Employers are already struggling with rising healthcare costs in 2025, and early signs suggest these challenges will persist — potentially worsening in 2026, according to Tracy Watts, senior partner at consulting firm Mercer.
And it’s getting to a point where employers may have to start shifting costs to employees, she added.
“According to our survey data, for the past several years, [employers have] really tried to hold off on shifting costs to employees, because I think everybody’s super sensitive to the affordability issue,” she said. “But I think that’s going to be hard going into 2026. So the renewals, your initial ‘What do you think your increase is going to be?’ is going to be higher than what employers probably have seen. And so getting that down to something that’s more within their budget range is going to be pretty hard.”
Watts made these comments during a Monday interview at the AHIP 2025 conference in Las Vegas.
Mercer previously reported that employers were projecting a 5.8% increase in healthcare costs in 2025 from the previous year. Employers won’t know what the actual increase was until the end of the year, but their projection is usually within a “fraction of a percentage point,” Watts said. She anticipates the increase to be even greater in 2026.
GLP-1s are a major factor for these cost increases, she added. Last year, many employers added coverage for GLP-1s, but she expects some to reconsider that decision and put in more stringent criteria around GLP-1 coverage.
To address cost increases, Watts is seeing employers take several strategies. One is moving towards high performance networks, which is a curated network of providers who have proven to provide quality care.
Variable copay plans are also gaining some traction, in which the copayment varies depending on certain factors, such as the type of service or provider network. Watts gave the example of the company Surest, which offers a tool where members can search for care and see different options for providers. Then their copayment is based on the choice they make.
“Our survey data with workers say that 30% are very concerned that they can’t afford the care that they need,” Watts said. “And so having a tool where you can get access to care and your choice determines what your out of pocket is going to be is getting some traction.”
In addition, some employers are implementing Exclusive Provider Organization (EPO) plans, in which members only have in-network coverage, unless for emergencies. This compares to a Preferred Provider Organization (PPO) plan, in which members can get out-of-network coverage, but at a higher cost.
“It’s on a smaller network. You pay less for the plan and less out of pocket when you need care. And even with those incentives, we’ve seen … lower costs than in their PPO plans,” Watts said.
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