US employers are preparing for a significant increase in health insurance costs, with premiums projected to rise nearly 10% next year, marking the largest jump in at least 15 years. According to benefits consultants Aon and WTW, health-coverage costs are expected to surge about 9.5% and 9.2% respectively in 2026, representing the fastest increase since at least 2011.
The average cost of a family health plan now hovers around $25,500 annually, comparable to the price of a compact car. Industry experts are expressing concern over the sustainability of these rising costs. Shawn Gremminger, head of the National Alliance of Healthcare Purchaser Coalitions, noted that employers are reacting with feelings ranging from shock to resignation.
Insurers attribute the increase in premiums to several factors, including escalating hospital bills, increased utilization of medical services, and the high cost of new medications, particularly GLP-1 drugs used for weight loss and diabetes management, such as Ozempic, Wegovy, and Zepbound. The rising incidence of cancer and chronic conditions among working-age adults is also straining insurance coverage.
In response to the surging costs, many businesses are shifting some expenses onto employees through higher payroll deductions or larger deductibles. Others are considering redesigning their health plans to restrict access to specific hospitals or specialists. A recent WTW survey indicates that 60% of large employers are contemplating switching insurers or pharmacy-benefit managers in the near future.
The case of Kall Morris Inc., a space-services company based in Marquette, Michigan, highlights the struggle many organizations face. CEO Troy Morris mentioned that his company pays for 100% of employee premiums but experienced a 20% rate increase for the current plan year, following a 9% hike in 2024. As a result, out-of-pocket maximums for families have risen from $8,150 to $10,000.
Mutual of Omaha, employing 6,300 workers, is another example of a business grappling with escalating costs. The company has already faced double-digit increases in expenses this year and has opted to drop coverage for GLP-1 drugs aimed at weight loss, after being warned by its pharmacy-benefit manager that implementing a weight-loss program could lead to losing valuable rebates.
The frustration among employers is palpable. Pam Kehaly, CEO of Blue Cross Blue Shield of Arizona, called the situation “the worst I’ve seen,” stating that aggressive billing practices by some providers, sometimes driven by artificial intelligence, exacerbate the problem. Kirk Roy, chief actuary at Blue Cross Blue Shield of Michigan, observed that conditions typically associated with aging, such as atrial fibrillation and joint issues, are increasingly becoming common in younger, working-age individuals.
As employers navigate this challenging landscape, the future of health insurance costs remains uncertain, with many looking for solutions to manage their expenses effectively while continuing to provide necessary coverage for their workers.
