Employers Tighten Benefits Cost Oversight As Medical And Pharmacy Pressures Mount

Medical cost pressure is intensifying even as employers make changes to health care plans intended to control it, according to Gallagher’s U.S. Benefits Strategy & Benchmarking Survey.

Gallagher found that 36% of employers reported premium increases of 10% or more at their most recent renewal, while only 50% agreed their organization effectively manages health care costs. The gap reflects mounting challenges tied to the cost of medical services, with 73% of employers citing managing the cost of medical services as a top concern, followed by the cost of specialty drugs (49%) and non-specialty prescription drugs (39%).

In response, 45% of employers now self-insure the medical plan with the highest enrollment, up 3 percentage points from 2025, rising to 86% among large employers (1,000 or more full-time employees), Gallagher said.

Meanwhile, 78% of employers anticipate higher health care costs in 2026, with 65% expecting costs somewhat higher and 13% expecting them significantly higher, according to Gallagher.

“At a time when cost pressure is persistent and difficult to forecast, employers can’t rely on periodic plan changes alone,” said John Tournet, US CEO of Gallagher’s Benefits & HR Consulting Division. “They’re adopting a more disciplined approach built on stronger data, closer oversight and ongoing evaluation of plan performance. We’re also seeing growing interest in tools and technologies, including AI-enabled capabilities, that can help employers uncover trends, identify emerging risks and make more informed decisions.”

Pharmacy Costs Draw Closer Scrutiny

Rising pharmacy spend, driven largely by specialty drugs and GLP-1 medications, is pushing employers toward more active oversight of pharmacy benefit managers, according to the report.

Just 20% of employers conduct regular PBM requests for proposals at least once every three years, though that figure rises to 50% among large employers, Gallagher found. Recent Federal Trade Commission enforcement, including a settlement with one of the largest PBMs requiring 100% rebate pass-through and elimination of spread pricing, is reinforcing that shift, the report said.

GLP-1 coverage for weight loss remains a divisive issue: 22% of employers cover the drugs, 21% do not but are considering it, and 58% do not cover them and are not considering it, Gallagher found. Among employers offering coverage, overall cost exposure runs about 25% higher, while medical trend among utilizers is only 8% lower, according to the report.

Specialty drug strategy also shows gaps in visibility, with 34% of employers saying they don’t know which specialty cost-management strategies are in place, a figure that reaches 51% among small employers (fewer than 100 employees), Gallagher said.

Voluntary Benefits Expand To Fill Coverage Gaps

Voluntary benefits are increasingly positioned as a deliberate extension of core coverage rather than a stand-alone add-on, according to Gallagher. Employers most often cite providing comprehensive benefit packages, offering financial protection to employees, and filling gaps in coverage from core benefits as top reasons for offering these programs, the report found.

Nearly one in three employers plan to expand voluntary benefit offerings over the next two years, according to Gallagher. Long-term care insurance offerings have grown to 28% of employers, up 5 percentage points from 2023, while pet insurance offerings reached 36%, up 13 points from 2023, and employee perks or discount programs reached 51%, up 7 points from 2023, the report said.

Still, 37% of employers cited concerns about participation rates as a reason voluntary benefits aren’t a bigger part of their financial wellbeing strategy, according to Gallagher.

Wellbeing And Leave Programs Face Execution Challenges

Wellbeing initiatives show uneven participation despite broad availability, with 23% of employers reporting fewer than 20% of eligible employees participating and only 14% reporting participation of 80% or higher, Gallagher found.

More than four in five employers evaluate the effectiveness of their wellbeing initiatives, though participation remains the most common metric used, according to the report. Emotional wellbeing has become the top priority, with 62% of employers reporting increased focus on it in 2026, up 6 points from 2025, Gallagher said.

Absence management is growing more complex as leave mandates multiply. Compliance with federal, state and municipal regulations ranked as the top concern, cited by 57% of employers, followed by manager understanding of available leave types at 42%, according to the report. In response, 27% of employers now outsource FMLA administration, and half of employers have consolidated vacation, sick and personal time into a single PTO bank, Gallagher found.

Learn more about the report here. &