The relentless rise in healthcare costs is squeezing American workers and employers, with premiums for employer-sponsored insurance climbing faster than inflation and deductibles reaching record highs. This escalating financial burden is prompting a shift towards high-deductible health plans, transferring more risk to employees and potentially leading to delayed or forgone care, according to new research and analysis.
Average family premiums for employer-sponsored health insurance are nearing ’s $26,993, with workers contributing roughly $6,850 towards the total cost. The KFF survey, cited in recent reports, indicates that is poised to see the sharpest increases in over a decade if plan design changes don’t offset underlying cost trends. Employers are bracing for potential hikes approaching 9%.
“While access to employer-sponsored insurance has been largely stable in recent years, that stability masks a growing affordability problem,” explains Elizabeth Lukanen, director of the State Health Access Data Assistance Center (SHADAC) at the University of Minnesota School of Public Health. “Over the past decade, premiums have risen faster than inflation, and deductibles have climbed even more steeply, crossing the $4,000 annual threshold for the first time and putting growing financial strain on working families.”
The shift towards high-deductible health plans (HDHPs) is a direct consequence of rising premiums. These plans offer lower monthly premiums but require employees to pay significantly more out-of-pocket before coverage kicks in. Lukanen notes that HDHPs now cover a majority of employees nationwide. “When faced with an unexpected medical event, [employees] may come up against thousands of dollars in out-of-pocket costs before coverage even begins, or may delay or forgo care, which can lead to negative health outcomes and potentially even greater costs in the future.”
Several factors are converging to drive up healthcare costs. Higher hospital prices, persistent inflation in provider labor costs, and a rebound in service utilization as deferred care from the pandemic returns are all contributing to the problem. The increasing cost of prescription drugs, particularly GLP-1s used for weight loss and cardiometabolic risks, is also a significant driver. While many employers covered these drugs in , tightening budgets may lead to restrictions on coverage in the coming year.
Consolidation among health systems is exacerbating the issue by strengthening their negotiating leverage on rates. At the same time, the increased accessibility of virtual care, particularly in behavioral health, is driving up utilization. These seemingly contradictory forces – cost containment efforts and increased demand – are creating a complex and challenging environment for employers and employees alike.
The impact is particularly acute for small businesses. According to research from the Employee Benefit Research Institute (EBRI), gains in health coverage offerings have been limited to large employers (those with more than 100 employees). Coverage among smaller employers has decreased. Paul Fronstin, director of health benefits research at EBRI, warns that “If health insurance premiums rise faster than wages and general inflation, small employers are likely to face intensified financial strain, which could accelerate the erosion of health plan sponsorship among firms with fewer than 100 workers.”
The expiration of Affordable Care Act (ACA) subsidies is adding another layer of complexity. As Forbes reported, the loss of these subsidies is leaving U.S. Families facing soaring premiums and increased financial strain, with potential ripple effects throughout the economy.
The current situation highlights the urgent need for scalable solutions to address rising healthcare costs. Without meaningful cost containment measures, the financial burden on both workers and employers will continue to grow, potentially jeopardizing access to care and undermining economic stability. The KFF survey suggests that a policy debate over price growth is intensifying, but an “obvious, scalable fix” remains elusive.
SHADAC, a multidisciplinary health policy research center, has been analyzing these trends for over 20 years, providing rigorous, policy-driven analyses to inform decision-making at the state and federal levels. The University of Minnesota School of Public Health, home to SHADAC, is dedicated to improving the health and wellbeing of populations worldwide through innovative research and partnerships.
