Mercer Warns of Record Health Benefit Cost Increases for Employers

What's Happening?

Mercer's 2025 National Survey of Employer-Sponsored Health Plans indicates that health benefit costs per employee are expected to rise by an average of 6.5% next year, marking the highest increase since 2010. This surge comes despite employers implementing cost-reduction strategies, which, without intervention, could have led to a 9% increase. The report attributes the rise to increasing healthcare prices and utilization, driven by advancements in diagnostics and therapeutics, inflation, and provider consolidation. Utilization has also increased due to delayed care during the COVID-19 pandemic and the growing acceptance of virtual healthcare. In response, 59% of surveyed employers plan to adjust their health plans to manage costs in 2026, considering options like raising deductibles and cost-sharing provisions.

Why It's Important?

The anticipated rise in health benefit costs poses a significant challenge for U.S. employers, who are already under pressure to manage healthcare budgets. The increase could lead to higher expenses for businesses and potentially shift more costs to employees, affecting their financial well-being. Employers are exploring various strategies to mitigate these costs, including working with vendors and adjusting plan designs. The situation underscores the need for sustainable solutions to address the long-term dynamics of healthcare costs, as temporary measures like passing costs to employees may not be effective.

What's Next?

Employers will continue to evaluate and implement changes to their health plans to control costs, with a focus on strategies that do not disproportionately impact employees. The Business Group on Health advises against simply passing costs to employees, advocating for collaboration with vendors to address underlying cost drivers. As healthcare costs continue to rise, employers may need to innovate and adopt new approaches to manage expenses while maintaining employee satisfaction and health outcomes.