Employers can expect to pay an average of $17,000 per employee for health care costs next year. Aon, a global professional services firm, projects a 9.5% increase in 2026, marking the third consecutive year with price hikes approaching double digits.
“We are seeing medical cost inflation levels at their highest in years,” said Farheen Dam, the company’s head of health solutions for North America. “But the overlooked reality is that employers continue to act as a stabilizing force. They absorb the bulk of the increase while making smart, targeted adjustments that protect employees and preserve plan value.”
Aon cited three broad trends fueling higher prices:
- The continued rise in chronic conditions, such as musculoskeletal and cardiovascular disease, and an increase in high-cost conditions such cancer, remain primary drivers of escalating medical costs in the United States.
- Simultaneously, hospital workforce expansion is enabling greater patient throughput, further contributing to higher levels of health care use.
- Prescription drug spending also is rising, driven by greater use of costly brand-name and specialty medications. Notably, demand for GLP-1 therapies has surged as uptake accelerates for treatment of diabetes, obesity and other chronic conditions.
Employers are expected to continue absorbing the largest share of health care cost increases, mitigating the rising expenditures through strategies such as benefit design changes, employee payroll contribution increases, partnerships with point solution vendors and targeted chronic condition management. However, as medical inflation persists, it also is placing pressure on employers’ ability to invest in other total rewards and people priorities, from compensation and career development to wider wellbeing initiatives, making it increasingly difficult to balance workforce needs holistically.
The rate of cost increases varies by industry, as does the proportion of cost shared by the employer plan sponsor and employee. The technology and communications industry has the highest average employer cost increase at 8.8%, while the finance and insurance industry has the highest average employee cost increase at 6.8%.
The technology and communications industry and professional services industry have the lowest average change in employee contributions after being in the top three last year. The retail and wholesale trade industry has the lowest increase in employer subsidy toward medical benefit cost.
Ongoing changes in the health care landscape and external economic pressures make it less likely that cost increases will return to more manageable levels in the future. To mitigate this uncertainty, employers are turning to data-based solutions that offer a clearer picture of workforce health care trends and what they can expect in years to come.
“Employers are facing a future of persistent cost pressure, and the old playbook won’t cut it,” said Debbie Ashford, North America chief actuary for health solutions for Aon.