Employers surveyed for the “WTW 2025 Best Practices in Healthcare Survey” said they anticipate their health care costs will increase by 9% in 2026. They told researchers they can’t absorb the increases or pass them on in full to employees, and instead hope to chip away at costs through a multi-pronged approach.

Since your are likely experiencing cost pressures as well, here’s a look at what your peers are experiencing and doing about it.

Where employers will focus

Managing vendor contracts — Survey results show 46% of employers are actively evaluating vendor performance.

Pharmacy benefit managers are under particular scrutiny, with three-quarters of employers either bidding out or planning to rebid their PBM. Many are also exploring more transparent, pass-through contract models.

Conducting audits — One-third of employers already conduct medical claims audits, and nearly half plan to add them. Another 22% have reviewed prior authorization or out-of-network payments, with 34% planning to.

These audits help uncover overpayments, billing errors or inappropriate authorizations. By increasing oversight, employers can identify waste, enforce contract terms and make sure vendor processes align with plan rules.

Preventing overutilization and abuse — Unchecked use of services remains a top cost driver, especially for specialty drugs, imaging and inpatient procedures.

Employers are taking a closer look at utilization controls, including stricter prior authorization, step therapy for high-cost drugs and site-of-care management to steer members toward lower-cost outpatient settings.

Note: Step therapy involves trying other lower-cost methods first, such as other proven medicines that aren’t as costly as new medications.

Alternative plan designs — Currently used by 41% of companies, alternative plan designs are expected to grow rapidly, with adoption potentially reaching 87% within two years.

These designs may include:

• Tiered or narrow networks,
• Transparent cost tools, and
• High-performance primary care models.

Employers are also using technology and enhanced navigation to guide employees when choosing providers. By structuring benefits to reward use of cost-effective, high-quality providers, employers told WTW they hope to chip away at growing costs while improving the employee experience.

The takeaway

If you are are concerned about rate hikes, talk to us about steps you can take to get a better handle on your health plan by incorporating some of the steps listed above.

In a survey of more than 700 U.S. employers by Mercer — including over 500 large organizations (those with 500 or more employees) — 51% of large employers said they are likely to make plan design changes in 2026 that would shift some costs to employees, such as modest increases to deductibles or out-of-pocket maximums. That’s up from 45% in 2025.

At the same time, 49% said they would try to avoid shifting costs altogether, reflecting continued sensitivity to employee affordability and satisfaction. Many are looking to minimize premium increases for both the company and employees by fine-tuning plan structures.

Strategies employers are using

To help manage rising costs while supporting employee access to care, employers are considering a variety of plan adjustments:

• Offering copay-based plans with low or no deductibles to reduce upfront care costs.
• Providing larger health savings account contributions to lower-income employees enrolled in high-deductible plans.
• Maintaining free employee-only coverage in at least one available plan (offered by 12% of large employers).
• Extending telemedicine services to part-time or non-benefits-eligible staff.
• Offering medical loans with low or no interest to help employees manage large bills.

Alternative and innovative health plan options

Some employers are also adopting newer plan models aimed at improving cost-efficiency and transparency over the long term, including:

• Variable copay plans. These arrangements adjust copays based on provider costs and allow employees to see prices upfront. While only 6% of large employers offered them in 2025, 35% plan to offer a similar option in 2026. Among those already offering one, nearly 30% of covered workers opted in.
• Exclusive provider organization plans. These plans use a closed network of providers and often offer higher plan value with lower premiums. More large employers are turning to them as a cost-conscious alternative to preferred provider organization plans.
• High-performance networks. These arrangements, often offered by national and regional carriers, steer care toward high-quality, cost-effective providers.

Why costs are climbing

Employers responding to the Mercer survey cited a few key cost drivers:

• Prescription drug spending, which rose 8% in 2024, led by specialty medications and the growing use of GLP-1 drugs for diabetes and obesity.
• Higher provider prices, driven partly by health system consolidation and labor shortages in the health care workforce.
• Increased demand for services, especially as more Americans age into higher-utilization categories.

Average health plan costs are expected to increase by 5.8% in 2025, following a 4.5% rise in 2024.

Enhancing support in other areas

Even as employers look for ways to manage rising expenses, many remain focused on strengthening benefits in areas that support employee well-being, satisfaction and retention.

According to the survey:

• 76% of large employers plan to offer digital stress management tools in 2026, such as mindfulness and meditation apps.
• 51% will provide live or in-person resources for building resiliency and managing stress.
• Nearly one in three employers plan to expand voluntary benefits by 2027, including offerings like pet insurance and employee discount programs.

Many employers are also training managers to recognize signs of mental health issues and direct employees to helpful resources.

What this means for your business

Mercer’s findings show that employers across the country are taking a proactive, balanced approach to managing rising costs while staying focused on supporting their workforce.

We can help you:

• Explore plan design options that preserve affordability.
• Identify cost-saving strategies without sacrificing coverage.
• Strengthen benefits in areas with the greatest employee impact.

With thoughtful planning, it’s possible to keep your benefit offerings competitive and cost-effective, even in a challenging cost environment.