H1-2026 Benefits Bulletin: Navigating Rising Costs, Legislative Shifts & the Evolving Workforce Benefits Landscape

Executive Summary

The first half of 2026 marks a pivotal inflection point in employer-sponsored benefits. Healthcare costs are surging at their highest rate in 15 years, driven by specialty pharmaceuticals, GLP-1 medications, and provider consolidation. This dramatic cost increase is forcing some employers to make difficult decisions. Simultaneously, landmark PBM transparency legislation has been signed into federal law, reshaping the pharmacy benefits landscape. Employers face the dual challenge of controlling costs while meeting evolving workforce expectations around mental health, financial wellness, and personalized benefits.

This bulletin synthesises insights from 16+ industry sources to provide actionable intelligence for benefits decision-makers.

What's Driving Costs Higher

• Specialty Rx & GLP-1s
  Rx-only trends projected at 10–12%. GLP-1 coverage rose to 49% of large employers, costing ~$1,000/ month per patient. 77% say managing this cost is a top priority.
• Provider Consolidation
  Consolidation to fewer, larger health systems has increased provider negotiating leverage. Combined with healthcare sector wage inflation, this is accelerating price increases.
• High-Cost Claimants
  Major health events (claims >$100K/year) are now twice as common as 5 years ago. Monthly claims jumped nearly 40% since 2020.
• Behavioral Health
  Surging mental health and substance use disorder is adding new cost pressure. Absences related to mental health are rising while employer investment in mental health resources remains disproportionate to the need.

Healthcare Cost Landscape

Mercer National Survey Highlights

• Cost Growth Trajectory
  Fourth consecutive year of elevated cost growth after a decade of ~3% annual increases. Leading to 59% of employers will make cost-cutting changes in 2026, which is up from 44% in 2024. Half of all large employers will plan to shift more cost to employees.
• Per-Employee Costs Rising
  Average cost per employee reached $17,496 in 2025, projected to exceed $18,500 in 2026. Rx spending rose 9.4% among large employers. Employee paycheck deductions expected to rise
  6–7%. Translating to 28% of median-income workers unsure if they can afford care.

The Society of Human Resources Management (SHRM) also projects health care costs to rise by 10%, driven by catastrophic claims and GLP-1 medications. Regional variations: East and Pacific regions are experiencing trends 1–2% above national averages.

Employer Response Strategies

• 51% of large employers are likely to raise deductibles or out-of-pocket maximums in 2026
• Increasing adoption of value-based care, virtual-first healthcare, and price transparency tools
• Growing interest in alternative plan models emphasising navigation and predictable cost patterns, with 35% of employers expected to offer non-traditional plan options focused on higher quality, cost-efficient care
• Considering alternative plan designs. Plan design is an area where there continues to be a lot of innovation.

Naturally, self-funding offers a lot of flexibility in being able to incorporate various cost control elements, such as Direct Primary Care and Onsite clinics, Direct Contracting, Bundled Procedure
Pricing, Point Solutions, Pharmacy carve-outs, including specialty sourcing, Reference-Based Pricing, etc.

Self-funding and the ability to enhance control over plan costs were historically available only to larger employers. However, these solutions have become accessible to smaller employers – even
if traditional self-funding may be too large a step to take. Captives and other bundled “off-the-shelf” solutions provide the ability to incorporate self-funding and supporting cost containment strategies.

Lastly, ICHRAs (Individual Contribution Health Reimbursement Arrangement) are gaining popularity. Introduced broadly in 2020, for all intent and purposes, ICHRAs convert an employer’s health plan to a defined contribution plan – employers provide a subsidy which the employee uses to secure coverage on the individual market. Employer adoption of ICHRAs increased by 34% from 2024 to 2025 for employers with 50+ employees (up from 29% adoption between 2023 to 24). While an ICHRA is a significant change, it has generally been received positively by employees, with strong reported satisfaction. In order for ICHRAs to be a viable option in a particular locale, the individual market must be reasonably priced and offer plan/carrier variety.

The Impact of GLP-1s

GLP-1s have rapidly become one of the most consequential impacts in employer-sponsored plans. Originally approved for diabetes management, expanded use for weight management has created a surge in utilisation that is fundamentally reshaping pharmacy cost structures and employer coverage decisions.

The Two Markets for GLP-1s

GLP-1s have created two distinct markets: diabetes care with clear clinical justification, and weight management are the areas where coverage varies widely among employers.

Nearly a third of employees say GLP-1 coverage could influence their employment decisions, making this more than a cost control issue - it’s a talent strategy consideration.

EMPLOYER GLP-1 STRATEGIES FOR 2026

• Implementing clinical criteria and prior authorisation for weight management indications
• Maintaining diabetes coverage while adding step-therapy protocols for obesity
• Partnering with PBMs to negotiate better rebate terms on GLP-1 medications
• Integrating GLP-1 prescriptions into broader wellness and chronic disease programs
• Some employers are eliminating GLP-1 coverage for weight loss entirely, while retaining it for diabetes

In certain areas of the country, some carriers are proactively eliminating GLP-1 coverage for weight loss and only extending the coverage for diabetic treatment. While this is an aggressive stance on the carriers’ part, it may become more prevalent over time.

PBM Reform & Legislation

49% of self-funded employers now carve out pharmacy benefits with a PBM, up from 27% in 2025, reflecting growing sophistication in pharmacy cost management.

Federal PBM Transparency: Now Law

In a landmark bipartisan action, the Consolidated Appropriations Act of 2026 (HR 7148) was passed by the House 341–88, approved by the Senate 71–29, and signed into law on February 3, 2026. This legislation represents the most significant federal reform of pharmacy benefit management in decades.

Key Provisions

• 100% pass-through of rebates mandated—PBMs can no longer retain manufacturer rebates
• PBM compensation in Medicare Part D is prohibited from being tied to drug list prices
• Expanded definition of ‘covered service provider’ for transparency requirements
• CMS receives $188M to enforce ‘reasonable and relevant’ Medicare Part D contract terms
• Maximum penalty of $100,000 (PBM, insurer, TPA) per false item for knowingly providing false information
• $10,000/day fines for employer plan sponsors who fail new transparency requirements

The Great Healthcare Plan

In January 2026, the administration announced ‘The Great Healthcare Plan,’ which includes a mandate to end kickbacks from PBMs to large brokerages acting as middlemen. The White House asserts these payments ‘deceptively raise the cost of health insurance.’ The plan is targeting taxpayer savings of at least $36 billion and a reduction of 10% to common ACA plans.

No Surprises Act Update

• 85% of Independent Dispute Resolution (IDR) disputes involve employer-sponsored health plans - the average resolution takes 91 days, with some exceeding 300 days.
• The system favors healthcare providers, siding with providers in cases involving hospital care 80% of
  the time.
• When siding with the provider, IDR awards significantly exceed commercial rates. As an example, for anesthesia for a colonoscopy, while health insurers paid an average of $300 for this service, when a dispute was reviewed by an IDR reviewer, the average award was $1,252 for this service.
• While the act has protected patients from ~$1 million surprise bills per month, the IDR process needs
  reform.
• The ERISA Industry Committee (ERIC) has warned federal officials that providers are using the No Surprises to drive up costs and leave networks.

WATCH: EMERGING PBM DEVELOPMENTS

• Warren-Hawley bipartisan bill could break up integrated PBM entities
• CVS Health settled Louisiana PBM transparency lawsuits for $45M
• Pharmacists Fight Back Act pushed to regulate PBM network practices

Workforce Wellbeing & Mental Health

MetLife’s 24th annual study reveals that workforce wellbeing has stalled, with cost pressures outpacing investments. For the first time since 2022, controlling health costs has surpassed talent retention as employers’ top benefits objective.

“Job Hugging”: The Hidden Retention Risk
While 77% of employees intend to stay, 56% stay out of necessity, not commitment. Financial confidence has fallen to its lowest level since 2012. 31% say the uncertain job market makes leaving too risky.

MENTAL HEALTH AS STRATEGIC PRIORITY
Gen Z now comprises 18% of the labour force and disproportionately reports mental health challenges, requiring employers to rethink support models.

Mental health leaves surging while employer investment per employee dropped ~7% year-over-year.

The Approach to Mental Health

• SHRM, among others, advocates shifting from reactive EAP-style support to a proactive, skills-based approaches—teaching resilience, adaptability, and problem-solving. This involves addressing mental health as a core competency rather than as a crisis response. By equipping employees with practical tools for emotional regulation, coping strategies, and daily life management, the hope is to improve well-being and address issues before they escalate.
• Organizations investing in mental health see a $4 return for every $1 spent. 75%+ of large employers will offer digital stress management tools. Embedding support into culture helps employees feel valued rather than managed.
• A related trend is the rise of a Lifestyle Spending Account (LSA). An LSA is designed to support employee physical, mental, and financial health. Unlike rigid traditional benefits, an LSA allows tailoring an offering to an employer’s company culture. An estimated 38-46% of employers are considering or planning to add LSAs, with average annual contributions ranging from $250 - $2,000 per employee.

Fiancial Wellness & Retirement

Financial stress is a top driver of reduced engagement and productivity across all demographics. Additionally, not all employees have the same needs – organizations need to understand the financial diversity of their workforce. According to the Business Group on Health, in 2025, 92% of employers included financial health as a dimension of their wellness strategy, with 100% of employers projected to include it for 2026.

Employers are seeking comprehensive solutions to simplify complexity – a one-stop shop that incorporate solutions to address immediate financial needs, such as earned wage access, with budgeting and savings tools that help employees build for the future. Similar to the trends seen in mental health, incorporating a skillsbased approach to financial wellness helps set up employees for success in the future. As the old adage goes – teach a man to fish, feed him for a lifetime.

The most popular financial wellness benefits for employers to offer are:

Emergency Savings benefits – including employer-sponsored emergency savings accounts (ESAs), payroll deducted savings programs and Secure 2.0 sidecar emergency accounts. These help to reduce 401(k) loans and financial stress as most Americans cannot cover unexpected expenses without debt.

Student Loan Support and Debt Management – including repayment benefits, Secure 2.0 student loan matching contributions (including integration with retirement matching), along with Debt counseling and repayment planning tools. Student debt has become of the biggest barriers to saving.

Earned Wage Access and Flexible Pay – which provide employee access to wages before payday. This appeals to workers living paycheck-to-payheck and can circumvent a need for high-interest loans.

Personalized Financial Coaching and Digital Tools – including AI-driven tools, retirement calculators, and debt and savings planning tools.

There has been a strategic shift from education towards financial outcomes. Seminars and financial literacy training have been replaced with actual financial benefits, automated savings, debt support and integrated retirement programs. Increasingly, employers are looking to help employees manage short-, mid-, and long-term financial risks.

According to a survey conducted by the National Financial Educators Council, 51.6% of employees say they would be more productive at work if their personal financial situation were more secure.

Emerging Trends & Technology

Artificial intelligence is transforming benefits management faster than anticipated. From personalized benefit recommendations to automated enrolment and claims processing, AI is reshaping both the employee experience and HR operations. However, a critical governance gap has emerged.

AI Adoption Snapshot

• 52% of employers using AI-powered learning platforms
• 51% testing AI for performance analytics
• Only 28% have a comprehensive AI governance policy
• AI is also heavily leveraged for personalized benefit recommendations and to help HR identify trends

Benefits Personalization

• One-size-fits-all benefits officially outdated — personalization is the new standard
• Choice-based platforms let employees customise by life stage
• Lifestyle spending accounts give employees control over benefit dollars
• Unified platforms consolidating programs into single experience
• Persona-driven insights shaping employer strategy

Cigna projects U.S. companies could lose between $1.3 trillion and $5.1 trillion in 2026 if turnover trends continue and 34% of the workforce changes jobs. Benefits are no longer a support function—they are a strategic lever for attracting and retaining top talent.

• 62% of employers increased benefits investment; 60% expanded voluntary offerings, yet engagement plateaued for 3 years (MetLife).
• Younger generations are developing chronic conditions earlier, visiting ERs more, and engaging primary care less (UHC).
• Increasing focus on preventive care: organizations incentivizing screenings, wellness visits, and early interventions.
• Healthcare transparency tools are enabling employees to compare prices with value-based plans, incentivizing high-quality providers; expansion of virtual-first care.
• Caregiver support is no longer optional: expanded childcare, eldercare, family leave. Dependent care FSA limit now $7,500.

Recommended Actions for H1 2026

1. Review Strategy for GLP-1s - Assess GLP-1 coverage policies. Self-funded plans naturally have more flexibility and can negotiate rebate terms, and should consider carving out pharmacy benefits. Evaluate impact of new PBM transparency mandates on your plan’s cost structure.
2. Prepare for PBM Compliance in Self-Funded Plans - New federal transparency requirements include $10K/day fines. Ensure your plan meets enhanced reporting obligations under the Consolidated Appropriations Act of 2026.
3. Audit No Surprises Act Exposure - 85% of IDR disputes involve employer plans with awards exceeding commercial rates. Review out-of-network claim patterns and dispute resolution processes.
4. Strengthen Mental Health Programs - Move from reactive EAP models to comprehensive and integrated mental health benefits. Ensure that your organisation’s culture is one that makes employees feel valued rather than managed. Train managers, expand digital wellness tools, and track utilisation metrics.
5. Establish AI Governance - Only 28% of employers have comprehensive AI policies. Develop governance frameworks for AI use in benefits administration and employee-facing tools.
6. Rebalance Cost-Sharing Strategy - With costs rising 8–10%, evaluate plan design changes carefully. Consider non-traditional options before shifting costs to employees.

About the Authors

Stephanie Scarola and Paula Kaeser are insurance specialists with ERA Group. They come from opposite sides of the industry and have over 35 years of collective experience in insurance. They assist clients in evaluating their insurance and benefit programs. ERA utilises its in-depth subject-matter expertise to evaluate arrangements, negotiate, and deliver best-in-class sourcing solutions for its clients.

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