Employer Health Insurance Costs Hit Record Highs – Here's What It Means For Workers

If your paycheck feels noticeably lighter after open enrollment, you aren’t imagining it. Employer-sponsored health insurance reached record highs in 2026, with the average family premium hitting $28,303 – and employers are shifting a larger share of the burden straight onto workers.

While total family premiums jumped 5% this year, the portion coming out of your paycheck spiked 9%, according to the KFF 2026 Employer Health Benefits Survey. At the same time, deductibles continue to climb. For Black workers and families already navigating systemic wage gaps and persistent healthcare affordability hurdles, these hikes aren’t just line items on a paystub – they force tough calculations between paying for basic living expenses and seeing a doctor.

Average employer health insurance costs for 2026

Each year, KFF surveys thousands of employers to track employer health insurance costs. In 2026, the average annual premium reached $9,804 for single coverage and $28,303 for family coverage, both up 5% from last year.

That’s the total cost of the plan, split between you and your employer. On average, workers paid $1,672 per year for single coverage and $7,471 for family coverage.

Over time, the gap adds up. Family premiums have risen 28% over the past five years, KFF found. By comparison, wages rose 26.9%, and inflation rose 24.4% over the same period.

Why are employer-sponsored health insurance premiums going up?

Premiums follow the cost of care itself. Ron Peck is the chief legal officer at The Phia Group, a healthcare cost-containment company that works with self-funded employer plans. He explained the chain. “As the cost of healthcare (that is, the actual price paid for the care itself) increases, naturally the price charged by third parties to pay those rising costs will likewise increase,” he told Blavity Health.

In addition, your premium isn’t based only on your own coworkers. Insurers spread risk across every employer they cover. So if other companies with the same insurer run up big bills, a healthy company may still pay more, Peck said.

Hospital prices

Joel Selanikio, MD, a practicing pediatrician and former CDC epidemiologist, pointed to hospitals as the biggest long-term driver. “Hospital prices are the older and bigger problem, and they’re getting worse as hospital systems merge and face less competition in many markets,” he told Blavity Health.

GLP-1 drugs

Weight-loss drugs like Ozempic and Zepbound are the newest pressure point on employer health insurance costs. “They work, they’re expensive, many workers qualify and most patients stay on them,” Selanikio said.

Notably, only 18% of large employers cover GLP-1s for weight loss, KFF found. Still, among those that do, 29% said the drugs had a significant impact on prescription spending. And among large firms that don’t cover them, 12% dropped that coverage in the past year.

Selanikio expects the drugs to lower other medical costs over time. However, “the problem is that they’re being asked to pay for the drugs now, and the cost savings won’t come until later,” he said of employers.

How much do workers pay on average for family health coverage?

In 2026, workers paid an average of $7,471 a year toward family coverage, according to KFF. That’s $621 more than in 2025, or about $52 more per month, before any deductibles or copays.

In other words, workers cover about 27% of the family premium, while employers pay the rest. For single coverage, the worker share is about 18%.

However, that share isn’t the same everywhere. At firms where at least 35% of workers earn $38,000 or less, workers pay 31% of the family premium, KFF found. At other firms, they pay 27%. As a result, the people with the smallest paychecks often give up a larger slice of their pay.

Health insurance deductibles: Large companies vs. small businesses

The deductible is what you pay out of pocket before your plan starts covering most care. For single coverage, the average deductible is $1,955. Yet workers at small firms face an average of $2,624, compared with $1,772 at large firms, according to KFF.

In fact, 55% of covered workers at small firms have a deductible of $2,000 or more, compared with 33% at large firms. Small-firm workers also pay more for family coverage: $9,687 a year on average, $2,847 more than workers at large firms.

Size explains much of that gap. Large employers often self-fund their health plans, meaning they pay workers’ medical bills directly rather than purchasing insurance from a carrier. “Larger employers naturally gravitate to this model, as they have enough employees to spread the risk,” Peck said.

Rami Sneineh is a licensed health insurance producer and co-president of the independent brokerage Insurance Navy Brokers. He said small companies often choose higher deductibles “in an effort to keep premiums affordable.”

Those deductibles hit some families harder than others. For instance, 49% of Black adults say it’s difficult to afford healthcare, compared with 39% of white adults, according to KFF polling. “When someone is struggling to pay rent, afford groceries, or cover other needs (like childcare), a doctor’s visit or other medical care can seem nearly as risky as not having insurance at all,” Sneineh said.

How rising healthcare costs impact employee wages

Rising employer health insurance costs also cut into raises. After all, every dollar an employer spends on health benefits is a dollar it can’t spend on pay. This year, wages rose 3.7%, and inflation rose 2.7%, KFF found. Family premiums, meanwhile, rose 5%, and workers’ share rose 9%.

Employers have several ways to absorb the hit. “They could simply charge more in premiums, deducted from employees’ paychecks, but they may also reduce other benefits (such as bonuses) and redirect those savings towards the cost of their insurance,” Peck said.

Similarly, 44% of large firms raised the share of premiums workers pay to deal with higher projected costs, according to KFF. In addition, 21% raised deductibles or other cost sharing. “Employees will also feel the sting when their co-pays and deductibles increase too,” Peck said.

How to choose the most affordable health plan during open enrollment

With employer health insurance costs this high, choosing the right plan matters more than ever. Still, the cheapest premium isn’t always the cheapest plan. “Remember, it’s not always about paying less for health insurance, but making sure you won’t end up paying more when you’re counting on your health insurance to pay,” Sneineh said.

Start by pricing out a whole year, not just a paycheck. Sneineh suggests comparing three scenarios for each plan. First, a healthy year with few bills. Next, a normal year with your usual care. Finally, a year with a large, unexpected expense.

Numbers aren’t the whole story, though. Louise Norris, a health policy analyst for healthinsurance.org who has covered health insurance since 2006, said to look closely at each plan’s provider network and covered drug list, “both of which can change over time.” She also suggests asking how a plan handles prior authorization, especially if another plan already approved your treatment.

HSA-qualified plans vs. PPOs

High-deductible plans that qualify for a health savings account (HSA) usually cost less up front. For example, the average family premium for an HSA-qualified plan is $26,450, compared with $29,522 for a PPO, KFF found.

However, HSA-qualified doesn’t mean “not a PPO.” “HSA eligibility is based on the plan’s cost-sharing and benefit design, whereas a PPO is a type of plan management,” Norris said. In other words, an HSA plan can also be a PPO or HMO. She added that HSA money goes in tax-deductible, grows tax-free and comes out tax-free for qualified medical costs.

Still, you’ll pay more out of pocket before coverage starts. An HSA-qualified plan can make sense if you’re healthy, have savings to cover the deductible and get an employer HSA contribution. On the other hand, a PPO may cost less overall if you take regular medications or expect surgery, a pregnancy or ongoing care. Also, “don’t forget to subtract any money your employer will contribute to your HSA,” Sneineh said.

When a traditional plan makes more sense

Some people simply prefer knowing what they’ll owe. People who expect a modest amount of care “find that they prefer the predictability of copays when they need office visits or prescriptions,” Norris said. And if your employer won’t contribute to an HSA and you don’t plan to, she said the HSA plan “might not be their top choice, despite the lower premiums.”

Bottom line

Employer health insurance costs hit a record in 2026, driven by hospital prices, pricey new drugs and insurers passing costs along. Workers are absorbing more of those costs through bigger premiums, higher deductibles and smaller raises. During open enrollment, compare each plan’s total yearly cost, not just the premium.

Frequently Asked Questions

Can I decline my job’s health insurance and buy a cheaper plan on the ACA Marketplace?

Yes, but whether you qualify for Marketplace subsidies (premium tax credits) depends on how your employer’s plan is priced. For 2026, employer coverage is considered “affordable” under federal rules if your required contribution for the lowest-cost plan does not exceed 9.96% of your household income.

What can I do if I can’t afford my deductible when I need medical care?

Ask for an itemized bill, request an interest-free payment plan and apply for the hospital’s financial assistance program, which nonprofit hospitals are required to offer under IRS rules.

Citations

Internal Revenue Service. Financial assistance policies (FAPs). Updated December 28, 2025. https://www.irs.gov/charities-non-profits/financial-assistance-policies-faps

KFF. 2026 Employer Health Benefits Survey. Published October 22, 2026. https://www.kff.org/health-costs/2026-employer-health-benefits-survey/

KFF. Americans’ challenges with health care costs. Updated October 23, 2026. https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-costs/

KFF. Workers now pay $7,471 on average annually for family health coverage, up 9% or $621 from 2025, benchmark employer health benefits survey finds. Published October 22, 2026. https://www.kff.org/other-health/workers-now-pay-7471-on-average-annually-for-family-health-coverage-up-9-or-621-from-2025-benchmark-employer-health-benefits-survey-finds/

U.S. Centers for Medicare & Medicaid Services. See your options if you have job-based health insurance. HealthCare.gov. https://www.healthcare.gov/have-job-based-coverage/options/

Yeo & Yeo. 2026 ACA affordability rules: Key updates for employers. Published December 2, 2025. https://www.yeoandyeo.com/resource/2026-aca-affordability-rules-key-updates-for-employers