Healthcare costs are climbing again in 2026, extending a multiyear run of compounding increases that continues to pressure employer budgets and employee paychecks alike. Multiple industry surveys point to the steepest jump in well over a decade, driven by a familiar but intensifying set of factors: high-cost medications, the growing prevalence of cancer and chronic disease, an aging population, and rising mental health utilization.

This guide breaks down how much costs are expected to rise this year and, more importantly, the underlying forces driving the trend so employers can understand what's happening and plan accordingly.

How much will healthcare costs rise in 2026?

Forecasts vary by source and methodology, but every major report tells the same story: costs are accelerating.

A new report from Mercer projects that total health benefit cost per employee will rise an average of 6.5% in 2026, the largest increase since 2010, and more than double the roughly 3% annual growth that was typical over the prior decade. Without any plan design changes, Mercer estimates the increase would have approached 9%.

Similarly, a survey of large employers by the Business Group on Health (BGH) found employers anticipate a 9% increase before plan design changes, falling to 7.6% after cost-control measures such as cost sharing, revised benefit offerings, and vendor evaluations. The BGH survey gathered data from 121 employers covering 11.6 million people, making it one of the most closely watched benchmarks in the industry. Notably, employers expect their pharmacy cost trend alone to rise about 12% (11.3% after plan design changes).

A third widely cited forecast from PwC projects medical costs growing 8.5% for the third consecutive year.

The takeaway across all three: regardless of the exact figure, 2026 is shaping up to be one of the costliest years for health benefits in recent memory. 

For how these increases translate into renewals, see our overview of medical trend and its impact on employer health plan renewal rates.

"The cost of coverage is going up. That's a combination of higher prices for health care services and higher utilization." — Beth Umland, director of research for health and benefits, Mercer

What's driving healthcare costs higher?

Several deep structural drivers are pushing spending up year after year.

GLP-1 drugs and weight-loss medications

Surging demand for glucagon-like peptide-1 (GLP-1) drugs is among the single largest contributors to rising costs. In the BGH survey, 79% of employers reported greater use of GLP-1s, with another 15% anticipating an increase ahead. In an earlier survey, more than half (56%) of respondents said GLP-1 spending was driving healthcare costs to a great or very great extent.

The economics are steep. GLP-1s typically run around $1,000 per month, and because they're intended to be taken on an ongoing basis to maintain their benefits, the cost recurs indefinitely rather than resolving with a course of treatment.

Originally approved to treat type 2 diabetes, these drugs have proven effective for weight loss when paired with diet and exercise, fueling rapid demand. Mounjaro (tirzepatide), Ozempic, and Rybelsus (both semaglutide) are approved for diabetes but frequently prescribed off-label for weight loss, while Zepbound (tirzepatide) and Wegovy (semaglutide) are approved specifically to treat obesity in qualifying patients.

The pipeline only widens the exposure. The same active ingredients are showing promise for conditions including Alzheimer's disease, heart disease, and sleep apnea. As those use cases clear clinical trials, more patients could become eligible for these high-cost therapies. Roughly 1 in 8 Americans have already used a GLP-1, about 6% are currently taking one, and an estimated 9% of the U.S. population could be on them by 2030. 

Employees often ask whether these treatments qualify for tax-advantaged accounts; here's our guide to whether weight-loss medications and programs are HSA- or FSA-eligible.

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Rising pharmacy and specialty drug spend

GLP-1s are far from the only pharmacy pressure. General price increases and specialty medications are core drivers of healthcare inflation.

Existing drug price increases. Several commonly used drugs, including denosumab, pembrolizumab, dupilumab, empagliflozin, and dapagliflozin, are expected to rise anywhere from 4% to 10% or more, with higher utilization compounding the effect.

Cell and gene therapies. Advanced treatments for conditions such as blood and lung cancer, sickle cell anemia, and spinal muscular atrophy represent remarkable medical progress, but at extraordinary prices. Some cost thousands of dollars per week; others run between $250,000 and $4.25 million for a single dose. Because even a handful of patients can move the needle, these therapies have an outsized effect on plan spending. By 2025, an estimated 100,000 U.S. patients were eligible for cell and gene therapies, a population that could represent roughly $25 billion in spending, with hundreds more treatments in clinical trials.

Biologics and biosimilars. Biologics (medications derived from living organisms) treat conditions ranging from cancer and psoriasis to rheumatoid arthritis and inflammatory bowel disease. They're highly effective and highly expensive: according to a report in JAMA, biologics make up only 2% of prescriptions but account for 37% of net drug spending. Biosimilars, lower-cost alternatives deemed to have no meaningful differences in safety or effectiveness from their reference biologics, offer a partial counterweight. As of late 2024, 62 biosimilars had been approved since the category launched in 2015, and one analysis found that $36 billion in biosimilar spending saved $56 billion on original biologics over a decade, potential savings that could exceed $180 billion over the next five years. Adoption still faces headwinds, however, including patent protections, exclusivity rights, and complex approval processes. Overall, the biologics market is projected to grow from roughly $450 billion today to nearly $850 billion over the next decade.

Cancer and other high-cost conditions

Cancer has emerged as the top condition driving employer healthcare costs, a trend worsened by both rising diagnosis rates and the escalating cost of treatment. Combined with the specialty drugs and advanced therapies used to treat it, cancer concentrates a large share of spending among a relatively small number of patients, exactly the dynamic that makes total costs so volatile and difficult to contain.

Chronic health conditions

According to the Centers for Disease Control and Prevention (CDC), about 90% of U.S. healthcare spending goes toward people with chronic and mental health conditions (heart disease, stroke, cancer, diabetes, arthritis, and obesity among them). A growing share of the population now lives with two or more high-cost chronic diseases.

Cardiovascular disease is one of the largest contributors. Heart disease and stroke could affect more than 60% of U.S. adults by 2050 and reach $1.8 trillion in related expenses, roughly tripling current inflation-adjusted costs.

Obesity is another major driver and is closely linked to other costly conditions like heart disease, type 2 diabetes, and sleep apnea. The CDC found that more than 2 in 5 U.S. adults have obesity (a BMI of 30 or higher), with adult prevalence reaching 40.3% in 2021–23, up more than 10 percentage points from a 1999–2000 study. In 2019, obesity-related medical care was estimated at nearly $173 billion annually, and chronic disease overall is projected to keep rising for years to come. Because so much of this spending is preventable or manageable when caught early, preventive care coverage guidelines play an outsized role in containing long-term costs.

Rising mental health utilization

Demand for mental health services continues to climb as employers expand access and work to reduce stigma. In the BGH survey, 73% of employers reported an increase in the use of mental health services. While broader access is a positive development for workforce wellbeing, the added utilization contributes meaningfully to overall benefit costs.

Healthcare labor costs

Rising employment levels, salary demands, and general inflation across the healthcare workforce flow directly into the cost of care. Those expenses are routinely passed along to employers, employees, and dependents. Mercer has noted that the supply of healthcare workers is not keeping pace with demand, a gap driven by an aging population that requires more care, an aging workforce, and high rates of burnout. These dynamics are among the key reasons costs are expected to keep rising.

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An aging population

U.S. life expectancy has risen significantly over the past half-century even as birth rates trend down, steadily pushing up the average age of the population. More than 55 million Americans are over age 55 today, and the 65-and-older population is expected to approach 80 million by 2040.

Healthcare costs rise with age. Adults over 65 use care more frequently, and per-person personal healthcare spending for this group runs about five times higher than spending per child and roughly 2.5 times the spending per working-age person, largely because of their greater likelihood of having one or more chronic conditions. As more Americans reach retirement age each year, the aging population will keep exerting upward pressure on total healthcare spending.

How employers are responding

Faced with sustained increases, more employers are taking action rather than absorbing the cost. Mercer found that 59% of employers intend to make cost-cutting changes to their health plans in 2026, up from 44% in 2024. Many had avoided such moves during the pandemic and the high-inflation years that followed, but fewer can continue shielding workers from rising costs. As a result, Mercer expects employees to pay an additional 6%–7% in premiums on average, with some organizations leaning instead on higher deductibles and copayments.

Common strategies employers are pursuing include:

•     Expanding plan choice to give employees lower-cost options. For example, plans with a broad provider network but tiered out-of-pocket costs based on the provider chosen. Some employers are also turning to ICHRAs, whose enrollment tripled in 2026, as a more flexible funding approach.

•     Exploring alternative funding models such as switching to a self-funded health plan or joining a health insurance captive to gain more control over claims spending.

•     Strengthening preventive care and screening coverage to catch high-cost conditions earlier.

•     Managing GLP-1 coverage through clinical criteria, prior authorization, or limits on eligibility.

•     Negotiating harder with vendors and exploring nontraditional prescription drug models.

•     Increasing cost sharing through deductibles, copays, and premium contributions, often paired with account-based options like HSAs and resources for helping employees manage out-of-pocket medical expenses.

"Concerns about pharmacy trends are nothing new, but they've gotten worse." — Ellen Kelsay, president and CEO, Business Group on Health

Employer takeaway

Quality healthcare is a substantial line item in any organization's budget, and rising costs are increasingly shared between employers and employees. While some level of increase appears unavoidable, informed employers are better positioned to anticipate these trends and respond with the right mix of plan design, cost-control measures, and benefit strategy.

Christensen Group helps employers navigate exactly these decisions. To see how cost management fits into the broader picture, explore the employee benefits trends shaping 2026, and contact us for more resources on managing healthcare costs.

Frequently asked questions

How much will healthcare costs increase in 2026?

Projections range from roughly 6.5% to 9% depending on the source. Mercer estimates a 6.5% increase in total health benefit cost per employee (the highest since 2010) while the Business Group on Health puts the figure at 9% before plan design changes (7.6% after). PwC projects medical cost growth of 8.5%.

Why are healthcare costs rising?

The increase is driven by a combination of higher prices and higher utilization. Key factors include surging demand for GLP-1 and other high-cost medications, the growing prevalence and cost of cancer treatment, rising rates of chronic and complex conditions, increased mental health utilization, healthcare labor shortages, and an aging population that uses more care.

How are GLP-1 drugs affecting healthcare costs?

GLP-1 drugs such as Ozempic, Wegovy, and Zepbound typically cost around $1,000 per month and are taken on an ongoing basis, so the spending recurs indefinitely. Adoption is widespread and growing, 79% of employers report increased GLP-1 use, making these medications one of the single largest contributors to rising pharmacy and overall healthcare costs.

What is the top condition driving employer healthcare costs?

Cancer has emerged as the top condition driving employer healthcare costs, fueled by both rising diagnosis rates and the escalating cost of treatment. Other major contributors include cardiovascular disease, obesity, diabetes, and mental health conditions.

How can employers control rising healthcare costs?

Employers are using a mix of strategies, including expanding plan choice and alternative funding models (such as self-funding, captives, and ICHRAs), strengthening preventive care, managing GLP-1 coverage through clinical criteria, negotiating with vendors, and adjusting cost sharing. About 59% of employers plan to make cost-cutting changes in 2026, up from 44% in 2024.

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