Healthcare Costs Are Rising Again. Should Employers Pass the Bill to Employees?
Healthcare costs continue to climb, and employers are once again facing difficult decisions.
According to new research from Mercer, nearly half of large employers expect to increase employees' out-of-pocket healthcare costs for 2027 through higher deductibles, copays, or other plan changes. Many organizations are also evaluating premium increases and redesigning health plans as medical and prescription drug costs continue to rise.
For many organizations, these decisions feel unavoidable. But before increasing employee cost sharing, there's an important question worth asking:
What problem are you really trying to solve?
Rising Costs Are Real. Employers aren't imagining the pressure. Mercer's research projects average health benefit costs exceeding $18,500 per employee while prescription drug spending continues to be one of the fastest-growing components of healthcare costs.
Organizations have several options to respond:
Increase premiums
Raise deductibles
Increase copays
Reduce plan richness
Explore alternative network designs
Invest in cost-management strategies
Many employers will likely use some combination of these approaches.
Cost Savings Can Come With Hidden Costs
Reducing benefit costs may improve next year's budget. But it can also influence employee behavior in ways that aren't immediately visible. Higher out-of-pocket costs may cause employees to:
Delay preventive care
Skip recommended treatment
Postpone filling prescriptions
Experience greater financial stress
Those decisions can ultimately affect productivity, absenteeism, engagement, and retention. Sometimes the least expensive benefits decision becomes the most expensive workforce decision.
Benefits Are Part of Your Employment Brand
Employees rarely separate compensation from benefits. They evaluate the total employment experience. Organizations competing for talent should consider how benefit changes affect questions like:
How competitive are we in our labor market?
Will these changes affect retention?
Are we investing in employee wellbeing or simply reducing expenses?
What message does this send to our workforce?
Benefits communicate organizational priorities just as clearly as compensation programs.
There May Be Better Ways to Manage Costs
One interesting finding from Mercer's research is that many employers aren't relying solely on higher employee cost sharing.
They're also exploring plan designs that encourage employees toward higher-value care, including high-performance provider networks and variable copay structures. These approaches attempt to improve affordability while managing overall healthcare spending. The lesson isn't that every employer should adopt these specific strategies. It's that organizations have more options than simply asking employees to pay more.
The Bottom Line
Healthcare costs are unlikely to slow down anytime soon. Employers will need to make difficult decisions, but those decisions shouldn't focus only on next year's healthcare budget.
The best organizations evaluate healthcare benefits the same way they evaluate compensation, incentive programs, and workforce planning: strategically.
The goal isn't simply to spend less. It's to invest wisely in a benefits program that supports employees while helping the organization achieve its long-term business objectives.