The Rising Cost of Healthcare Remains A Major Challenge for Employers

Employers are under increasing pressure to control soaring healthcare costs while still delivering access to the care members need. Yet, costs continue to rise and US health continues to decline. While many HR and Benefits leaders are still recovering from steep healthcare premium increases in 2025, relief doesn’t appear to be on the horizon.. In 2026, employers are projected to experience another sharp ~9% increase in healthcare costs—a trend being driven by high-cost prescription drugs like GLP‑1 therapies, more cancer diagnoses, and growing claims volume.

This follows an already significant 5.8% increase in 2025, which compounds on the three-year trend of similar healthcare cost increases for employers. This consistent cost escalation signals that employers must act with urgency to manage the trajectory of healthcare spending.

GLP-1 Medications: A Game Changer—and a Cost Catastrophe

GLP-1s (such as Ozempic, Wegovy, and Mounjaro) are transforming the management of obesity and Type II diabetes, yielding impressive clinical outcomes. But, they're also becoming one of the fastest-growing and significant drivers of employer healthcare spending.

Around 29% of employers report that GLP‑1 medications account for more than 15% of their annual claims.

About 44% of employers with more than 500 employees now cover GLP‑1s for obesity (with most covering for diabetes), but the annual cost per prescribed member can range from $8,000 to $10,00, creating a staggering burden on employer-sponsored plans.

The growing popularity of these medications is only intensifying the cost challenge. Young adults (18-39) who make up a significant portion of the current workforce experienced a 553% increase in GLP-1 prescriptions from 0.19% in 2019 to 1.33% in 2024.  As employees seek more weight management solutions, employers must find a way to meet this need while controlling healthcare costs that continue to rise.

Chronic Conditions and Specialty Care: The Broader Cost Picture

Chronic diseases also continue to dominate health spending, with 90% of the U.S.'s $4.9 trillion in annual healthcare spending attributable to chronic conditions, including obesity, heart disease, diabetes, and stroke.

Prescription drug spending is especially significant in the U.S, reaching $805.9 billion in 2024, representing a 10.2% increase over the prior year, the highest per capita globally. Specialty pharmaceuticals continue to drive costs, accounting for approximately 50% of total drug spend for 5% of total claims.

Employers must confront the core drivers of rising costs, including the chronic, expensive, and increasingly specialty-driven nature of care.

The Employer Response: Cost Containment vs. Access

Given the current reality of cost pressures, employers are deploying a variety of strategies; however, balancing cost containment with employee health access remains a delicate task.

Plan Design Changes & Pharmacy Controls

The Business Group on Health found that employers expect ~9% cost inflation in 2026, but could push that down to 7.6% through plan design changes. Employers are resoundingly naming health care costs management overall as their top priority, followed by affordability for their organization and employees.

Employers are reevaluating relationships with carriers and pharmacy benefit managers, applying more scrutiny to costs and exploring alternative plan designs to buffer employees from rising premiums and deductibles.

Coverage Pullbacks & Employer Pushback

Some employers are electing to limit or eliminate coverage for GLP‑1s, especially for weight loss, citing unmet ROI in the short term and concerns over temporary treatment outcomes. This unbalanced approach limits access to the medication, which many members need to control their diabetes and manage weight effectively. Given the expanding use cases for GLP-1s, this solution is likely not sustainable and offers only temporary relief to a long-term challenge.

In 2024, North Carolina’s state employee plan ended coverage for Wegovy and Saxenda due to projected costs exceeding $1 billion over six years.

Patients face coverage denials at staggering rates. In 2024, 64% of patients with obesity and 32% of patients with type 2 diabetes faced denials on GLP-1s. This trend leaves a significant gap between members seeking weight management support and access to medications that enable weight loss. 

Long-Term ROI via Health Improvement

While conflicting data on the long-term financial impact of GLP-1s is still emerging, the need for innovative solutions from employers is clear. A 2024 Prime Therapeutics report noted that care for patients with obesity on GLP-1s was $4,200 higher in the second year. However, other data suggest long-term savings are possible, with one study showing medical costs dropped 7% over two years and cardiovascular events were reduced by 44%.

The Journal of the American Medical Association also cites that losing just 5% of total body weight may deliver 8% in healthcare savings. Employers must therefore prioritize innovative methods that balance cost with the intended health outcomes.

A Balanced Member Health Strategy Matters

Instead of blanket cost containment measures, employers can reduce long-term expenses by investing in population health and clinically sound strategies that employ several benefit design tactics.

Comprehensive health management and wellness programs can deliver significant returns for employers while delivering resources. These programs offer an opportunity to enable members with tools to manage their conditions while reducing overall healthcare costs. 

Companies implementing condition management and wellness programs typically experience a reduction in healthcare costs often amounting to $3.27 in healthcare costs and $2.73 in absenteeism costs for every dollar spent. 

Healthier member populations often result in fewer chronic complications, lower medication reliance, and ultimately, reduced total claims.

Pulling It All Together for a Balanced, Sustainable Strategy

Here’s a strategic framework employers can consider:

1. Data‑Driven Cost Shielding

• Use analytics to identify high-cost drivers: GLP‑1 usage, cancer care, behavioral health.
• Monitor trends and forecast cost impacts to align interventions early and determine where to invest in supplemental disease management support from point solutions.

2. Smart Coverage Design

• Review your current costs to understand how high cost therapies, like GLP-1s may be impacting your total healthcare spend. 
• Work with your health plan and PBM to understand your options with prior authorization, step therapy, documentation, and quantity limits to ensure clinical appropriateness.

3. Value-based Access with ROI Lens

• Cover GLP-1s thoughtfully while providing broader support through cardiometabolic management programs, like Lark. 
• Pair GLP-1 access with lifestyle support and tracking to boost efficacy and support long-term outcomes that benefits members and your bottom line.

4. Invest in Health Promotion

• Roll out programs targeting obesity, diabetes, chronic disease, and mental health. These programs are particularly helpful when you can support members across multiple conditions within the same platform which boosts engagement. 

5. Measure, Iterate, Communicate

• Track cost trends, health outcomes, ROI from wellness and pharmacy strategies. Communicate transparently with employees to foster trust and engagement. Some employers even choose to place incentives for employees to participate in programs to incentivize healthy outcomes. 

Employer healthcare costs are surging—9% projected increase next year, accelerated by high-cost drugs like GLP-1s, chronic disease prevalence, specialty drug spending, and mental health needs. Employers navigating this landscape face trade-offs between short-term cost containment and long-term health outcomes. But there are options to find a better balance that delivers health outcomes while managing rising healthcare costs.

A balanced approach with strategic coverage, cost-conscious plan design, value-aligned plans, and investment in health promotion can shift the narrative from rising cost burden to sustainable health investment.

Lark's clinically validated, AI-powered platform helps employers manage costs by improving member health outcomes. By offering proactive, personalized care for cardiometabolic conditions like diabetes, hypertension, and obesity, Lark helps you get ahead of high-cost claims.

See how Lark can help you shift from a cost burden to a strategic health investment. Request a demo today.