Rising Costs and Scrutiny: How Organizations Are Rethinking Benefits

Rising healthcare benefits costs and complicated regulatory requirements are affecting how employers manage their benefits programs, according to the 2026 Benefits Benchmarks Report by risk management and consulting firm Gallagher. 

The report’s key findings include:

• 36% of the surveyed employers reported health plan premium increases of 10% or more during their most recent renewal, up from 27% in 2025. Only 50% of respondents, though, believe their organization is effectively managing healthcare costs.
• 49% identified specialty drugs as a top healthcare cost management challenge. Many also are weighing whether to cover glucagon-like peptide-1 (GLP-1) costs for weight loss, with 22% currently providing coverage.
• Beyond healthcare costs, employers are exploring how to overcome challenges with leave requirement. According to the report, more than 57% of employers cited regulatory compliance as a lead absence management concern.
• Additionally, employers are looking for ways to provide broader support for employees through well-being programs and voluntary benefits, such as identity theft protection, legal plans and pet insurance.

Overall, the findings point to benefits decisions becoming more complex and strategic as costs rise, said John Tournet, the U.S. CEO of the Gallagher’s benefits and HR consulting division.

“It's not just about shifting costs to employees,” he said. “It’s really, are the people and are the companies managing our plans doing it the right way? We can’t just keep shifting cost to employees. And, that has led to a stronger interest in employers wanting to go self-funded versus being fully insured.”

Access bonus Workspan Daily Plus+ articles on this subject:

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How Employers Are Responding

As HR and benefits leaders balance rising healthcare costs with employee value, the challenge is determining where investments should be made.

“Employees are expecting a more holistic approach to benefits ... pulling everything from financial to emotional and family support into one package,” Tournet said.

But despite mounting costs, employers are not pulling back on perks such as paid time off (PTO), leave programs and flexibility since they continue to play an important role in attraction and retention, said Kevin Curry, a senior vice president and leave solutions leader at benefit services provider Alight.

“Our research found that 67% of employees say leave benefits influence their company loyalty,” he said, referring to Alight’s upcoming 2026 Employee Mindset Study.

For pharmacy costs, employers are taking a closer look at how benefits are managed, including direct-to-consumer and direct-to-employer models. Tournet said employers also are becoming more proactive and creative about managing large claim costs, such as emerging therapies and on-site care as a way to help control costs.

Rob Whalen, the co-founder and CEO of benefits platform solutions company BNFT, added that benefits will become more flexible to meet the broader needs of employees.

“I look at life as this moving thing, and everyone goes through windows and transitions. So, how does a company support their employees through those?” he said.

Whalen said that will require leadership to understand what their workforce values and provide more flexible benefits within their core offerings. 

But investing in benefits alone isn’t enough if employees are unaware of what’s available to them.

“I think that’s the challenge today with employers who’ve done a great job building benefit programs,” Curry said. “The ecosystem is so large, it’s hard for employees to navigate.”

One solution is to equip managers with resources filled with information to help connect employees with available employee benefits. For example, Gallagher’s report found 42% of the employers surveyed were concerned about the lack of understanding from managers regarding leave requirements and compliance obligations.

“Managers are usually the first point of contact, so the way they respond not only affects the employee experience, but it also impacts overall compliance risk,” Tournet said. “Preparing them with ongoing training, clear escalation paths and more centralized resources are going to be key.”

The Next Era of Benefits

Looking ahead, Tournet expects greater integration across benefits and technology, such as analytics and artificial intelligence (AI), which may bring those areas together to provide a more personalized approach. The organizations that will come out ahead will be those balancing greater governance, oversight and transparency, but with a simpler and more holistic employee experience, he said.

“We’re entering an era where there’s going to be more operational discipline because these costs are not sustainable,” said Tournet.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Finance and Budgeting
• Well-Being