American employers are staring down a widening gap between inflation and the cost of group benefits – and the overwhelming majority are choosing to absorb the difference rather than reduce coverage or pass the burden to employees, according to a recent study.

The 2026 Global Benefits Forecast by MBWL International and Normandin Beaudry found that cost control is the primary focus for 64 percent of global organizations this year, while nearly half say controlling benefits costs is their biggest challenge – driven by rising healthcare inflation, economic uncertainty, and constrained internal resources. Yet despite those pressures, a separate Normandin Beaudry survey found that only two percent of North American employers are considering cutting benefits outright.

One of the biggest challenges around benefits for organizations is that costs are increasing more rapidly than the inflation rate, according to Daniel Drolet, Senior Partner, Health and Benefits at Normandin Beaudry in Montreal. "We just released our latest salary increase trends and it's around three, 3.1 percent, but benefits right now is trending at double that – six or seven percent overall," says Drolet. "Overall health, including dental, is around 10 percent, so there's a discrepancy and it's a complex one to explain why it's not aligned with consumer price index or other cost measures."

With salary increases tracking roughly in line with consumer price inflation, HR leaders are caught between employee expectations and finance team scrutiny. "When you come up with a 10-to-12-percent increase, the first thing they think is, 'We can't ask employees to pay 10 to 12 percent more,'" says Drolet. "And at the same time they struggle with, 'I can't pay more, what do we do with the plan?' It's a complex situation we're facing right now."

The pressure is particularly acute in the US, where employer-sponsored benefits remain the primary vehicle for healthcare access and rising costs are reshaping how HR leaders approach total compensation strategy.

Cost pressure is increasing, but cuts aren't the answer for many

Despite the cost squeeze, Drolet says the approach to benefits has shifted meaningfully from previous cycles. During the high-inflation periods of the 1990s and again after the 2008 financial crisis, benefit cuts were common – but that calculus has changed.

"Right now there's some pressure, but employers are still focusing on what they can do for employees," says Drolet. "I don't want to increase the employee contribution or copays too much and transfer costs to employees – because when you manage costs and you push them to employees, you're not managing them, it's just displacement of cost."

According to the MBWL survey, only 17 percent of global employers are considering increasing the employee share of costs, while 40 percent are prioritizing improved governance of benefits and 36 percent are focusing on automating administrative processes.

The harder challenge is specialty drugs. New medications – some used to treat rare diseases – can cost upwards of half a million dollars per year, and unlike a life insurance claim, these are pay-as-you-go commitments that can span decades and create unpredictable long-term liability for plan sponsors. "It's really the biggest risk we've ever faced in group benefits," says Drolet. "It's life changing, but someone has to pay at the end of the day."

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