Navigating employer healthcare costs: what doesn’t work

Employer healthcare spending is on track to increase nearly 7% in 2026, putting the average cost above $18,500 per employee. In earlier research, Mercer estimated that increase could be closer to 9% for companies that didn’t implement any cost-cutting measures.

So, understandably, employers are eagerly looking for ways to keep healthcare costs in check. One common tactic? Shifting more of the burden to employees by raising deductibles, premiums, or out-of-pocket maximums. Nobody can blame employers for thinking it’s a sensible enough place to start—but it’s not necessarily an effective one.

The average deductible for single-person coverage has climbed from $1,617 in 2020 to $1,886 in 2025. That’s a 17% jump in just five years. Workers are also paying more toward their monthly premiums (specifically for family coverage), contributing $1,283 more between 2020 and 2025.

And if employers haven’t already pushed more costs to their workers, many are planning to do so. 51% of U.S. large employers expect to make changes to their medical plans that would require employees to pay more.

It might seem like a quick fix for skyrocketing healthcare spending, but this approach doesn’t actually do anything to reduce the underlying expenses. It just changes who’s paying them—and it can lead to even costlier problems in the long run.

Why cost-shifting doesn’t work

It’s not hard to see the appeal of cost-shifting. It’s fast, predictable, and shows up immediately on a budget line. But there are a surprising number of tradeoffs that often outweigh the potential savings.

It delays care (which gets more expensive later)

If people assume they can’t afford to see a doctor, they’re far more likely to skip appointments—50% of employees say they’ve avoided medical care because of out-of-pocket costs.

When you look at the numbers, that hesitation makes sense. Being underinsured isn’t rare among people with employer coverage. Nearly two-thirds of underinsured Americans get their insurance through a job, and 57% of all underinsured Americans skip needed care because they can’t afford the cost. And here’s another alarming stat: nearly 40% of American adults don’t have enough savings to cover an unexpected $400 expense—a bill that’s easy to rack up in a single day of care.

And while foregoing care might save some costs upfront, it usually leads to much larger expenses later. Here are a few examples:

• Diabetes management: One 2024 study looked specifically at complications among patients with diabetes. When deductibles got too high, patients skipped routine care to manage costs, such as rationing insulin, missing doses, or delaying checkups. As a result, adults with diabetes who were involuntarily switched to a high-deductible plan faced an 11% higher risk of hospitalization for a heart attack, a 15% higher risk of stroke, and more than double the likelihood of going blind or developing end-stage kidney disease.
• Cancer care: In a 2026 study of nearly 150,000 adults (including over 10,000 cancer survivors), people enrolled in high-deductible health plans had significantly worse overall survival and cancer-specific survival than those with lower-deductible plans. Financial barriers to care—like delaying treatment or skipping follow-up visits due to cost—accounted for anywhere from 30% to 70% of the difference in survival outcomes.

They’re two different examples that make the same point: when the cost of care goes up, people delay or avoid it. Doing so often costs way more (in both dollars and health) than the deductible ever would have cost.

The employer savings are nominal

Most healthcare spending is concentrated in a small group of patients with high-cost conditions, not in the everyday visits that deductibles typically discourage.

Research from the Agency for Healthcare Research and Quality found that the top 5% of healthcare spenders account for nearly 50% of all healthcare expenditures. Increasing a deductible doesn’t touch what happens after the threshold is met—and that’s where prices really stack up.

Take a $100,000 course of cancer treatment, for example. Even if you double the employee deductible from $1,500 to $3,000, you’re still covering nearly all of the treatment cost. So, sure, it saves the company $1,500—that’s not nothing—but that $1,500 is a lot more money to the employee and may prevent them from going through with the treatment at all.

It hurts productivity and retention

Untreated pain and unmanaged conditions cost more to treat later—and they also cost a lot of productivity in the meantime. Chronic pain alone affects roughly one in four U.S. adults, and it often leads to a mix of missed days and reduced performance on the job.

Money concerns hold back workers even more. Employees report losing more than seven hours of productivity a week due to financial stress, costing U.S. employers an estimated $183 billion a year. Additionally, 78% of leaders say employee financial stress contributed to higher turnover last year, as workers left for higher pay or better financial wellness benefits.

These costs might not show up in your benefits budget, but you can bet you’ll see them somewhere.

So, why do employers keep shifting costs anyway?

Cost-shifting does almost nothing to solve the underlying problem, but many employers are still compelled to do it for one very straightforward reason: it’s one of the fastest and often simplest changes they can make.

Steps like renegotiating provider contracts or redesigning networks around value-based care can take years. In comparison, raising a deductible takes just one open enrollment cycle. Cost-sharing becomes the fallback “strategy that neither employers nor employees like, but companies resort to in a pinch,” said KFF president and CEO Drew Altman.

The tradeoffs—things like delayed care, increased financial stress for employees, and higher turnover—don’t appear on the same budget line as the reported savings. Plus, those impacts often take months or years to show up. This makes short-term savings look more impressive than they are, leading employers to mistake a temporary fix for a real solution.

What can employers do instead?

Asking employees to stomach higher price tags typically backfires. So, it’s smarter to focus on what’s driving up costs in the first place.

That’s the exact idea behind value-based care. Rather than shifting who pays, it changes how care is delivered and priced. This could include:

• Centers of excellence programs that steer employees to high-quality, high-value providers for complex procedures and conditions. This is especially valuable for specialty care, which makes up a disproportionate share of employer healthcare spend.
• Value-based care arrangements that tie provider payment to patient outcomes instead of volume. This incentivizes fewer complications and readmissions over more procedures. If these arrangements include bundled, transparent pricing, it’s even better.
• Care navigation that helps employees find and access the right treatment or support the first time—instead of guessing and ending up with delayed or inadequate care—and supports them throughout their entire care journey.

These approaches target major healthcare cost drivers without asking your employees to shoulder more financial risk to get there.

Cost-shifting feels like a step in the right direction because it’s fast and shows up immediately in the budget. But it doesn’t solve the problem. It just moves it, often to the employees who can least afford it.

Value-based care targets the actual price and quality of care, instead of reshuffling who’s paying for it.

Carrum Health connects employees to high-quality specialists and centers of excellence with transparent, value-based pricing. And unlike renegotiating contracts or redesigning networks, it doesn’t have to take years to pay off.

Because better cost control shouldn’t come at your employees’ expense.