then combine that with what you’ll pay in monthly contributions to see your true annual cost. For example, if your contributions total $3,000 for the year and you expect another $1,000 in doctor visits or prescriptions, your real annual cost is about $4,000. You can compare this against other plan options to see which offers the best value.

**Increase contributions to an FSA or HSA, or consider opening one. **These tax-advantaged are typically offered through your employer during open enrollment and can help you save for health care costs throughout the year. They allow you to pay for eligible medical expenses with pretax dollars. Even a small monthly contribution — say $75 — can build a cushion of $900 over a year, reducing the sting of an unexpected bill.

HSA funds also roll over annually, making them ideal for people who anticipate future health care needs. If your employer doesn’t offer these accounts, you can open an HSA on your own through a bank or financial institution, which might be worth exploring if you expect regular out-of-pocket medical costs.

In a year when health care inflation is outpacing wage growth, (11) the best defense is preparation. Understanding your plan, using tax-advantaged accounts and factoring future medical needs into your budget can help you weather what’s shaping up to be the most expensive year for health insurance in more than a decade.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Mercer (1), (2), (3), (4), (6), (7); Drugs.com (5); Burea of Labor Statistics (8), (11); Reuters (9); American Hospital Association (10)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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