What Employee-Sponsored Health Plan Leaders Must Do Now to Tame a Projected 9% Cost Surge in 2026

In the Advisory Board’s Aug. 21, 2025 briefing*, they projected that employer-sponsored health plan costs in the U.S. will rise by a median of 9% in 2026—a sharp increase that will significantly strain employer budgets. For U.S. company leaders in HR, benefits, finance, and operations, the question is not if expenses will rise, but how to mitigate the impact for both the company and employees.

Here are the key cost drivers identified in this report, why they matter, and suggestions for employers to reduce or control costs.

Key Drivers of Cost Increases

1. Specialty Drugs, Especially GLP-1s: These newer drug classes have very high price tags and growing utilization. GLP-1 medications, used both for diabetes and weight loss, are a primary contributor. 

2. Cancer Treatments: With expensive immunotherapies and precision medicines, oncology is one of the fastest growing segments in employer health spend.

3. General Medical & Hospital Utilization: Increased treatment for musculoskeletal and cardiovascular conditions, diabetes, and mental health and substance use disorders contribute to the baseline inflation of costs.

While escalating costs pose a significant challenge, they constitute only one side of the equation - and the least impactful for getting out of this vicious cycle in the medium term. What is also sorely needed is improved alignment between business and health outcomes (quality). This can only come with smarter and more strategic investments in new kinds of benefits programs.

What Employers Can Do: Practical Steps for Plan Leaders

Here are several strategies plan sponsors and benefit leaders can put in place now to align incentives and improve financial transparency.

Formulary Management & Drug Strategy

How it Helps: Controls spend and increases transparency from specialty & high-cost pharmaceuticals.

Key Implementation Tip: Use formulary tiers, demand lower costs, negotiate rebates or outcome-based contracts; partner with specialty pharmacies.  

Preventive Care & Chronic Disease Management

How it Helps: Lowers long-term cost by avoiding late-stage disease and complications.

Key Implementation Tip: Identify high-risk employee groups; deploy wellness/behavioral programs; preventive screening; early intervention for pre-diabetes, cardiovascular risk assessment.

Network Design & Value-Based Care

How it Helps: Incentivize patients toward higher quality, lower cost providers to drive the best possible outcomes.

Key Implementation Tip: Implement tiered networks or centers of excellence for oncology, cardiology and other specialties; adopt value-based payment models; embed quality incentives.

Specialty Drug Forecasting & Budgeting

How it Helps: Anticipates expense spikes so budgets aren’t overwhelmed.

Key Implementation Tip: Use data analytics to model likely utilization; include specialty drug spend in renewal forecasting; scenario planning.

Employee Engagement & Education

How it Helps: Helps employees make smarter choices that reduce cost.

Key Implementation Tip: Educate on drug options, provider costs; promote preventive services; provide tools for comparing providers.

Audits and Payment Integrity Programs

How it Helps: Save anywhere from 1-10% of RX spend and ensure oversight of your plan’s design.

Key Implementation Tip: Ensure PBM contracts allow for this and then partner with vendors who can perform regular oversight.

What Plan Leaders Should Prioritize

• Forecasting Specialty Spend is essential. Many employers are surprised by the costs of GLP-1s or cancer therapies because they weren’t included in the budget model.

• Partnerships with PBMs, specialty providers, and pharmacy vendors should include outcome-based or value-based terms.

• Plan design that balances cost-sharing so employees aren’t overburdened while still incentivizing the use of cost-effective care.

• Transparent communication with employees about rising costs, why plan changes may be needed, and how to maximize benefits without surprise expenses.

The projected 9% increase in health plan costs is steep, but it's not unavoidable. Employers who act—by forecasting, refining benefit design, pushing back on intermediaries on drug pricing, investing in prevention, and forming value-based partnerships—can reduce the portion of that increase they absorb, and protect their workforce from unsustainable out-of-pocket costs.

* The Advisory Board, Charted: Employer health costs to jump 9% in 2026