Why Healthcare Costs Are a CFO Problem | 125 Managed Health
On a hypothetical $2 million annual health-benefit budget, an 8.2% increase adds $164,000. That amount belongs in the conversation about next year’s hiring, wages, and investment. Preliminary results from Marsh’s 2026 survey of more than 1,800 U.S. employers project an average 8.2% increase in total health-benefit cost per employee for 2027, after planned cost reductions. Without those changes, employers projected an 11% increase. The 8.2% projection would be the largest since 2003. (Source: Mercer)
Finance leaders are already seeing the consequences. Mercer’s 2026 CFO survey found that about one-third of respondents ranked health-benefit costs among their top three operating-expense concerns, up from 19% in 2024. Respondents reported effects on other benefits, wage growth, and product or service prices. The renewal decision has implications across the business. (Source: Mercer)
What the Renewal Means for the Budget
For illustration, assume the employer’s own $2 million budget rises at those survey-average rates, with enrollment, coverage mix, and its share of costs unchanged. The 11% scenario adds $220,000. Actual renewals will differ.
On that budget, each percentage point is $20,000. A two-point difference leaves $40,000 more for planned spending. Finance and HR can use that amount to establish a cost target before reviewing alternatives.
The budget also needs a consistent basis for comparison. KFF reported average annual family premiums of $26,993 in 2025, with workers contributing $6,850 on average. Those premiums include both employer and worker contributions. A company reviewing its own costs needs to separate its contribution and track spending per enrolled employee alongside the annual total. Changes in enrollment or coverage mix can make those measures move differently. (Source: KFF)
Employee Costs Behind a Lower Premium
Marsh found that 59% of employers plan cost-cutting benefit changes for 2027, including plan-design changes that may raise employees’ out-of-pocket costs. (Source: Marsh)
Suppose a proposed plan reduces an employee’s payroll deduction by $30 a month and raises the deductible from $1,000 to $2,500. The employee would contribute $360 less toward annual premiums and face $1,500 more in potential deductible exposure. How that works out depends on the care they need and the plan’s other terms.
Employer account funding belongs in the comparison. KFF found that 34% of covered workers in 2025 had a general annual deductible of at least $2,000 for single coverage. Subtracting employer health reimbursement arrangement (HRA) or health savings account (HSA) contributions reduced that share to 26% in KFF’s calculation. The plans’ stated deductibles remained unchanged. (Source: KFF)
Checking What Each Benefit Delivers
Take telemedicine. For a program intended for routine use, compare its annual fee with the number of eligible employees, completed visits, and employee feedback. High enrollment with few visits could reflect limited need, poor awareness, or difficulty getting an appointment. Employee feedback helps explain what the usage figures cannot.
Other benefits serve different purposes. Coverage for rare, expensive events can provide protection without frequent claims. Its value needs to be assessed against the financial exposure it covers.
When two vendors serve largely the same employees for the same purpose, finance has a specific overlap to investigate. 125 Managed Health’s Employer Checklist: Add Supplemental Benefits Without Overlap offers a framework for reviewing existing benefits before adding another program.
Where Section 125 Fits
The benefit structure also deserves review. Under IRS guidance, a Section 125 cafeteria plan is a written employer plan that allows employees to choose between cash or taxable benefits and qualifying benefits provided on a pre-tax basis. (Source: Internal Revenue Service)
Section 125 does not remove medical-cost inflation. Potential tax savings depend on the qualifying benefits and applicable rules. Finance should review proposed payroll calculations with its tax and payroll advisers.
125 Managed Health offers a voluntary employer-sponsored program designed to complement existing coverage. Its initial analysis uses company, payroll, and census information to estimate potential employer savings and employee impact. Those estimates need to be weighed against the costs of participation.
For a hypothetical proposal, $50,000 in annual employer tax savings less $35,000 in additional fees and employer costs leaves $15,000 in net employer savings. The analysis should show employee costs and benefits alongside that employer calculation before finance approves the arrangement.
Employers can schedule a complimentary consultation with 125 Managed Health to discuss an initial analysis based on their workforce.
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Educational information only. Benefit availability, tax treatment, savings, and employee outcomes vary by plan design, eligibility, elections, payroll structure, state requirements, and applicable law. Employers should consult their benefits, payroll, tax, and legal advisers before implementation.
