Healthcare costs may increase by nearly 10% next year, according to the latest edition of the Business Group on Health’s annual survey of large U.S. employers, which BGH executives called a sign of the “unprecedented” environment that employee benefits teams face.
2025 marked the third consecutive year in which actual healthcare costs exceeded BGH members’ projections. Respondents included 127 employers representing 8.7 million covered U.S. individuals. Moreover, 2025’s year-over-year increase of 8.8% was the highest ever reported by BGH members.
“It’s clear that employers are at an inflection point,” Brenna Shebel, vice president at BGH, said during a press conference announcing the results on Tuesday.
The organization found that disease categories such as cancer, musculoskeletal and cardiovascular drove most of the trend — a finding consistent with previous editions of the survey — alongside increased prices for hospitals, outpatient facilities and pharmaceuticals. Pharmacy costs alone are expected to increase 12% in 2027 before plan design changes.
BGH’s cost-increase findings are “no doubt quite astounding,” said Ellen Kelsay, the organization’s president and CEO, and all the more challenging given that most employers have already locked in their employee benefits budgets for 2026. Many won’t be able to take drastic cost-cutting measures until 2028 at the earliest, she noted.
For many, the response to high costs will begin with a closer look at vendors and third-party partnerships. The vast majority of respondents, 95%, have issued requests for proposals, and 58% plan to replace underperforming vendors and/or eliminate programs with low utilization. Additionally, 83% have increased the scope of their performance guarantees from health partners.
Employers won’t stop at these measures alone, Kelsay added, with nontraditional and emerging care models increasingly gaining steam.
Take pharmacy benefit managers, an oft-maligned player in the healthcare space. Nearly one-third of BGH’s respondents will have a “transparent” or “new-generation” PBM arrangement in place by 2027, and an additional 47% were considering doing so in future years. Doing so could take on average 12 to 18 months, Kelsay said, as employers want to ensure due diligence and a smooth transition to a new partner.
“These are big, big processes for employers,” Kelsay continued. “It’s not something they can quickly turn on a dime.”
Employers are also weighing whether to require plan enrollees to use centers of excellence, or COEs, for specific points in the healthcare journey, Shebel said. Eighty-two percent of BGH respondents already had a COE model in place this year, and 12% were either adding or considering this option moving forward. Value-based solutions, high-performance networks and accountable care organizations were also in the mix.
Meanwhile, employers have pulled back on one particular coverage area: GLP-1s, specifically for weight management. In fact, not a single employer in BGH’s survey said they planned to add GLP-1 coverage for weight management in 2027 — and 14% said they have dropped or plan to drop this coverage in time for 2027.
Those findings echo the results of this year’s SHRM Employee Benefits Survey, which similarly found that coverage of GLP-1s for diabetes management far outpaced coverage for weight management. Even the 60% of BGH members who said they were maintaining this coverage largely plan to implement stronger utilization controls, like validating members’ clinical eligibility or requiring participation in weight management programs.
Part of the issues employers have with GLP-1s, aside from their expense, concerns their emerging role as a default option for weight loss rather than one of many avenues available to patients, according to Kelsay. The direct-to-consumer space for the drugs has also expanded in recent years, leaving employees with more options to obtain the medications.
“For many employers, they’re having to make some hard decisions about maintaining the viability of their overall plan and whether or not they can do so while still continuing GLP-1s,” she said. “Some of this is also just a reframe of all the other programs that employers have long offered, [such as] other anti-obesity medications, other lifestyle, behavior, nutrition programs, bariatric surgery, you name it.”