Why deductible hikes are the wrong fix for rising health costs

Roughly half of large US employers plan to raise deductibles or increase other out-of-pocket costs for workers in 2026, according to a Mercer survey of 711 companies. It is a reflex response to what is shaping up as the steepest projected health benefit cost increase in 15 years. For Alison Myers, President of Corporate Benefits and Specialty Health at Venbrook Insurance Services in Los Angeles, that instinct is making things worse.

"Deductibles and copays are small tools for small problems," Myers said. "When you hit a $500,000 high-cost claim, the deductible and the copays don't matter. A member is going to pay up to $6,000, and from $6,000 to $500,000 is dark matter, and there's nothing an employer can do."

Plan design decisions that look like cost control are often just cost transfer — moving financial burden onto employees while leaving the underlying claims drivers alone.

The 1% driving 30% of claims

Myers sees two forces at work. The first is general healthcare inflation: a doctor's visit that cost $100 now costs $150. The second is a concentration problem, where approximately 1 percent of a covered workforce accounts for more than 30 percent of total claims.

Most employer benefit strategies are pointed at the wrong population. Raising deductibles cuts plan costs for the 95 percent of employees who are not generating high-cost claims, while the small cohort who are goes untouched.

"What many employers do is make the mistake of thinking that raising the deductible is going to reduce costs," Myers said. "And it will — but it's reducing costs for 95% of your workforce that's not making up your high-cost claims. You're hurting a big portion of your workforce for a small portion of the population that's raising your claims."

For HR leaders balancing employee experience against total compensation budgets, that trade-off carries a cost that does not appear in a renewal summary: workforce dissatisfaction, barriers to preventive care, and the gradual progression of manageable conditions into catastrophic claims.

The 20/60/20 model

Myers uses what she calls a 20/60/20 risk concentration distribution model to redirect where plan design attention should go. Picture a workforce on a bell curve. The healthiest 20 percent sit on the left — typically younger employees who barely use the plan. The 20 percent generating high-cost claims sit on the right: cancer diagnoses, premature births, serious accidents, complex chronic conditions.

"That is not risk you can control," Myers said. "You cannot control cancer. You can't control a brain aneurysm."

The middle 60 percent — Myers calls them "emerging risk" — is where HR leaders have real leverage. Developing conditions that are not yet catastrophic. Manageable chronic issues that, with the right plan design and employee engagement, need not reach the high-cost tier.

"If we want to reduce healthcare costs across this country, we've got to focus on emerging risk so that that emerging risk population doesn't shift into the high-cost claims," she said. "If you can hold that 60% in the middle, we can start getting our arms around our healthcare costs. That's the secret sauce."

The shift in emphasis matters. Instead of designing a plan that squeezes savings from the healthiest employees through higher cost-sharing, the work becomes keeping the middle cohort from getting sicker — through accessible preventive care, chronic disease management, and sustained engagement.

Why higher deductibles make the generation cliff worse

Myers points to what she calls the "generation cliff" — a growing share of Medicare-eligible employees working full-time past traditional retirement age, a trend that picked up speed after the COVID-19 pandemic. People are living longer and working longer, but the health profile is not improving at the same rate. That shifts the chronic-disease burden upward across the workforce.

Higher deductibles, in that environment, accelerate the problem. By putting up financial barriers to preventive care — blood pressure management, diabetes treatment, routine screenings — cost-shifting nudges employees out of the manageable middle and toward the high-cost right. The Affordable Care Act (ACA) requires coverage of a range of preventive services at no cost-sharing, but higher deductibles on broader non-preventive care still reduce utilization of the care that keeps chronic conditions from escalating.

GLP-1s: the same logic, same mistake

The reasoning behind deductible hikes is showing up again in employer decisions on glucagon-like peptide-1 (GLP-1) drugs — and as HR leaders rethink drug benefits under rising pharmacy costs, the pattern is familiar. Mercer's National Survey of Employer-Sponsored Health Plans found that six percent of large employers dropped GLP-1 coverage for weight loss in 2026, with another five percent planning to follow or actively considering it.

For HR leaders under pressure from finance to cut pharmacy spend, the move seems clean. Myers does not see it that way.

"It doesn't change the fact that the disease or the chronic illness still exists," she said. "Dropping GLP-1s doesn't change where the cost is going to show up. Those drugs are reducing cholesterol, they're reducing diabetes, they're reducing weight. The short-sightedness of the expense without allowing the GLP-1s to do what they're doing means we never get to grab that data and see a decrease in type 2 diabetes, a decrease in heart conditions, a decrease in cholesterol and statins."

Cutting GLP-1 coverage may reduce pharmacy spend in the near term. It may also push employees deeper into the chronic disease progression that generates the high-cost claims employers cannot absorb. For HR leaders making the case to a CFO, the distinction is worth spelling out.

Get the CFO in the room

Myers requires the CFO at the table for large employer benefit conversations — not just the HR director. When benefits stay inside the HR lane, the financial and strategic weight of what she calls a company's second-largest operating expense never gets the scrutiny it needs.

"When you have the CEO protecting the vision and the mission, and the CFO protecting the bottom line, now we're having a strategic conversation," she said. "The shift in mindset for employers is that your benefits are not a liability, they're an asset. You're actually investing in the asset of your people."

The practical upshot for HR leaders: benefits strategy is not an annual renewal exercise. It is a year-round conversation with the C-suite, built around workforce health data, plan design, and the emerging risk population that sits between healthy and catastrophic.

With Mercer projecting health benefit costs will rise approximately 6.5 percent on average in 2026 — the highest increase since 2010, even after planned cost-reduction measures — employers still reaching for the deductible lever are solving for the wrong variable. The 2026 benefits benchmarks data from more than 3,700 organizations shows 42 percent of employers already reporting premium increases of 10 percent or more at their last renewal — a signal that passive cost management is no longer an option. The HR leaders who get ahead will be those who build a strategy around the 60 percent in the middle, before those employees move to the right side of the curve.