The cost of health benefits is on pace to increase by 5.8% this year, a sizable jump from the 4.5% rise experienced in 2024, according to a Mercer survey.
This would be the third consecutive year of health care cost growth outpacing overall inflation, according to the survey of 711 organizations.
The 5.8% growth rate in 2025 is after accounting for any planned cost-reduction measures. Employers had estimated that their costs would rise by about 8%, on average, if they took no action to lower costs, Mercer reported.
With annual increases in the Consumer Price Index having plummeted since peaking above 8% in 2022, other factors are to blame for much of the recent increases.
“One source of pricing pressure is the widening gap between the supply of health care workers and the demand for health care services, which is building as older Americans become a larger part of the population,” Mercer wrote.
Another factor is the continuing consolidation of health care systems, which boosts their negotiating power.
The cost increase for prescription drugs, which has significantly outpaced that of overall health care costs for many years, did so again in 2024, rising 8% for “large employers” (those with more than 500 employees). That was down slightly from 8.6% the previous year.
The report noted that new gene and cellular therapies, as well as other specialty drugs, are both “making a big difference in people’s lives” and “extremely expensive.” On top of that, organizations are dealing with the increased availability and popularity of costly GLP-1 medications.
Three-quarters (74%) of the large employers reported they have taken action to increase their analysis of costs and benchmark comparisons, or plan to do so in 2026.
In response to cost growth, 51% of the large employers said they are likely or very likely to make plan-design changes in 2026 that would shift cost to employees. That was up from 46% for this year. Previously, the report noted, employers had been more reluctant to do that because of the tight labor market and concerns about the affordability of health care for employees.
Meanwhile, the survey addressed a topic not often included in discussions of employee benefits: extreme weather events. More than three quarters (76%) of large-employer respondents said employees have been affected by at least one such event, and 52% said business operations have been affected. In response, some employers are moving or planning to implement programs to support employees affected by extreme weather.
Three in 10 are or will offer mental health support for “eco-anxiety.” Other most-often responses include guidelines to protect worker safety and health from severe weather, processes to offer relief funding to impacted employees and paid leave for those impacted.
In 2026, 66% of employers will have one or more policies or programs in place to address climate risks for the workforce, up from 53% this year.
