The 2026 Benefits Crunch: What HR Must Get Right Before Year-End

Stephanie Latarewicz SHRM-SCP, SPHR, GBA and founder of Reel HR, LLC brings over a decade of real-world HR leadership experience to the world of talent acquisition and workforce development.

In HR, December is always intense. But this year, the pressure is different. It’s heavier, faster, and coming at us from all angles. Rising healthcare costs, the explosion in GLP-1 usage (Glucagon-Like Peptide-1 or “weight loss” usage), shifting contribution limits, and tightening regulations are converging into what some are calling a 2026 benefits affordability crunch.

At one organization I worked with several years back, our pharmacy costs jumped so sharply in Q4 that it forced an emergency review of our entire benefits strategy, just as we were finalizing renewals and prepping communication plans for the next plan year. Heading into 2026 bodes a similar feeling.

The reality is simple: with cost trends rising and new state mandates accelerating, 2026 is likely to be one of the most challenging benefit years employers have seen in the past decade. And if HR doesn’t prepare now, January will be a painful surprise for both the business and the workforce.

Let’s break down what’s driving the crunch, what HR must address before year-end, and how to protect employee trust as costs rise.

GLP-1 Costs Are Reshaping Employer Budgets

GLP-1 drugs like Wegovy and Ozempic are rewriting employer pharmacy budgets. According to industry reports, GLP-1 utilization increased 210% in 2023, followed by a 148% increase in 2024 (Evernorth), and generics are still years away (Mercer).

Employer plans that support coverage of GLP-1s are struggling with:

• Skyrocketing per-member-per-month (PMPM) costs
• Inconsistent prescribing patterns
• Employee expectation that coverage is “standard”
• Pressure to explain why some drugs are covered and others aren’t

It’s no longer just a pharmacy trend; it’s a workforce messaging challenge.

Medical Premiums Are Rising Faster Than Wages

Major consulting firms are forecasting 6-8% increases in medical premiums for 2026, the highest since the early 2010s (Mercer). In fact, 87% of business leaders believe health benefit costs will become “unsustainable in the next 5-10 years” (CAP).

Drivers include:

• Specialty drugs
• Rising costs of medical care
• Rising chronic condition rates
• Provider consolidation

Many organizations absorb part of the increase, but not all. Employees will feel this, and HR must prepare for blowback.

New IRS Limits for 2026 Are Coming

Typical late-year IRS updates will potentially impact:

• 401(k) contribution limits
• HSA and FSA limits
• Catch-up contributions
• High-deductible health plan (HDHP) requirements

These changes sound administrative, but they affect take-home pay, benefits elections, and compliance timelines.

State and Federal Regulations Are Ever-Changing

HR teams must navigate a growing patchwork of:

• Pay transparency requirements
• Paid family leave programs
• Mandatory workplace postings
• Annual employee notices
• Evolving independent contractor rules

With more employees working across multiple states, compliance is no longer a “check the box” exercise, it’s a year-end scramble.

Employee Affordability Pressures

Finally, and perhaps the most urgent trend, employees are feeling even more squeeze.

• 36% have delayed medical care due to cost (Kaiser)
• 44% say medical premiums are impacting their financial stability (Kaiser)
• 1 in 5 adults say they have not filled a prescription because of cost (KFF)

When costs rise, employee trust becomes the legal tender HR must protect.

With these pressures intensifying, HR’s year-end priorities must shift from routine administration to strategic intervention. Here are some priority areas HR needs to address before the year ends.

Align with Finance on 2026 Cost Modeling

If your benefit plan covers it, GLP-1 utilization alone will require updated forecasting. HR and Finance must jointly review:

• Revised medical and pharmacy trend assumptions
• Potential cost-share changes
• Plan design modifications
• Stop-loss coverage implications
• Budget scenarios for best, moderate, and worst-case spending

This alignment shapes everything that follows, including communication strategy.

Reevaluate Plan Design for 2026

Cost pressure requires strategic, not reactive, plan design decisions. This includes reviewing:

• GLP-1 coverage strategy (coverage with criteria, value-based programs, or carve-outs)
• PPO vs. HDHP mix
• Prior authorization rules
• Disease management or wellness program alignment
• Preventive care incentives (critical to long-term cost control)

Employees don’t want surprises; they want clarity. Plan design decisions must be paired with strong explanations.

Prepare Employee Communication Early

The biggest risk in a high-cost year is not necessarily the cost, it’s the confusion. HR must communicate clearly about:

• What is changing
• Why it is changing
• How it affects paychecks
• What support employees have
• How to use their plan wisely

Thorough, proactive communication will reduce escalations, manager frustration, and panic.

Tighten Compliance Before January 1

Year-end is the critical moment to finalize:

• Mandated notices
• Pay transparency updates
• ACA reporting
• State posting updates (for remote workers too)
• Nondiscrimination testing for 401(k) plans
• Updated employee handbooks

Even simple oversights, such as a missing a state posting or incorrect contribution threshold, can create costly risk.

Prepare Managers for Employee Questions

In a high-cost year, managers become your front line. They need:

• Talking points about plan design changes
• Clarity on various coverage rules
• Guidance on how to respond empathetically to affordability concerns
• FAQs they can reference quickly

Manager alignment ensures consistent messaging and reduces misinformation.

Ensure Systems Are Configured Correctly

A January 1 payroll or HRIS error is one of HR’s biggest credibility risks. Before year-end, double-check:

• Updated IRS limits inside systems
• HSA/FSA rollover rules
• PTO rollover/forfeiture calculations
• Correct premium deductions
• 401(k) contribution limits and catch-up configurations
• Integrations between HRIS, carriers, and payroll

When the basics work smoothly, employee trust stays intact.

 

HR can’t stop premiums from rising, and HR can’t control drug trends, but HR can control clarity, consistency, and trust. When HR communicates early, aligns the organization, and secures the systems behind the scenes, employees experience stability, even when costs shift. HR becomes the translator between business pressure and employee reality.

And that’s where our strategic value is proven.

2026 will challenge budgets, test communication strategies, and stretch HR capacity. But with intentional preparation now, before December closes, HR can enter the new year ahead of the curve.

The costs are rising. The pressure is real. But the organizations preparing now will be the ones that protect trust tomorrow.

 

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.