As healthcare costs continue to rise, employers are pulling every lever they can to try and get their spend better under control. Jeff Bak, President and CEO at Imagine360, sat down with Leader’s Edge to discuss how employers are turning to direct contracting with health systems to steer employees to high-quality care that provides value.
1. Healthcare costs are hitting their highest growth in over a decade
Employers are projecting a 6.5% increase in 2026, the highest since 2010 and the fourth straight year of elevated growth. After a relatively stable period of 2%–4% increases pre-pandemic, costs have reset to a higher baseline that shows no signs of easing.
2. Employers are absorbing costs in ways that impact business decisions
Rising healthcare expenses aren’t contained to the benefits line—they’re influencing broader business strategy. Employers are delaying wage increases, raising prices, and cutting back on other benefits just to keep up, creating ripple effects across the organization.
3. Employees are delaying care and skipping medications
Cost pressures are shifting to employees, who are increasingly making trade-offs with their health. Nearly half of U.S. adults report not taking medications as prescribed due to cost, while many delay or avoid care altogether—often leading to worse outcomes and higher long-term costs.
4. Traditional cost-control strategies are falling short
Common approaches like high-deductible health plans, wellness programs, and value-based care initiatives have delivered limited results. Many employers feel they’ve exhausted the “usual levers,” yet costs continue to climb.
5. Price, not utilization, is the primary cost driver
While healthcare utilization has increased over time, prices are the bigger factor driving spending growth. Even when usage stays flat, rising negotiated rates—especially in hospital settings—continue to push total costs higher.
6. Pricing inconsistencies costs remain a major pressure point
Employers are paying an average of 254% of Medicare rates for facility services, with some paying significantly more. At the same time, the cost per inpatient day continues to rise, contributing to overall spend.
7. Pharmacy costs are consuming a growing share of spend
Prescription drugs now account for roughly 27% of employer healthcare costs, and that share is expected to grow. Per-person drug spending has more than doubled over the past decade, driven primarily by rising prices—not increased utilization.
8. GLP-1 drugs are accelerating cost growth
Spending on GLP-1 medications has surged rapidly, jumping from 5.9% to 16.5% of employer pharmacy spend in just two years. These drugs are now among the top contributors to cost increases, forcing employers to rethink coverage strategies.
9. Healthcare costs are driving workforce and hiring decisions
More than one-third of employers report reducing benefits or slowing wage growth due to healthcare costs, while others are raising prices or even cutting jobs. Few organizations say they can sustain more than 5%–6% annual cost growth going forward.
10. Vendor performance is under increased scrutiny
Employers are taking a harder look at every partner in their ecosystem—from brokers to PBMs to carriers. Many are going to market more frequently, auditing performance, and replacing vendors that don’t deliver measurable value within a few years.
11. Direct contracting is gaining traction across employer sizes
Once limited to large employers, direct contracting is expanding quickly, with 75% of employers now using some form of it. By negotiating directly with providers, employers can lower costs, improve access, and steer employees toward higher-value care.
Imagine360 partners with high-quality health systems within key marketsand members are steered to utilize the contracted healthcare system. In markets where Imagine360 does not have direct contracting partnerships, it uses reference-based pricing with facilities. With reference-based pricing, Imagine360 uses the hospital’s published charges plus a 12% margin or Medicare fees plus 20%. These rates protect employers from high-cost claims, which Jeff Bak, President and CEO of Imagine360, says are common in many traditional plans.
Taken together, these trends point to a system under sustained pressure. Costs are rising faster than employers can absorb, and employees are already feeling the impact in delayed care and financial strain. The difference now is that more employers are moving from incremental changes to structural ones—rethinking vendor relationships, pricing models, and how care is delivered. Whether through direct contracting, pharmacy optimization, or more transparent pricing approaches, the organizations that act early are the ones most likely to regain control over their healthcare spend.
This is an abbreviated version of a Leader’s Edge article written by Tammy Worth.
