Employer-provided health insurance costs have climbed for the third consecutive year, with the annual expense for a family plan now approaching $27,000, based on new survey data from the nonprofit KFF.
This figure represents the average one-year premium cost divided between one family and employer.
Zoom out: This year’s 6% cost increase comes after two years of 7% gains, indicating that health costs are climbing at a pace faster than the inflation rate. Economists caution that this trend is starting to put pressure on the economy, potentially constraining growth in employment and wages.
Gary Claxton, a senior vice president at KFF, told The Wall Street Journal: “If health care costs go up faster than the economy in general, that means there’s less money left over to go to wages.”
The KFF survey, which encompasses more than 1,860 employers, reflects the reality for nearly half of the U.S. population that obtains health coverage through their jobs.
A 2025 WSJ/Vistage survey of 336 small businesses revealed 51% are experiencing health insurance cost increases of 10% or more.
What’s propelling the surge?
Costly New Drugs: Employers are witnessing dramatically increased expenses for new and expensive medications, particularly the popular class of drugs known as GLP-1s, which encompasses widely used weight-loss treatments like Wegovy and Zepbound. The KFF survey reveals that not all employers are willing or able to provide coverage for these drugs for weight loss at this time.
Chronic Conditions Up: Expensive chronic conditions, including cancer, are increasing among the working-age population.
Rising Hospital Prices: Healthcare providers have successfully secured higher rates in their contracts, resulting in significant increases in hospital bills.
Many employers are now shifting the financial responsibility to their workforce, according to the KFF survey. The data reveals that following a short-lived decline, workers are once again facing rising deductibles and out-of-pocket expenses.
Take William Duff Architects in San Francisco as an example. The firm previously paid for complete premium coverage but had to reverse that policy when confronted with a staggering 38% price hike on their most comprehensive health insurance option.
“Over the years, we’ve been managing the cost increases through cuts in other areas, efficiencies and less profits,” founder William Duff Jr. told The WSJ. “We couldn’t absorb it all any longer.”
A notable trend is emerging: An increasing number of small business owners are moving away from conventional health insurance plans. Instead, they’re choosing to offer their employees Health Reimbursement Accounts, allowing workers to purchase their own coverage.