Companies will be hit by a 'perfect storm' of rising costs, evolving employee needs, and coverage gaps
Employers worldwide are facing another year of steep medical cost increases, with global health benefit costs expected to rise by 10.1 per cent in 2026, according to the newly released Mercer Marsh Benefits (MMB) Health Trends report. The report, published by Mercer, highlights that this marks the third consecutive year of double-digit growth in medical trend rates, underscoring the ongoing challenges organizations face in managing employee health care expenses.
The report draws on input from more than 268 insurers across 67 markets, providing a comprehensive view of global health care cost trends. The findings reveal that the persistent rise in medical costs is being driven by a combination of factors, including inflation, increased demand for health services, and the growing prevalence of chronic conditions.
According to Hervé Balzano, president of health at Mercer and MMB international leader, “Employers are facing a perfect storm of rising costs, evolving employee needs, and coverage gaps. The persistent double-digit medical trend rates are a wake-up call for organizations to rethink their health and benefits strategies.”
North America, Canada see significant increases
The report notes that Canada is expected to see a medical trend rate increase of 8.6 per cent in 2026, up from 6.9 per cent in 2025. While this is below the global average, it still represents a significant cost pressure for Canadian employers. The report attributes these increases to inflationary pressures, advances in medical technology, and the continued impact of the COVID-19 pandemic on health care utilization.
In Canada, employers are grappling with the challenge of balancing cost containment with the need to provide comprehensive health benefits to attract and retain talent. The report highlights that 68 per cent of insurers in North America expect higher medical trend rates in 2026 compared to 2025, reflecting growing concerns about the sustainability of employer-sponsored health plans.
“Employers in Canada and across North America must navigate a complex landscape of rising costs and evolving employee expectations,” said Balzano. “It’s critical for organizations to take a proactive approach to managing health care expenses while ensuring employees have access to the care they need.”
Coverage gaps and chronic conditions drive up costs
The MMB report identifies significant gaps in insurance coverage as a key driver of rising medical costs. Globally, 68 per cent of insurers reported that existing health plans don’t adequately cover prevention, early detection, or treatment of chronic conditions, such as diabetes and cardiovascular disease. This lack of coverage often leads to higher long-term costs, as untreated conditions can result in more severe health issues and increased utilization of expensive medical services.
The report also points to a growing demand for mental health support, with 54 per cent of insurers noting that current plans fall short in providing adequate mental health coverage. This gap is particularly concerning given the increased prevalence of mental health issues in the wake of the pandemic.
“Addressing coverage gaps is essential for controlling costs and improving employee health outcomes,” Balzano emphasized. “Employers should work closely with insurers to ensure their health plans are comprehensive and responsive to the evolving needs of their workforce.”
Inflation, utilization pressures persist
Inflation remains a significant factor in the rising cost of health benefits. The report notes that 80 per cent of insurers cited inflation as a key driver of higher medical trend rates, while 70 per cent pointed to increased utilization of health care services. The combination of these factors is expected to put continued pressure on employers’ health benefit budgets in the coming year.
The report also highlights the impact of new medical technologies and treatments, which, while improving health outcomes, often come with higher price tags. Insurers are increasingly focused on balancing the adoption of innovative therapies with the need to manage costs effectively.
To address these challenges, the report recommends that employers prioritize prevention and early intervention in their health benefit strategies. This includes investing in wellness programs, chronic disease management, and digital health solutions that can help employees access care more efficiently.
The report notes that 58 per cent of insurers are expanding their offerings to include digital health tools, such as telemedicine and mobile health apps, in response to growing demand from employers and employees alike.
“Employers cannot afford to take a wait-and-see approach,” Balzano concluded. “Proactive management of health benefits is essential to ensure both cost control and positive health outcomes for employees.”
