The SHRM Annual Conference is in Orlando this week. Twenty thousand HR professionals are sitting in sessions on benefits strategy, total rewards and cost containment. Meanwhile, the number driving every one of those conversations has already been set. The organizations that are not prepared to respond to it will feel it before year end.
Let me give you the number first, because the rest of this article makes more sense when you understand exactly what we are up against. According to Mercer’s 2025 National Survey of Employer-Sponsored Health Plans — a dataset drawn from over 1,700 U.S. employers — the total health benefit cost per employee is projected to rise 6.5% on average during 2026. That figure is the highest single-year increase recorded since 2010. It is not simply a forecast built on unusual assumptions. It is what employers are already absorbing after applying every cost-reduction measure available to them. Without intervention, the underlying cost growth was closer to 9%.
I have been advising businesses on employee health insurance for over 25 years. I have sat across the table from HR directors, CFOs and business owners in every kind of market condition including the post-ACA chaos, the pandemic disruption, the specialty drug explosion and I can tell you that 6.5% carries a different weight than it did in any of those prior cycles. Here is why: wages are growing at roughly 3%. Inflation is running below that cost trend. Which means that for the third consecutive year, health benefit costs are compounding faster than any other major line item in an employer’s operating budget, faster than payroll itself, and there is no policy mechanism currently in place that reverses that trajectory in 2027.
6.5% — Avg. employer health benefit cost increase in 2026—highest since 2010 (Source: Mercer, 2025)
$18,500+ — Projected avg. annual cost per employee for employer-sponsored insurance in 2026 (Source: Mercer / Business Group on Health)
~9% — What costs would have risen without employer cost-reduction action in 2026 (Source: Mercer, 2025)
Those numbers deserve a moment. The average cost of employer-sponsored health insurance has now crossed $18,500 per employee annually. For a company carrying 200 employees on a group plan, that is a benefits spend approaching $3.7 million per year before any ancillary benefits, dental, vision or supplemental coverage are added to the ledger. And approximately 59% of employers are now making changes to their plan design by raising deductibles, increasing out-of-pocket maximums, restructuring cost-sharing just to arrive at that 6.5% figure rather than the 9% baseline.
The HR professionals attending SHRM’s Compensation and Benefits track sessions this week are getting the framework for what to think about. What they are not always getting is the practical context for what to do about it before the renewal lands. The gap that exists between awareness and action is precisely where plan sponsors lose ground year after year.
Why This Increase Is Different From Every Other Year’s Increase
Medical cost trend is not new. Premiums have risen in nearly every year for the past two decades. But the 2026 environment is being shaped by a specific combination of pressures that interact with each other in ways that are harder to offset than a single driver would be. Understanding them individually is the difference between having a strategy and having a reaction.
01 — Prescription Drug Spending — Particularly GLP-1 Therapies
Prescription drug costs are rising 13–15% annually according to Aon data. GLP-1 medications now account for approximately 20% of total prescription drug costs and saw total spend increase roughly 50% in 2025 alone. Among large employers offering GLP-1 coverage, 59% report that actual costs exceeded their projections. A per-member-per-month cost that stood at $1.43 in 2019 had grown to $24.59 by 2024 — a compounding rate that no plan design was built to absorb without adjustment.
02 — Chronic Condition Prevalence and Utilization Growth
The underlying population driving claims is sicker, older and more frequently accessing care than it was five years ago. Aon’s projections cite the continued rise of musculoskeletal and cardiovascular disease as a primary driver, alongside an increase in high-cost cancer-related claims. Hospital workforce expansion is enabling greater patient throughput, which translates directly into higher utilization volume and higher plan costs.
03 — Provider and Manufacturer Price Inflation
Providers, health systems and pharmaceutical manufacturers are rebuilding margins that compressed during and after the pandemic. Price inflation — not just utilization — is now the dominant factor in medical cost growth according to Segal’s annual cost trend data. Pure price inflation is considerably harder to offset without network strategy and carrier negotiation leverage.
04 — Three Consecutive Years of Premium Compounding
KFF’s 2025 Employer Health Benefits Survey found that family premiums averaged $26,993 — and that 2025 marked the first time in 20 years that employer-sponsored family coverage increased by 6% or more for three straight years. An employer who absorbed 5% in 2023, 6% in 2024 and 6.5% in both 2025 and 2026 has not experienced four moderate years. They have experienced a structural shift in what their plan costs as a percentage of total compensation.
“The cost pressures are more significant. Even though there is a focus on employee health and well-being, there is certainly just a financial reality that employers can no longer defer.”
— Sunit Patel, Chief Actuary of U.S. Health, Mercer
You Are Being Asked to Do More With the Same — or Less
Here is what I hear consistently from the people that do exactly what you do and what the data from KFF and Mercer confirms across the broader market. Approximately 59% of employers this year are making plan design changes to absorb cost. To reiterate that translates into raising deductibles, restructuring cost-sharing and reducing or eliminating coverage for specific drug categories. Those changes land hard with employees. They call HR registering their complaints because they want to know why their out-of-pocket exposure changed. In competitive talent markets, attrition risk rises when the benefits package no longer benchmark favorably against a competitor’s offer.
The HR professional is simultaneously the plan administrator, the employee advocate, the internal communications lead and the compliance officer for the benefit program. They are expected to justify cost increases to leadership, explain plan changes to employees and manage the annual renewal process often without a benefits partner who is engaged in that work year-round rather than exclusively in the 60-day window before the effective date.
That is not a workload issue. It is a structural problem with how most brokerage relationships are built. A broker who contacts you in October with carrier options is not a partner — they are a vendor. The distinction matters enormously when costs are compounding the way they are right now.
What a Year-Round Benefits Partner Actually Does
Continuous plan performance review against claims data and utilization trends — not a once-a-year snapshot during open enrollment preparation.
Annual full-market analysis across all major carriers, including HMOs, PPOs, regional networks, level-funded structures and reference-based pricing options — documented and benchmarked against your employee population.
Proactive pharmacy benefit strategy, including PBM contract evaluation, formulary management and GLP-1 coverage policy development before it becomes a budget crisis.
Compliance and audit readiness review — a plan that was structured correctly at implementation can drift through carrier changes, enrollment errors and regulatory updates your current broker may never have flagged.
Employee communication support that translates plan mechanics into plain language — because a benefit that employees cannot understand is a benefit that does not drive retention.
What Organizations Can Do Before the Next Renewal
Twenty-five years of working across carriers and plan structures has taught me that the organizations that manage cost most effectively are not necessarily the ones with the largest populations or the most leverage. They are the ones whose broker is doing the actual market work. Most often, evaluating the full carrier landscape annually, not renewing with the incumbent carrier by default, and bringing a documented strategy to the renewal conversation rather than a summary of last year’s claims.
The carrier market shifts every year. HMO and PPO network compositions change. Regional carriers gain or lose provider contracts that affect member access. Level-funded and self-funded structures become viable at lower population thresholds than they used to. Reference-based pricing models have matured considerably and are now a legitimate consideration for mid-market employers who previously had no real alternative to fully insured carrier pricing. None of that intelligence makes it into your renewal analysis if your broker is not doing the work to surface it.
Beyond carrier strategy, there are specific operational decisions that have an immediate impact on 2026 cost exposure. GLP-1 coverage policy is the most visible one right now. Conversations ensue whether to cover, at what eligibility threshold, with what utilization management protocols, and how to communicate that policy to employees. Employers who adopted coverage broadly in 2024 without a clinical management framework are the ones absorbing 59% cost overruns today. That is a solvable problem, but it requires expertise in pharmacy benefit design that is distinct from general brokerage.
Compliance posture is the quieter risk that surfaces less often in conference sessions but creates significant exposure when it does. A plan audit whether triggered by an ERISA review, a carrier audit or an employee complaint will reveal documentation gaps, enrollment irregularities and plan document discrepancies that accumulated without anyone’s notice. I work with organizations that have never had that conversation with their broker, because their broker has never raised it. That is not a hypothetical risk. It is an active one, and it has a very straightforward mitigation: review your plan documents and your compliance posture before someone else requests that you do.
What the SHRM Conference Week Should Prompt You to Do
The sessions at SHRM26 this week are excellent framing. Pay equity, healthcare cost containment, flexible benefit design, total rewards strategy are the right conversations to be having in 2026. But awareness of the problem and a path to solving it for your specific organization are two different things.
The 6.5% increase is already baked into the next renewal cycle for most plan sponsors. What is not predetermined is whether your organization arrives at that renewal with a documented strategy, a full-market carrier analysis, a compliant plan structure and a clear understanding of where your cost exposure actually sits or whether you arrive the way most organizations do: reactive, under-prepared and negotiating from a position of limited information.
I built Paul Donas, LLC around a straightforward premise: HR professionals and business owners deserve a benefits partner who treats their plan like it matters every single month of the year, not just during open enrollment. We represent all major carriers and broker the full market annually. We design strategies around your employee population, your industry and your budget reality — not around what is easiest for us to place. And we stay in the relationship to handle everything that comes after the effective date, because that is where the real work of benefits management actually lives.
If the 6.5% number got your attention and you want to understand exactly what it means for your plan specifically, the next step is simple. Fill out the form at pauldonas.com and we will do the rest. No obligation — just a clear-eyed look at where your plan stands and what is available to you in this market.
Ready to Stop Reacting and Start Planning?
Stop Worrying About the Next Renewal
Fill out the form at pauldonas.com and we will give you the information you need to make the best decisions possible before your next renewal forces the question.
pauldonas.com • 973.509.7473 • [email protected]
Data Sources: Mercer 2025 National Survey of Employer-Sponsored Health Plans • KFF 2025 Employer Health Benefits Survey • Aon U.S. Employer Health Care Cost Report 2025 • SHRM 2025 Employee Benefits Survey • Segal 2025 Health Plan Cost Trend Survey
This article is intended for general informational purposes for HR professionals and benefit plan sponsors. It does not constitute legal, financial or actuarial advice.
© 2026 Paul Donas, LLC • 973.509.7473 • pauldonas.com
