Aon has reported that US employer health care costs are projected to rise 9.5% in 2026, with average costs expected to exceed $17,000 per employee. This marks the third consecutive year of near double-digit increases in health care cost trends.
Growth in chronic conditions such as musculoskeletal and cardiovascular diseases, along with a rise in high-cost conditions like cancer, continues to drive medical cost escalation. Hospital workforce expansion and higher prescription drug spending, particularly for brand-name and specialty medications, are also contributing factors. Demand for GLP-1 therapies has increased, especially for diabetes and obesity.
“We are seeing medical cost inflation levels at their highest in years. 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,” said Farheen Dam (pictured above), head of Health Solutions for North America at Aon.
In response, many employers are exploring self-funded strategies to gain more control over spending, though this can expose them to greater financial risk if high-cost claims occur. Stop loss coverage remains a key tool for mitigating these risks, and demand for such coverage is growing as employers seek to manage volatility in their health plans.
Employers are expected to continue absorbing most of the health care cost increases, using strategies such as benefit design changes, higher employee payroll contributions, and targeted chronic condition management.
Persistent medical inflation is also making it harder for employers to invest in other workforce priorities, including compensation and well-being initiatives.
Aon’s analysis shows employer and employee health care cost increases are at their highest in five years. Employers cover about 81% of plan costs, with employees paying the rest. In 2025, employees are projected to pay $4,920 for coverage, including $2,967 in premiums and $1,953 in out-of-pocket expenses.
The rate of cost increases varies by industry. Technology and communications has the highest average employer cost increase at 8.8%, while finance and insurance leads in employee cost increases at 6.8%. Public sector employers are seeing the lowest increases.
Meanwhile, state regulators in Delaware and New Mexico have recently approved significant health insurance rate increases for 2025 individual market plans, with rates climbing between 25% and 35%. These approvals reflect the combined effects of federal policy shifts and rising medical costs, adding further pressure on both consumers and insurers.
Looking ahead, employers expect elevated cost trends to persist. “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 at Aon.
Ashford said that combining actuarial rigor with predictive analytics helps organizations move from reactive budgeting to proactive risk management.
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