Employers and state health programs across the United States are bracing for a sharp rise in health care costs next year, with new data pointing to the surging use of GLP-1 drugs, cancer treatments, and mental health services as primary drivers. According to an annual survey published on August 20, 2025, by the Business Group on Health and reported by STAT, 121 large employers covering 11.6 million people expect a median 9 percent increase in health care costs for 2026. This jump, up from 8 percent in 2025 and 7.5 percent in 2024, reflects a trend that’s causing both private businesses and public programs to rethink how they manage—and pay for—employee and beneficiary health.
At the heart of the rising costs are GLP-1 drugs, a class of medications originally developed for diabetes but now widely prescribed for obesity under brand names like Wegovy, Ozempic, Zepbound, and Mounjaro. The STAT survey found that about 80 percent of employers have seen an uptick in GLP-1 use, with 99 percent covering these drugs for diabetes and 73 percent for obesity. The popularity of these medications is reshaping employer health plans, prompting new strategies to manage their expense. Notably, most employers are putting up more guardrails around access—requiring prescriptions from specific providers and mandating participation in weight management programs. In fact, 90 percent of surveyed plans now require prior authorization, and more than half insist on weight management program participation before approving GLP-1 prescriptions.
But the rising tide of health spending isn’t just about new drugs. Cancer remains the top condition driving employer health care costs for the fourth consecutive year. Nearly 90 percent of surveyed employers listed cancer among their three most expensive health conditions for 2025, up from 80 percent the previous year. To contain these costs, about half of employers say they’ll start steering workers toward specialized cancer centers of excellence by 2026, with another 23 percent considering the move by 2028. These centers, which promise high-quality care at lower prices, are seen as a way to balance employee health needs with financial realities.
Mental health and substance use disorder treatments are also straining budgets. Nearly three-quarters of employers report that more workers are seeking such services, and 17 percent expect demand to keep climbing. This surge is prompting companies to expand coverage and look for innovative ways to meet employee needs. Women’s health, too, is getting more attention: 58 percent of employers plan to expand preventive care for women in 2026, and nearly 60 percent will provide menopause support services. Coverage for postpartum depression, doula services, and programs to support high-risk pregnancies in under-resourced populations are also on the rise.
Despite these mounting expenses, companies are trying to shield workers from higher premiums and deductibles. “Employers are still going to be absorbing 90-plus percent of the health care costs,” said Ellen Kelsay, CEO of the Business Group on Health, on a call with reporters (as quoted by STAT). “They are still going to do their level best to absorb as much of this cost increase as possible.” However, even if workers don’t feel the pinch directly, the relentless climb in health care costs can limit wage growth over time, as employers divert more resources to benefits.
Some companies are getting creative in their efforts to keep costs in check. Delta Airlines, for example, has leveraged data analytics to get a handle on spending. By analyzing more than 10 billion de-identified records from its 100,000 employees and their dependents, Delta identified that a significant portion of cancers were being diagnosed after symptoms appeared—often at a more advanced stage. In response, the company launched a “Living Well with Dr. Henry” series to educate employees on the importance of screenings and made it easier for them to schedule appointments. “I’d like to have 99 percent of our cancers diagnosed on a routine screening test rather than feeling a lump or pain or bleeding,” said Henry Ting, Delta’s chief health and wellness officer and a former Mayo Clinic cardiologist.
Other employers are advised to take a hard look at their insurance carriers and third-party vendors. Robert Andrews, CEO of the Health Transformation Alliance, encourages companies to audit claims rigorously and ensure their insurance partners are delivering on negotiated deals. “Watch your carrier very closely, audit the carrier, make sure you’re getting the deal that you bargained for,” Andrews told STAT. He also suggests putting caps on out-of-network charges and ensuring insurers actually enforce them.
Meanwhile, the public sector is also grappling with the dual challenges of rising costs and access. On August 20, 2025, Tennessee’s Medicaid program, TennCare, announced it would expand coverage to include FDA-approved weight-management medications—including GLP-1 drugs—for both adults and children. Previously, only beneficiaries under 21 were covered, leaving a significant gap for the nearly 38 percent of Tennessee adults living with obesity. This policy change is seen as a major step toward addressing one of the state’s most urgent public health challenges.
Gary Dougherty, senior director of state government affairs for the American Diabetes Association, called the TennCare expansion “a significant step forward,” explaining that it “will cover medications for obesity management for both adults and children.” Dougherty emphasized that this move not only helps reduce obesity-related complications but could also cut health care costs across the state. He highlighted the importance of equitable access, particularly for rural and underserved communities, noting that TennCare’s policy addresses transportation and internet barriers to care. “It’s also ensuring that those in rural and underserved communities are being served by physicians who are willing to prescribe the medications,” Dougherty said, adding that the American Diabetes Association will continue to work with policymakers to improve access.
Dougherty shared his own experience with GLP-1 drugs, reporting, “Since taking a GLP-1 over the last 18 months or so, I’ve actually lost nearly 25% of my starting body weight, and my A-1C has dropped almost a full point, well below the prediabetes range. My cholesterol readings are now in the normal range.” He noted that many others have also been able to reduce or stop other medications thanks to GLP-1 therapy.
The TennCare expansion comes as the Congressional Budget Office warns that federal Medicaid cuts—estimated at about $1 trillion over the next decade—could cause at least 15 million people nationwide to lose coverage. Against this backdrop, Tennessee’s move stands out as a rare example of expanding access amid broader retrenchment. There is also promising news from Washington, D.C., about possible plans to let Medicaid and Medicare Part D cover GLP-1 drugs for weight management, although details remain pending.
As employers and public programs alike look for ways to rein in costs without sacrificing care, experts like Paul Fronstin of the Employee Benefit Research Institute predict that companies will continue to scrutinize vendors, revise plan designs, and deploy targeted solutions for costly conditions like diabetes and mental health. Yet with unemployment low and the competition for talent fierce, most employers remain reluctant to shift costs onto workers—a delicate balancing act that’s likely to persist as the health care landscape evolves.
With the stakes rising for both employers and employees, the nation’s approach to health care coverage is being tested as never before. The coming year will reveal whether new strategies—and a willingness to innovate—can keep quality care accessible and affordable for all.
