7 Reasons Preventative Health Belongs in Every PEO Tax Liability Strategy

“Take care of your employees, and they’ll take care of your business. It’s as simple as that.”

— Bill Gates

Health benefits are getting more expensive. And not just a little.

The reality for worksite employers is that healthcare costs are climbing faster than revenue growth for many small and midsize companies. What used to be a predictable year-on-year rise has become an unpredictable surge, with 2026 shaping up to be the steepest increase in over a decade.

For leaders running lean organizations, these cost increases don’t just hit the balance sheet, they threaten the sustainability of the entire business model.

At Sanguine Strategic Advisors, we’re seeing a clear shift. Preventative health, once treated as a “nice-to-have” benefit, is now becoming a strategic necessity.

The New Normal: Rising Faster, Hitting Harder

According to Mercer’s annual survey, the total health benefit cost per employee is expected to rise 6.5% in 2026. It’s the highest single-year jump since 2010. That follows a 5.8% increase in 2025, even after cost-control measures.

For context, healthcare costs rose only about 3% per year over the past decade. That’s more than double the long-term trend, and it’s hitting employers and employees alike.

Large companies have negotiating power, self-funding options, and scale. Smaller businesses? They’re paying retail prices in a wholesale market.

Looking Ahead: Costs Aren’t Slowing Down

The Business Group on Health survey paints an even tougher picture: employers expect healthcare costs to jump around 9% in 2026, the biggest increase in more than ten years.

Even with plan redesigns and cost-sharing adjustments, projections still hover between 7%–8%. That means for many small businesses, the cost of a family’s employer-sponsored coverage could top $35,000 a year. That’s not just unsustainable, it’s a structural problem that can’t be solved with another round of premium adjustments.

Employees Are Paying More, Too

Aon reports that the average total plan cost per employee, including both employer and employee contributions, has hit $15,860. Of that, employees themselves are now paying over $5,000 through premiums, deductibles, and copays.

While worksite employers continue to shoulder the bulk of the cost, the worksite employees are feeling the squeeze more than ever. This creates a dangerous cycle: higher costs lead to lower engagement, which leads to poorer health outcomes, which drives costs up even further.

The Employer Response: Control What You Can

According to Mercer, more than half of employers (53%) are already planning cost-cutting changes in 2025. They’re targeting everything from pharmacy benefits, particularly GLP-1 weight-loss drugs, to plan design and provider networks.

Meanwhile, 66% of employers worry that reductions in Medicare and Medicaid funding will simply shift more costs to the commercial market. Even with these adjustments, we’re not solving the underlying issue: the system is built to treat illness, not prevent it.

The Double Whammy: Price and Utilization

Costs are rising for two reasons, both of which are accelerating.

Prices are going up as hospitals, clinics, and providers pass on labor and inflation costs.

Utilization is going up as more employees seek care, particularly for chronic conditions.

As Mercer describes it, employers are facing a “double-whammy.” Specialty medications, chronic disease management, and general inflation are converging to create a perfect storm for benefit budgets.

Why It Hurts Small and Midsize Businesses Most

PEOs have the opportunity to better equip their worksite employers when costs rise 7% or 9%. These employers are feeling it directly in margin pressure, employee turnover, and plan reductions that make benefits less competitive.

This is where preventative health becomes not just an ethical move, but a financial one. By reducing risk factors early, businesses can lower claims costs, improve productivity, and avoid the compounding expense of chronic disease management.

7 Reasons Preventative Health Belongs in the Strategy

Preventative Health as a Profit Strategy

Preventative health isn’t about yoga classes and step challenges. It’s about reducing the number of high-cost claims before they happen. It’s flu shots, mental health support, regular screenings, fitness incentives, and accessible health education, all proven to cut future costs.

When done right, these programs deliver measurable business results:

• Lower long-term healthcare premiums
• Reduced absenteeism and improved performance
• Stronger employee loyalty and retention
• A more attractive employer brand for top talent

As health costs climb, these gains aren’t just nice to have, they’re the difference between stability and erosion.

The Bottom Line

The future of master healthcare plans and employer-sponsored healthcare will belong to proactive PEOs. Preventative health isn’t a luxury or an HR perk. It’s a risk-management strategy.

And for PEOs to have the opportunity to bring this great benefit to their worksite employers, it is one of the few levers left to control what’s coming next.