Employer Health Care Costs Continue to Rise Amid Inflation and Labor Shortages

As labor shortages ease in hospitals, employers are facing increasing medical claims and inflation in drug and hospital prices, driving up health care costs nationwide. The average cost per employee is expected to exceed $17,000 in 2026, with a 9.5% increase, according to Aon's annual estimate. Medical inflation, driven by chronic conditions like musculoskeletal and cardiovascular disease, as well as an increase in high-cost conditions like cancer, is a major driver of the continued rise in insurance costs. Employers are responding by looking to pharmacy benefit managers (PBMs) for better pricing and transparency, while also shifting from reactive oversight to proactive cost and care management.

Key Takeaways:

• Employer health care costs nationwide are expected to rise 9.5% in 2026, with the average cost per employee exceeding $17,000, according to Aon's annual estimate.
• Medical inflation, driven by chronic conditions like musculoskeletal and cardiovascular disease, as well as an increase in high-cost conditions like cancer, is a major driver of the continued rise in insurance costs.
• Employer responses include looking to pharmacy benefit managers (PBMs) for better pricing and transparency, as well as shifting from reactive oversight to proactive cost and care management.
• Employers are expected to continue absorbing the largest share of health care cost increases, covering about 81% of plan costs on average, according to Aon.
• The Midwest Business Group on Health's annual employer survey found that every respondent pointed to high-cost claims, drug prices, and hospital prices as the greatest threats to affordability.
• Nearly all employers surveyed reported health system consolidation and cell and gene therapies as mounting pressures, with 41% lacking full access to their health data and 37% reporting partners refusing to share it.

Statistics:

• Average cost per employee in 2026 will exceed $17,000, with a 9.5% increase, according to Aon's annual estimate.
• 5% of members account for 60% of all medical and pharmacy spending, according to Aon's data.
• 41% of employers lack full access to their health data, while 37% report partners refusing to share it, according to the Midwest Business Group on Health's annual employer survey.
• Employers are expected to continue absorbing the largest share of health care cost increases, covering about 81% of plan costs on average, according to Aon.
• Medical cost inflation is at its highest in years, with employers making smart, targeted adjustments to protect employees and preserve plan value, according to Farheen Dam, head of Aon's health solutions in North America.

Sources:

• Aon's annual estimate of employer health care costs, 2026
• Midwest Business Group on Health's annual employer survey, 2025
• Crain's article, "Employers face rising health care costs, seek pharmacy benefit managers for help"