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Let's just say it: renewal season 2026 is a lot.
Employers are projecting a median 9% increase in healthcare costs — the steepest climb since 2010, according to the Business Group on Health's 2026 Employer Health Care Strategy Survey. On a compounded basis, costs in 2026 are likely to be 62% higher than 2017 levels. And more than a third of employers in a recent Assurex Global survey said the size of their renewal increase was their biggest surprise of the year.
We've been talking to HR and benefits teams all quarter, and a theme keeps coming up: I know costs are up, but I don't fully understand why — and I need to be able to explain it. To leadership. To employees. To yourself, when you're trying to make a decision about plan design at 4:45 on a Tuesday.
So here's that explanation. Five things actually driving the numbers this year, in plain language, with what they mean for your team.
In 2024, pharmacy expenses made up nearly a quarter of all employer healthcare spend — 24 cents of every dollar. For 2026, employers are forecasting an 11-12% increase in pharmacy costs specifically, according to Business Group on Health.
The primary drivers are specialty drugs, gene therapies, and the continued expansion of GLP-1 medications for obesity treatment. These are not situations where plan design changes alone can close the gap. Most of the cost is driven by unit price increases and a growing number of employees qualifying for high-cost therapies — not by overutilization or waste that can be squeezed out of the system.
What this means for HR teams: Expect pharmacy to be a significant part of the renewal conversation, and be ready to explain to leadership why plan design adjustments have limited impact on this particular cost driver. If your PBM contract is up for review, now is the time to explore models with greater transparency and reduced rebate dependence.
Cancer has ranked as the leading condition driving employer healthcare costs for four consecutive years, and prevalence continues to grow. Employers aren't just absorbing treatment costs — they're also investing more in early detection, with many expanding screening coverage, removing age restrictions on preventive care, and adding breast cancer screening alternatives.
About half of large employers now offer a cancer Center of Excellence (COE) in 2026, with another 23% planning to do so by 2028. The reasoning is straightforward: early detection and high-quality treatment coordination tend to produce better outcomes at lower long-term cost.
What this means for HR teams: If your plan doesn't yet cover preventive cancer screenings broadly, this is a cost-containment strategy disguised as a coverage enhancement. Framing it that way in renewal discussions can help.
Mental health and substance use disorder utilization is rising, and it's contributing to cost increases. But it also reflects something employers have been working toward for years: employees are actually using the behavioral health benefits they're enrolled in.
The challenge is that increased utilization, combined with a behavioral health provider shortage and the expansion of virtual care, is putting real pressure on plan costs. Two-thirds of large employers have named improving behavioral health access as a priority for 2026 — which means both utilization and investment are trending up simultaneously.
What this means for HR teams: Don't treat rising behavioral health spend as a problem to eliminate. Treat it as a signal that access barriers have dropped, and focus on making sure employees can navigate to the right level of care efficiently. Unnecessary emergency utilization for mental health crises is a significant cost driver that better navigation can reduce.
Nearly a third of employees with employer-sponsored insurance could medically qualify for a GLP-1 medication. Coverage costs for employers offering these drugs have the potential to push premiums 5-14%, depending on the plan population. And one of the more striking data points from the NFP 2026 Benefits Trend Report: nearly one in three employees say they would consider switching jobs to access GLP-1 coverage.
This is no longer a question of whether to engage with GLP-1s in your benefits strategy. It's a question of how — what guardrails to put in place, how to think about adherence (only 1 in 12 members remain on treatment after three years), and how to communicate the decision to your workforce transparently.
What this means for HR teams: If your organization is still in a "we're watching the space" posture, renewal season is the forcing function. Come prepared with a clear point of view, even if that point of view is "not yet, and here's why."
Across almost every category of care, utilization is rising. Part of this reflects employees returning to care they deferred during and after the pandemic. Part of it reflects improved virtual care access removing geographic barriers. And part of it reflects a healthcare labor supply that has started to recover, increasing appointment availability.
This means costs aren't just going up because services are more expensive — they're also going up because more employees are accessing care more often. That's generally a positive outcome for long-term health, but it has a real short-term cost impact.
What this means for HR teams: Utilization-driven increases are harder to explain to employees than price-driven increases. Build your employee communication around "why costs are changing" in plain language before the deduction adjustments show up in paychecks.
Here's what we keep seeing from the teams who navigate this best: they separated medical trend from pharmacy trend early, identified their actual cost drivers specifically, and built their renewal strategy around data rather than defaults. They didn't just react to the number their carrier gave them.
A few things that consistently help:
Benchmark against national trend. A 9% increase sounds alarming in isolation. In the context of industry averages, it may mean your carrier is performing in line with the market. Know the difference before you walk into a leadership meeting.
Separate controllable from structural costs. Pharmacy unit prices and specialty drug costs are structural — there's no plan design change that makes them go away. Unnecessary ER utilization and poor care navigation are controllable. Your communication to employees should reflect that distinction. It matters for trust.
Start employee communication before the effective date. Employees who understand why costs changed are more likely to trust their employer — and far less likely to treat every deduction change as a payroll error. We dig into exactly how to do that in Blog #2.
And if you're already thinking about 2027: the employers who get the best renewal outcomes are the ones who start that conversation in Q3, not October. You know who you are. 😊
