Key Points:
- Medical care prices rose 4.2% in August, outpacing overall inflation.
- Large employers project a 9% jump in health spending for 2026, with drug costs up 12%.
- High-priced cancer treatments and weight-loss drugs are driving increases.
- Workers are turning to cash-pay options and health savings accounts to afford GLP-1s.
Health Costs Outpace Inflation
Health-care costs are rising at the fastest pace in more than a decade, setting up employers and workers for the steepest increase in spending since 2010.
The Consumer Price Index shows medical care costs climbed 4.2% year-over-year in August, compared with a 2.9% rise in overall inflation. Doctor visits were up 3.5%, while hospital and outpatient care jumped 5.3%.
These increases are filtering into health insurance premiums. Consumers who don’t qualify for subsidies on the Affordable Care Act exchanges could face double-digit premium hikes in 2026, based on preliminary insurer filings. Employees covered through work are also bracing for higher premiums and out-of-pocket costs.
Employers Project 9% Jump in Spending
Business surveys indicate large employers expect health coverage costs to rise an average of 9% in 2026. That would mark the sharpest annual increase in 15 years.
While more than half of employers say they may shift some of the costs onto workers, many are first exploring other ways to contain spending. “Employers have avoided passing costs to employees whenever possible,” said Ellen Kelsay, CEO of the Business Group on Health. “This year, for the first time in a while, we’re seeing signs they may have to consider it — but only as a last resort.”
Cancer Drugs and GLP-1s Drive Costs
Prescription drug prices overall rose 0.9% in August, but specialty drugs are creating the biggest burden for employers.
Business Group on Health surveys show companies expect pharmaceutical spending to climb 12% in 2026, on top of an 11% increase this year. Cancer treatments remain the leading driver, followed closely by GLP-1 drugs such as Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound, which are prescribed for diabetes and weight loss.
“Cancer has been the top cost driver for four straight years, with diagnoses often occurring at later stages,” Kelsay said. “But the explosion of GLP-1 use for obesity is quickly catching up.”
Nearly two-thirds of large employers now cover weight-loss medications, compared with less than half of smaller firms. To manage costs, many are tightening eligibility requirements or looking for lower-cost alternatives.
Surge in Cash-Pay Purchases
Some employers are quietly pointing workers toward the cash-pay market for GLP-1 drugs, where telehealth providers and manufacturer programs sell the medications at roughly half the list price of more than $1,000 per month.
Employees are increasingly using flexible spending and health savings accounts to cover these purchases. According to health payments firm Paytient, GLP-1s are now the top category of cash-pay spending through such accounts, with usage tripling over the past year.
But this strategy raises equity concerns. “Cash-pay works for higher earners, but it risks leaving lower-income employees behind,” said Paytient CEO Brian Whorley.
Employers Push for New Payment Models
To improve affordability, employers are pressuring pharmacy benefit managers (PBMs) to allow more flexible pricing models. Some startups are already experimenting with group purchasing arrangements for future cell and gene therapies.
Industry leaders say how companies handle GLP-1 pricing could set the tone for future drug financing. “GLP-1s are a stress test,” Whorley said. “If employers and PBMs figure this out, it could become a blueprint for other high-cost, life-changing drugs.”
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