If last year was about bracing for the impact of high medical trend, this year has been about navigating through it. Healthcare costs continue to climb rapidly: our data shows that, so far in 2025, healthcare costs have increased by about 8%. For 2026, costs are expected to increase another 9.1% before plan design changes, according to our recent Best Practices in Healthcare Survey.
As the latest data shows, the cost environment has reached a new level of intensity, and the pressure is being felt on every side.
This year more than half of employers exceeded their healthcare budgets by an average of 4.5%, according to our survey. The macroeconomic backdrop — persistent inflation, wage pressure and economic uncertainty — has sharpened the focus on affordability, not just for employers, but for employees and their families.
The macroeconomic headwinds aren’t likely to ease soon. Healthcare inflation is growing at a faster rate than general inflation, and there’s no sign of slowing down. What can you do?
Use predictive data and advanced analytics to define your risk tolerance. Now more than ever, you must assess your exposure to risk and variability. Can you quantify claims variability for your plan? How much volatility can your organization tolerate? Monte Carlo simulation and predictive analytics can help you assess your exposure to risk.
Define your risk management strategy. There are many levers available to manage financial risk, including stop loss, captive strategy and Individual Coverage Health Reimbursement Arrangements (ICHRAs) to name a few. Learn more about risk management strategies and captive insurance.
Actively manage your pharmacy programs. New pharmacy benefit managers (PBMs) have been disrupting the market with attractive value propositions, and you should evaluate the new options available to you. Additionally, you should closely review coverage for GLP-1 medications and assess exposure to high-cost specialty drugs.
Use transparency data to evaluate medical carrier offerings and alternative plan designs. You have more data and options available to optimize your medical costs. Transparency data lets you compare medical costs quickly between health plans. Alternative plan designs offer differentiated cost models and employee experience.
Navigating today’s high-cost healthcare environment requires a proactive management approach. You face mounting pressures from rising pharmacy costs, a growing chronic disease burden and shifts in care utilization. By using advanced analytics and transparency data, reviewing risk management levers and reconsidering pharmacy strategies, you're better positioned to control costs, mitigate risk and provide sustainable, high-quality benefits for the long term.
*Unless otherwise noted, analysis is based on:
What's the current trend in healthcare costs for 2025 and beyond?
Healthcare costs continue to rise rapidly, with an 8% increase in 2025 and a projected 9.1% increase for 2026 before plan design changes. More than half of employers exceeded their healthcare budgets by an average of 4.5% this year.
What are the main drivers behind increasing healthcare costs?
The main drivers include:
How can employers manage rising healthcare costs effectively?
Employers can take several proactive steps:
By implementing these strategies, employers can better control costs, mitigate risk and provide sustainable benefits for the long term.
