It’s no secret that employers are struggling when it comes to healthcare costs. A new survey from Willis Towers Watson revealed that more than half of employers were over budget by an average of 4.5 percentage points in 2024.
The survey, released Monday, received responses from 417 employers with over 100 employees. About 81% were self-insured and 19% were fully-insured.
It found that employers don’t expect any relief soon either. They anticipate their healthcare costs to increase by 9.1% in 2026 (before making plan changes), compared to 8.1% in 2025 and 7% in 2024. After making plan changes, these numbers are 8%, 7% and 6%, respectively. The top drivers of these costs are pharmacy costs (specifically specialty drugs and GLP-1s), high-cost claimants and chronic conditions.
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When asked how they plan to manage costs in the next three years, 59% of employers said they are looking to implement “broader cost-saving actions,” 47% will increase cost shifting onto employees, and 32% will absorb costs. When looking at the last three years, the percentage of employers that adopted these strategies was 46%, 44% and 50%, respectively.
“Fewer employers are absorbing rising costs because it’s becoming too expensive. They’re also avoiding aggressive cost-shifting because it can affect employee health, satisfaction and retention. Instead, employers are looking to bold disruptive changes that control costs and improve health to create a more sustainable path forward,” said Tim Stawicki, chief actuary of Health & Benefits at WTW.
Employers also plan to hold their vendors more accountable, with 46% of companies evaluating vendor performance. In addition, 36% are taking medical plans out to bid, and another 50% are planning or considering doing this.
About 41% of businesses are also adopting alternative plan designs, and 46% are planning or considering doing so in the future. These include using networks that limit access to certain providers, offering more transparency, and providing more care navigation.
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Additionally, employers are increasingly dissatisfied with their pharmacy benefit manager: 75% have or will take their PBM out to bid. About 49% are using transparent contract structures and 58% have conducted audits on their pharmacy benefits.
When it comes to managing GLP-1 costs, employers’ strategies include requiring participation in a lifestyle management program, implementing a 30-day fill limit and higher cost sharing.
Moreover, employers are becoming more interested in leveraging AI. About 80% said they think AI will “fundamentally change how healthcare benefits are managed in the next three years.” Employers see the most potential for AI in healthcare through tools that enhance navigation, personalize decision-making, improve employee experience, streamline benefits communication and assess healthcare vendors.
“Employers must take a more revolutionary approach to address both immediate cost pressures and long-term cost trends, especially since healthcare costs appear firmly on an upward trajectory. At the same time, employers seek innovations in clinical programs, technology, and effective uses of AI in healthcare to address the burden of chronic disease and to help people protect their health,” said Courtney Stubblefield, managing director of Health & Benefits at WTW.
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