Health Insurance Costs Are Climbing Fast — Here’s How Employers Can Keep Coverage Affordable

Employer health plans are at a tipping point. The healthcare cost trend rose by 9% to 9.5% in 2026, marking the steepest annual increase in 15 years. For many employers, absorbing the full impact of that trend is not feasible. As a result, some are shifting more of the cost burden to employees, who may see their premiums climb by 6% to 7%, along with higher deductibles and out-of-pocket expenses.

The rising costs are leading more than half of employers to consider cuts to benefits. Less robust healthcare plans can provide short-term spending relief, but experts caution that reducing overall access to care isn’t a practical long-term solution. 

Instead, companies can embrace strategic shifts to reduce costs, such as strengthening primary care, expanding digital health, and smarter health plan design.

Why Costs Are Rising So Quickly

No single reason accounts for the sharp rise in healthcare costs. Instead, a multitude of factors occurred over the past five years that have led to snowballing costs. 

Delayed Preventive Care

Many Americans skipped preventive visits during the pandemic. Experts predicted a quick rebound as people hurried to catch up on exams and screenings they had missed. In actuality, that did not happen. 

These preventive care delays mean patients missed the window of opportunity for early diagnosis of serious conditions. Doctors are now seeing patients presenting at a much higher acuity or with complications from unmanaged chronic conditions. Treatment in these cases is more complicated and more expensive. 

Expensive New Therapies

The headlines are full of stories about the popularity of GLP-1 drugs for diabetes and weight loss. Millions of people are taking these medications, which offer significant clinical benefits, but they come at a high cost. 

Breakthrough gene therapies are another area where the clinical benefits are extraordinary. New gene therapy protocols can cure life-threatening conditions such as hemophilia, but the cost runs into the millions per patient. 

The cumulative cost of these high-dollar treatments has ripple effects across the whole universe of healthcare spending. 

Hospital and Provider Inflation

Cuts to Medicare and the growing rate of uninsured people have also had wide-ranging effects. Hospitals have increased rates to private insurers to offset cuts and uncompensated care. Higher unit costs are coming through from providers, as well. 

Pharmacy Costs Outpacing Medical Costs

The cost of pharmaceuticals continues to be a major driver of healthcare spending. The Health Policy Institute reports that 66% of U.S. adults take prescription medications. That number goes as high as 98% for adults with chronic conditions such as diabetes. 

That, along with the price of popular drugs, has led to spending on prescription medications exceeding overall medical spending in some employer plans. 

Why Shifting Costs to Employees Isn’t the Answer

Employers often try to compensate for skyrocketing insurance costs by shifting some of the burden to employees, passing along premium increases, raising deductibles, or increasing the maximum amount on out-of-pocket payments.

But this kind of cost-shifting is not a sustainable strategy. It damages morale and increases financial stress on workers and their families. Less robust benefits packages can have adverse effects on hiring and are competitive for employers.

To build sustainable strategies to control healthcare spending, employers must focus on spending smarter instead of simply spending less.

Smarter Strategies for Managing Costs

Employers can deploy several strategies to address healthcare costs without cutting benefits for employees. 

Strengthen Primary and Preventive Care

Early detection saves both lives and dollars. Screenings like colonoscopies and mammograms can catch serious conditions early and are fully covered under most health plans. Yet many employees still miss them. 

Many third-party administrators (TPAs) work closely with employers to analyze claims data and flag gaps in care. These are instances where someone is overdue for a recommended screening or isn’t filling prescriptions for a chronic condition. TPAs then reach out directly to those members, helping them schedule appointments and understand their benefits. 

This hands-on, data-driven approach helps prevent costly, unmanaged chronic conditions while improving employee health and reducing long-term spending.

Leverage Virtual and Digital Health Tools

Virtual health care and digital platforms are incredible tools for increasing healthcare access, without the need for costly and time-consuming in-person visits. Employees can make telehealth appointments for minor medical issues, routine visits, and follow-up care, reducing ER and urgent care visits. 

The convenience of virtual care takes the hassle out of going to the doctor, while still delivering the benefits of robust care. This can improve employee satisfaction and drive cost containment.

Redirection of Care Around High-Cost Drivers

Site of care plays a critical role in managing healthcare spending. TPAs can help employers set up benefit plans that steer employees toward high-quality, cost-effective providers. For example, joint replacement surgeries performed at carefully selected hospitals and providers deliver better outcomes, faster recovery, fewer readmissions, and a quicker return to work.

Dynamic co-pay strategies also offer a solution. They work by using an employee-facing platform that identifies the out-of-pocket costs for each provider in real time. The provider with the lowest cost is shown at the top of the list. Prices are guaranteed once an employee locks in their selection. If something changes between one visit and the next, and a provider is no longer in-network, that’s also reflected on the platform.

This transparency reduces out-of-pocket costs and creates price certainty for employees while lowering the total cost of care for plan sponsors. 

Additionally, self-funded employers can better manage healthcare spending by pinpointing major cost categories, such as joint replacements, cancer care, and specialty drugs, and aligning benefits to address them directly. For instance, when employers see rising use of GLP-1 medications, pairing them with wellness programs focused on nutrition and exercise improves long-term results. 

Integrating these solutions in your healthcare strategy enables employees to maintain the care that’s appropriate for them.

Empowering Employees as Informed Health Consumers

Employers can be proactive about making sure employees understand how to get the most out of their benefits. Employers can play an active role in helping employees understand their coverage, explaining how to access recommended care, and positioning themselves as a resource for any questions that arise.  

Human resources teams can inform employees about smart strategies such as:

• Using preventive care benefits
• Seeing in-network providers
• Utilizing nurse care managers and plan navigators
• Choosing lower-cost options, such as telehealth visits and generic medications

Education and plan transparency are essential to achieving this shift.

Rethinking How We Pay for Care

Healthcare costs are expected to keep rising, presenting long-term challenges for employers. Rather than relying solely on cuts, employers need strategies that help them spend smarter. 

TPAs can guide employers through this new reality, helping to analyze cost drivers, redesign benefits, and implement targeted solutions. These proactive, data-driven approaches not only reduce wasteful spending but also support better health outcomes. 

With the right strategy, employers can stay competitive while keeping coverage affordable and effective for their workforce.