Employer-sponsored health care costs in the U.S. are projected to jump significantly in 2026—exceeding $17,000 per employee—as medical inflation accelerates. Here are the factors driving this rise, and what companies are doing to manage the pressure.
Key Takeaways
- Total health costs for employers are expected to rise by around 9.5% in 2026.
- This marks the third year in a row of near-double-digit increases in medical and prescription spend.
- Employers are absorbing most of these increases, even as employees see rising premiums and out-of-pocket costs.
What’s Fueling the Increase
1. Chronic and High-Cost Conditions
Diseases like cardiovascular, musculoskeletal disorders, and cancer are becoming more common and more expensive to treat. These chronic and high-cost conditions are major drivers of medical spend.
2. Specialty & Brand-Name Drugs
Prescription drug costs—especially specialty medications—are climbing. A growing contributor is demand for GLP-1 therapies (used in treatments for diabetes and obesity), which are more costly than many traditional drugs.
3. Increased Utilization
Hospitals are expanding their workforce capacity, enabling them to treat more patients. More people are using more health services. That, combined with more expensive treatments, multiplies costs.
4. Inflation & External Pressures
General inflation, rising prices for medical supplies, devices, and labor are pushing up costs outside of pure medical care. These external factors ripple through the entire health care ecosystem.
Cost Breakdowns & Trends
- Employers typically cover about 80-81% of health plan costs, with employees covering the rest.
- In 2025, employee contributions—including both paycheck premiums and out-of-pocket costs like deductibles and copays—are expected to total nearly $5,000 per person.
- Some industries are feeling higher cost increases than others: tech and communications often face steeper employer cost increases, while finance and insurance may see larger increases on the employee side.
What Employers Can & Are Doing
Because these cost trends threaten budgets and benefit plans, many employers are adopting strategies to manage the increase:
- Redesigning benefits to shift some of the cost burden (e.g. higher deductibles, co-payments, or contribution rates).
- Using data analytics to identify cost drivers more precisely and predict high-cost members.
- Strengthening chronic disease management programs to help prevent worsening health and reduce long-term costs.
- Increasing transparency in pricing and provider networks to negotiate better deals.
Implications
- Employers may need to choose: absorb more cost, reduce benefit value, or pass more cost to employees—none of which is easy.
- Rising health care costs could limit employers’ ability to invest in other priorities, like wages, employee development, or wellness programs.
- For employees, the trend may mean higher premiums, more out-of-pocket costs, and possibly reduced benefit levels.