As Million-Dollar Claims Cause Mid-Market Pressure, Alternative Funding Models Offer Relief

What was once a tool for attracting talent has become a balance-sheet risk. Unprecedented premium spikes, increased utilization, and the emergence of seven-figure medical claims are contributing to what some describe as the most challenging renewal cycle in years. It's a volatile market full of hidden risks that are often only amplified by traditional insurance models, prompting mid-sized employers to seriously rethink their benefits strategy.

Kate Moher is President of Employee Health & Benefits at Marsh McLennan Agency. A seasoned executive with a career that includes roles as CEO of C2 Solutions and National Vice President of Broker Strategy and Development at UnitedHealthcare, Moher has spent decades at the intersection of benefits strategy and business growth. She says the calculus for investing in expensive benefits is different than it was two years ago, when many employers were going above and beyond to attract talent.

"Some of these claims that we’re seeing in the marketplace are well over a million dollars. For a middle-market employer, that level of risk is really challenging to take on and potentially fund," says Moher. She points to GLP-1 medications and their soaring costs as illustration of the risk divide. "They've just taken off over the last two years. As an employer, there's a lot of conversation about whether to cover the drugs. The cost is high." Moher notes that alongside the drugs' elevated sticker price, employers face clinical risks related to patient adherence and side effects.

• Not all risk is equal: As a result, organizations' GLP-1 strategies are increasingly dictated by their size. "Large groups, let's say 2,000 plus, have a lot more bandwidth with risk. They're covering GLP-1s if you fall within a diagnosis of diabetes or weight loss for a certain drug," Moher explains. "For the smaller group employers, the risk is much higher. You don't see as many of the middle-market employers being able to cover GLP-1s in their plans."

In response, many companies are turning to alternative funding strategies that give them more direct access to cost-containment levers. Drawing on March McLennan's 2026 Employee Health and Benefits Trends report, Moher outlines a menu of options ranging from a level-funded product, which allows for predictable expenses while introducing elements of a self-funded plan, to more advanced strategies like reference-based pricing, health captives, or PEOs. "If you can move out of a fully insured funding model, you have much more ability and access to real risk mitigation and cost control strategies."

PBM contracts offer another avenue for cost containment. Moher advises employers to carefully consider their PBM agreements, particularly components like formulary structures and utilization controls. "How do they mirror up with the plan design? It's important that you really think about what's in your plan."

• Brand busting: An increasingly common tactic is to negotiate for a biosimilar-first contract, which lowers costs by substituting costly name-brand drugs with clinically equivalent but less expensive drugs. Moher advises employers that this approach requires an element of employee education. "It really does require the employer to have a solid communication plan with the employees so they know that a biosimilar is the same as that brand-name drug."

• Transparency wave: Employers will soon have additional data on their side in the fight for pharmaceutical affordability. Transparency rules mandated by the Consolidated Appropriations Act are finally being extended to the opaque world of PBMs, and the resulting wave of publicly available data is expected to give employers significant new leverage. "More transparency data coming into the public domain is going to help everyone," Moher says.

She cautions that executing any of these strategies requires more than just mastering the financial mechanics. Success, she says, often hinges on something far more human. While emerging pressures like AI governance will require future attention, she views the most immediate challenge as one of leadership and trust. "The hardest part is building confidence with employees that the decisions being made are good for them." Ultimately, she suggests, the elaborate architecture of a benefits strategy is less important than the quality of the communication used to convey its value. "That communication is often where benefits strategies succeed or fail."