Healthcare's Cost Crisis and How to Fix It

Healthcare costs rose 8% in 2025, the highest rate Business Group on Health has recorded. Compounded over a decade, that figure becomes a 54% increase, and the trajectory is not changing on its own.

Ellen Kelsay, president and CEO of BGH, traces what employers are actually doing about it. Pharmacy now represents 20% to 30% of a typical employer's healthcare spend, much of it driven by GLP-1s and cell and gene therapies that are straining plan design decisions. On top of that, mental health costs have entered the top five cost drivers for the first time. Most employers are deeply reluctant to shift costs to employees who are already stretched, but some are running out of room to absorb increases without making trade-offs somewhere.

Two themes define what employers can still control. The first is quality steerage. Getting employees to the right providers, from primary care through centers of excellence, is the most effective lever for bending the cost curve without cutting benefits. The second is vendor accountability. BGH flagged it two years ago and underlined it again this year. Employers are scrutinizing their vendor portfolios harder, demanding real outcome data, and proving willing to unwind partnerships that are not delivering.

The near-term risk on AI is not whether the technology works, but whether the cost of vendor AI investment gets passed back to plan sponsors. For anyone new to a benefits leadership role, the direction is clear. Be bold, forge a strong relationship with finance, and use data to push partners toward accountability.

Watch the full episode of Margin of Care to hear Ellen Kelsay's full read on the AI pricing risk and the “battle of the AIs” she sees coming as vendors race to deploy it.