Healthcare costs projected to rise 9% in 2026

Employers are bracing for another year of significant healthcare cost increases in 2026, as cost management and affordability become top priorities for benefit leaders. 

Business Group on Health's 2026 Employer Health Care Strategy Survey projects a median 9% rise in medical cost trends — or 7.6% after plan design changes. This comes on the heels of the highest back-to-back jumps in a decade.  

"In this challenging environment, employers remain firmly committed to an ongoing investment in employee health and well-being," said Ellen Kelsay, president and CEO of Business Group on Health. "Yet they will need to make bold and strategic moves to contain costs, sometimes disrupting health care models along the way." 

Read more: Sick of answering the same benefits questions from employees? Let AI do the work

Among the biggest cost drivers are obesity medications, cancer, chronic conditions and mental health, according to BGH. Employers report that utilization of GLP-1s has surged, with nearly eight in ten employers already seeing higher demand. While effective, these drugs come at a high price, prompting organizations to implement strict requirements such as prior authorization and mandatory participation in weight management programs. 

At the same time, cancer remains the single largest driver of healthcare costs, cited by nearly nine in ten employers, with musculoskeletal conditions, cardiovascular disease, diabetes, autoimmune disorders, and obesity adding further strain. Mental health and substance use services are also rising sharply in utilization. Employers, who for years focused on expanding access and reducing stigma, are now turning their attention to ensuring that the care employees receive is both high quality and cost effective.

Read more: How technology is easing mental health care pain points

Pharmaceutical costs on an unsustainable trajectory

Pharmacy costs, which already account for nearly a quarter of healthcare spending, represent another major challenge, according to BGH. Employers anticipate an 11-12% increase in pharmacy costs going into 2026, an unsustainable trajectory that cannot be addressed through traditional plan design changes alone. This has spurred calls for systemwide reforms and alternative pharmacy benefit management models that emphasize transparency and reduce reliance on rebates.

In addition to cost pressures, employers are demanding more accountability from their vendors, with a renewed emphasis on quality and value over volume. The majority of employers believe that improvements in navigation to higher-quality providers, increased transparency of both cost and quality, and stronger coordination of integrated care teams will have the greatest impact. 

Read more: CEO and cancer survivor wants to make medical cannabis an employee benefit

Reducing inappropriate and unnecessary care also remains a key focus. Employers are simultaneously doubling down on prevention strategies, particularly in cancer. More organizations are expanding coverage for screenings, offering alternatives to invasive tests, removing age restrictions, and even incentivizing employees to complete recommended preventive care.

"As employers urge workforces to use health plan resources and navigation tools to find high-value care, we'll see more people using primary care and getting recommended screenings and immunizations," Kelsay said in the release.