Healthcare Costs: Employer Strategies | Mercer 2024
- Employers are struggling with rising healthcare costs, and the challenges may worsen in 2026, according to Tracy Watts, a senior partner at Mercer.
- Watts noted that employers have resisted shifting costs to employees in recent years,but increasing financial pressures may make that unsustainable.
- Mercer had previously projected a 5.8% increase in healthcare costs for 2025.
Employers face escalating healthcare costs,wiht projections suggesting even greater challenges in 2026. This report unveils how these rising expenses threaten employer benefits and may lead to employees shouldering a larger financial burden. mercer experts reveal that initial renewal estimates for 2026 are concerning, driven partly by GLP-1 drug costs. Explore key strategies, including high-performance networks and variable copay plans, that companies are adopting to combat increasing healthcare costs. We break down the shift from PPO to EPO plans for potential savings. For up-to-the-minute news, News Directory 3 provides insightful coverage. Discover what’s next as employers navigate these evolving economic pressures while striving for cost-effective healthcare solutions.
Rising Healthcare Costs Threaten Employer Benefits
Updated June 17, 2025
Employers are struggling with rising healthcare costs, and the challenges may worsen in 2026, according to Tracy Watts, a senior partner at Mercer. Speaking at the AHIP 2025 conference in Las Vegas on Monday, Watts indicated that companies might soon shift more of the financial burden onto their employees.
Watts noted that employers have resisted shifting costs to employees in recent years,but increasing financial pressures may make that unsustainable. Initial renewal estimates for 2026 are expected to exceed what employers have recently experienced,making budget adjustments difficult.
Mercer had previously projected a 5.8% increase in healthcare costs for 2025. watts anticipates an even greater increase in 2026, with GLP-1 drugs being a major contributing factor. Manny employers added coverage for these medications last year but may now reconsider or implement stricter criteria.
To combat rising expenses, employers are exploring several strategies. One approach involves moving toward high-performance networks, which consist of select providers known for delivering quality care. Variable copay plans are also gaining traction,where copays fluctuate based on factors like the type of service or provider network.
Watts cited Surest as an example of a company offering tools that allow members to compare care options and associated copays. This approach aims to address affordability concerns, as 30% of workers are worried about affording necessary care, Watts saeid.
Some employers are also implementing Exclusive Provider Association (EPO) plans, which limit coverage to in-network providers except in emergencies. This contrasts with Preferred Provider Organization (PPO) plans, which offer out-of-network coverage at a higher cost. Watts said EPO plans offer lower costs compared to PPO plans,even with incentives.
what’s next
Employers will likely continue exploring various strategies to manage healthcare costs, balancing affordability for both the company and its employees.The effectiveness of these strategies will become clearer as 2026 approaches.