Job-based health plans are experiencing notable cost increases that add to concerns regarding affordability. The latest survey from KFF reveals that average premiums for family coverage rose 5% this year, reaching a total of $28,303. Workers, too, are feeling the impact, as their share of costs climbed. This increase occurs amidst broader economic pressures, with likely implications leading into the upcoming midterm elections.
The survey illustrates a sharp rise in the amount workers contribute to their health insurance. Family coverage costs now average $7,471 annually, reflecting a 9% increase. The share of total premiums employees are responsible for has risen to 27% for family plans and 18% for individual coverage, with these figures demonstrating slight increases from previous years. In contrast, workers’ earnings saw only a 3.7% increase this year, while inflation remained at 2.7%, compounding the financial strain felt by employees.
As health care costs continue to climb, many large employers—44%—have responded by increasing worker contributions. As stated by Matthew Rae, associate director at KFF, the limited options available to employers often compel them to pass on these rising costs to their employees.
The outlook for 2027 remains grim as consulting firms like AON and Marsh predict further premium increases—9.5% and 8.2%, respectively. This marks the fourth consecutive year of significant hikes. Factors cited include increased service utilization, soaring prices for prescription drugs, and escalating hospital charges. Other analyses suggest that artificial intelligence is also contributing to the cost increases, as healthcare providers utilize technology to enhance billing practices.
A Business Group on Health report expects a median premium rise of 9.2%, although some employers might look for ways to adjust benefits to mitigate these costs. Jim Winkler from the group indicated that the focus is shifting from employers taking on the financial burden to workers facing higher out-of-pocket expenses.
In light of increasing costs, some employers are employing various strategies to manage their health expenses. This includes raising deductibles, modifying benefit offerings, or moving to new insurance providers. For instance, Phifer Inc., a firm that reported stable health costs, has adopted a model featuring zero-cost primary care through on-site clinics coupled with direct contracts with physicians. Russell DuBose, the company’s HR vice president, emphasized the positive outcomes associated with direct care access, aiming to enhance patient engagement while controlling costs.
Many experts criticize the healthcare industry’s lack of action in controlling rising costs. Elizabeth Mitchell, CEO of the Purchaser Business Group on Health, questions why employers are expected to shoulder rising prices when consistent growth in costs suggests systemic inefficiencies. Industry leaders are calling for legislative measures to cap costs—such as deductibles, hospital charges, and drug prices negotiated for the government sector to be available to private insurers.
While numerous companies face escalating health costs, some manage to stabilize their expenses effectively. On-site clinics are less common—only 7% of companies have one—but those that do typically report better control over costs. Other firms are increasingly sourcing prescription drugs internationally for better prices. Notably, about 9% of companies with over 50 employees are pursuing this strategy as part of their cost-management initiatives.
The report underscores a growing concern among all employers regarding the potential impact these rising healthcare costs may have on overall job stability. As employers remain vigilant, many express concern that persistent healthcare inflation could pose a significant threat to business viability and employment rates in the near future.