Large employers drop health benefits as costs rise
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Some of the country's largest employers are pulling back on benefits as they face yet another year of near double-digit health care cost growth.
Why it matters: It's a sign that year-after-year spikes in medical costs have real consequences. And corporations are less willing to eat most of the increases.
Driving the news: Disney recently made headlines by deciding to drop health coverage for working spouses with access to their own coverage next year. A Disney spokesperson said the adjustments are being made "in response to rising health care costs nationwide."
- Starbucks is ending its coverage of GLP-1s for weight loss beginning next month, and Deloitte is rolling back its parental leave and IVF funding benefits for certain employees.
- "We see employers changing what's offered in the benefit in addition to some employers cutting benefits because they don't feel like they have a choice," said Dan Mendelson, CEO of Morgan Health, JPMorgan Chase's employer health division.
The big picture: A trio of recent projections all conclude that the health care benefit cost spiral isn't going away anytime soon, and the burden has become heavy enough that companies are experimenting with all kinds of measures to respond.
- Marsh's annual survey of employer-sponsored health plans found that total health benefit cost per employee will rise by 8.2% on average in 2027, the highest increase since 2003. That's after companies' cost-cutting measures.
- Similar projections recently released by Aon and the Business Group on Health also predicted high-single-digit cost growth next year.
- A good portion of this will be passed on to employees through plan design changes, or by requiring them to cover a greater share of premium costs, per Marsh.
Between the lines: Employers shifting health costs to workers is old news. Now, they're starting to experiment with ways to address some of the underlying causes.
- That includes direct contracting, offering narrower networks of hospitals, swapping vendors and steering their workers to providers deemed to be providing the most value. They're also investing more in primary care.
- "Employers have already absorbed totally outrageous cost increases," said Elizabeth Mitchell, president and CEO of the Purchaser Business Group on Health.
- "Why is anyone surprised that they'd have to make changes to coverage? There's not some endless pot of money that the health care system can just take."
Mitchell said that, as far as she's aware, none of PBGH's members are looking to cut benefits, but "they are increasingly prepared to leave partners that don't manage costs effectively."
- "I think that's the change they're collectively making, is putting the pressure where it should be on providers and health plans and other vendors to actually bring costs down."
Zoom in: Employers are particularly focused on GLP-1 coverage for weight loss.
- The Business Group on Health's survey found that while 72% of employers offered GLP-1 coverage for obesity in 2025, only 60% did in 2026.
What we're watching: Cutting benefits is not the only option for employers if their cost-cutting efforts fail.
- Small businesses have been dropping coverage altogether for years now, unable to afford the rising costs.
- And interest in alternative benefit approaches is rising. The Business Group on Health survey found that 12% of employers are assessing such approaches.
- Those include Individual Coverage Health Reimbursement Arrangements, in which employers give employees a set amount of money to purchase their own insurance.
The bottom line: "Employers don't wake up in the morning and say, 'I want to cut benefits,'" Mendelson said. "It's kind of a last resort."
