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The cost of employer-sponsored health insurance increased faster than the rate of inflation and wage growth this year, and no relief is in sight in 2026.
The average cost per employee was $17,496 per employee in 2025, which represents a 6% increase over the previous year, according to Mercer’s 2025 National Survey of Employer-Sponsored Health Plans. Sharp growth in prescription drug spending helped fuel the higher cost. Drug costs rose by an average of 9.4% among employers with 500 or more workers. Forty-nine percent of large employers covered costly GLP-1 drugs for weight loss this year, up from 44% in 2024.
An even higher total health benefit cost increase of 6.7% is expected next year, which will push the average cost above $18,500 per employee. Because employees’ share of the cost of health coverage typically rises at about the same rate as overall cost, increases of this magnitude are heightening concerns about affordability.
“Employers want to minimize increases in paycheck deductions while ensuring employees across all pay levels can afford the care they need, when they need it,” said Ed Lehman, Mercer’s U.S. health and benefits leader.
A good starting point for addressing affordability is offering an array of plans designed to meet different health needs and financial situations and helping employees understand the implications of their enrollment decisions. Traditional medical plans offer members a trade-off between the premium cost and the level of coverage provided. The differences in the plans offered can be meaningful.
In recent years, new, non-traditional medical plan models have been introduced that manage cost and address affordability in new ways, generally by using smaller networks of providers selected on the basis of cost and quality. These plans typically incentivize enrollment by offering employees lower contributions, lower cost-sharing or both.
“We expect this trend will continue, as these newer plans tend to cost less and offer more affordable benefits to the plan member,” said Tracy Watts, the company’s U.S. leader for health care policy. “Employers have workforces with diverse needs. When employees choose the right plan for themselves, they can unlock savings.”
Many employers provide specialized, standalone programs designed to help employees better manage specific health conditions. These programs typically are low cost or free to members and often are delivered virtually.
“The best of these programs help members better manage their health conditions, which creates opportunities for both employees and employers to reduce health care spending over time,” Lehman said. “But results are not a given. The key is having the right metrics to monitor program performance.”
Measuring the performance of their health programs to ensure they are delivering value will be a top priority for employers over the next three to five years, the survey found. “It’s a tough challenge,” Lehman said, “but there are ways that employers can make health care more affordable for employees.”
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