Health insurance costs in the U.S. have climbed relentlessly for four straight years—and 2025 is set to bring the steepest surge yet. Employers across the country are preparing for the largest increase in premiums in 15 years, according to a sweeping survey of more than 1,700 companies.
The National Survey of Employer-Sponsored Health Plans, conducted by Mercer—a subsidiary of Marsh McLennan—forms part of the firm’s broader advisory work, helping employers contain rising insurance costs while promoting better health and well-being for their workforce.
According to Sunit Patel, Mercer’s U.S. Chief Actuary for Health and Benefits, two key forces are converging to drive costs even higher. “Health benefit cost trend has two primary components — healthcare price and utilization. Right now, both are rising.”
Mercer projects that health benefit costs per employee will climb 6.5% in 2026—even after employers implement cost-cutting measures—the steepest rise since 2010. Without such adjustments, the increase could soar to nearly 9%, a stark reminder of the unrelenting strain on employer healthcare budgets. The surge would mark the fourth consecutive year of elevated growth, breaking from a decade in which annual increases averaged a more modest 3%.
Multiple Forces Converge to Drive Soaring Costs
Some of the rising costs stem from the very progress reshaping modern medicine. Breakthrough diagnostics and cutting-edge treatments—from revolutionary cancer therapies to powerful weight-loss drugs—are changing lives in profound ways, but at price points far higher than older options. At the same time, the consolidation of providers into massive health systems has given hospitals greater leverage, allowing them to demand higher reimbursement rates from insurers.
Patel noted that demand for health services has climbed steadily over the past two years, driven in part by patients catching up on care they delayed or missed during the pandemic. The rebound has also been fueled by an easing of labor shortages, which has made it easier for providers to meet rising needs. “The rise of virtual healthcare — and growing consumer acceptance of it, particularly in behavioral health — is also affecting utilization patterns,” Patel said, “because it removes geographic barriers to care and can be a more convenient option for patients.”
Inflation has added another layer of pressure, as rising wages across the healthcare sector push overall costs higher. Meanwhile, the pandemic accelerated the adoption of virtual care, making it easier for patients to access services. Paradoxically, this convenience has led to greater utilization, driving up total claims and further straining the system.
A Mercer spokesperson told Fortune that this marks the first 15-year high since the survey’s inception in 1987. Past peaks include a 13-year high of 14.7% in 2002—the highest since 18.6% in 1988—and a seven-year high of 6.9% in 2010, the largest increase since 2002. “Cost growth was very volatile from 1987-2002, the early years of managed care, with sharp highs and lows,” the spokesperson said, noting that growth stabilized around 6%–7% annually starting in 2004 before slowing to roughly 3%–4% a year from 2012 onward.
Employers Fight Rising Costs by Passing the Burden to Workers
Facing intensifying financial pressures, employers are ramping up aggressive measures. According to the survey, 59% of companies plan to implement cost-cutting changes to health plans in 2026—a sharp jump from 48% in 2025 and 44% in 2024. The most common approach involves increasing deductibles and cost-sharing, pushing more out-of-pocket expenses onto employees. Yet, many organizations are also exploring smarter ways to rein in costs without simply shifting the burden. Strategies such as managing high-cost claims and rigorously measuring program performance are gaining traction, aiming to ensure that every dollar spent delivers real value.
At the same time, strengthening mental health benefits continues to be a top priority in the post-pandemic era. Nearly two-thirds of large employers plan to expand access to behavioral healthcare over the coming years. Ed Lehman, Mercer’s US Health and Benefits Leader, emphasizes, “Employers recognize it’s essential for employee well-being and overall business performance.”
What You Need to Know About This Season’s Open Enrollment
For employees, the impact hits the wallet. Health coverage deductions from paychecks are projected to rise 6% to 7% on average in 2026, reflecting the trend of employee contributions climbing alongside overall plan costs. Beyond steeper premiums, higher deductibles and copays are likely to push out-of-pocket expenses even further, placing additional financial pressure on workers already navigating a tight budget.
Mercer advises employees to “carefully weigh premium costs and cost-sharing provisions” during open enrollment, urging a thoughtful balance between monthly premiums and out-of-pocket responsibilities to choose the plan that best fits their needs. The firm also highlights that over one-third of large employers are expected to offer non-traditional, high-performance network plans in 2026—designed to lower out-of-pocket expenses by guiding patients to carefully selected providers renowned for both quality and cost-efficiency.
[This report has been updated with a statement from a Mercer spokesperson.]
