Your 2026 trend problem (and what to do about it)

For the second year in a row, actual healthcare costs exceeded employer forecasts. According to Business Group on Health, employers expected medical cost trends to reach 8% in 2025 and are anticipating 9% in 2026, with the pharmacy costs rising even faster at 11% and 12% respectively, and total costs per employee hitting over $17,000.

Those cost pressures quickly become a problem for benefit teams to solve. Many built budgets assuming ~8% trend and are seeing closer to 12% in reality. A few percentage points may seem small on paper, but they directly affect margins, earnings, and internal trust. And because next year’s budget is built on a base that’s already too low, a 2025 overage quickly rolls into 2026 and 2027.

Most organizations don’t have a real contingency plan for when they realize mid-year that costs are running high. And it’s not for lack of trying — the typical levers simply don’t move fast enough:

• Plan design changes can’t happen mid-year
• Procurement takes 3-6 months 
• High cost claims already in motion can’t be undone 

So even when leaders see a 3-5% overage coming, their options are limited. That’s why teams are searching for programs that are financially predictable, fast to activate, and able to reach the population driving volatility. 

 

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It makes sense that most conversations center on areas like cancer, MSK, GLP-1s, and pharmacy. These categories are top of mind because they’re top of cost. BGH reports that cancer remains the leading cost driver for 88% of employers, and pharmacy now consumes nearly 25 cents of every healthcare dollar. 

Substance use care is often left out of these conversations, but it quietly influences many of the cost buckets employers are already trying to control. It’s historically been deprioritized in medical spending — always important, never quite urgent enough — yet substance use is the biggest unaddressed cost driver in employee health spend.

Substance use affects 48.5 million Americans, driving more than $35 billion in annual medical costs for employers and contributing to $93 billion in lost productivity across the U.S. economy. It’s a known cause of cancer, worsens chronic conditions, and increases pharmacy spend. And people with untreated SUD have significantly higher utilization in nearly every category:

• 2-3x higher ER utilization 
• Increased inpatient admissions 
• Worse outcomes for cancer and cardiac conditions 
• Poor chronic disease management 
• Lower medication adherence 

The problem is that most of this cost shows up scattered across categories and none clearly show substance use. 

We continue to see that when substance use is addressed early and consistently, downstream costs fall across these categories — fewer ER visits and inpatient stays, better chronic condition outcomes, and improved medication adherence. Pelago’s own peer-reviewed research this year showed reductions in ER visits, inpatient care, and total medical claims when substance use is treated. 

Benefit leaders are entering the year with high expectations from internal teams, more complicated cost drivers, and fewer levers that can be pulled quickly to reduce spend. In this environment, solutions need to be financially predictable, third-party validated, and fast to activate even mid-year. Substance use care stands out as an upstream strategy that reaches across categories and influences cost patterns that have been difficult to predict

Substance use is not the only solution for rising trend, but it’s an area where health plans and employers can act together, quickly, with measurable impact. For organizations looking for a financially predictable lever that can be turned on mid-year without adding budget, specialty substance use care belongs in the conversation.