U.S. Employers Face 9% Health Cost Surge as Structural Pressures Mount

Employer healthcare costs in the U.S. are projected to rise 9% in 2026, the highest increase in more than a decade, according to the Business Group on Health’s latest survey. Over a 10-year period, costs have climbed 62%, reflecting sustained pressure rather than short-term volatility.

The data was discussed during a panel hosted by Transcarent at the Business Group on Health 2026 Annual Conference, where Ellen Kelsay, President and CEO of Business Group on Health, outlined the scale and persistence of cost pressures.

“This year has seemed to be so much worse than past years,” Kelsay said during the session. “When you look back over a decade… sixty-two percent over a decade—that is really sobering.”

The increase comes as employers continue to absorb rising costs without clear visibility into underlying drivers. Healthcare is typically the second-largest expense after payroll for many companies, adding pressure on budgets and long-term planning.

Cost Drivers Expand as System Inefficiencies Persist

The cost surge is being driven by a combination of chronic conditions and high-cost treatments. Cancer, musculoskeletal disorders, diabetes, and obesity remain leading contributors, alongside growing demand for behavioral health services. Prescription drugs, including GLP-1 therapies and specialty medications, are also accelerating spending.

Kelsay said these drivers are becoming more acute rather than changing fundamentally. “There are factors in there that are not necessarily new. Some are new, but they’re just getting more acute,” she said, pointing to chronic disease and pharmaceutical costs.

At the same time, employers face structural inefficiencies across the healthcare system. Redundant services, fragmented care delivery, and fee-for-service models continue to inflate costs without corresponding improvements in outcomes.

“We have a lot of inefficiency, a lot of waste and abuse… a lot of redundant, duplicative services being delivered,” Kelsay said.

A fragmented system remains a core issue, with wide variation in pricing and access to care. Previous AIM Media House reporting has highlighted how disconnected systems and lack of unified patient data contribute to inconsistent care and cost variation.

Administrative complexity also adds to the burden. Estimates suggest that inefficiencies and administrative waste account for a significant share of healthcare spending, further limiting employers’ ability to control costs.

Industry leaders say the outlook is unlikely to improve in the near term. “It’s going to get worse before it gets better,” Kelsay said, citing worsening population health and additional cost pressures ahead.

Employers Shift Toward Data-Driven and Structural Changes

As cost pressures intensify, employers are reassessing traditional benefits strategies. Incremental changes such as plan design adjustments and cost-sharing increases are no longer sufficient to manage long-term growth.

Janet Sullivan, Vice President of Benefits and Retirement at McKesson, said organizations are being forced to rethink long-standing approaches. “Things that have been working for us in the past, we’re going to have to think about things a little bit differently going forward,” Sullivan said.

Companies are increasingly evaluating vendor performance, renegotiating contracts, and using detailed claims and utilization data to guide decisions. Many are also building stronger alignment with finance and legal teams to quantify the business impact of benefits strategies and manage regulatory exposure.

This shift reflects a broader move toward data-driven decision-making in healthcare. Sullivan said data now underpins executive recommendations. “We’re making a recommendation, and we’re going in with ‘here’s why,’ and it’s all based on data,” she said.

At the same time, employers are exploring new models that prioritize navigation and experience. AI-driven platforms are emerging as a way to guide employees toward appropriate care and reduce unnecessary utilization. Similar approaches across the industry are focused on simplifying access and improving coordination.

Alternative plan designs are also gaining traction. Some employers are testing new structures that reduce complexity and shift away from traditional deductibles, reflecting a broader effort to redesign how care is accessed and paid for.

The shift is also changing how benefits decisions are made. Employers are incorporating employee feedback, benchmarking data, and clinical insights alongside financial analysis, often expanding collaboration across internal teams.

Kelsay said the shift requires a change in mindset as well as strategy. “We need to change to move to something better,” she said, urging employers to move beyond incremental adjustments.