Employer-Sponsored Health Insurance Reaches New Peak: What It Means for Workers

If your paycheck seems smaller after open enrollment, there is a reason. Employer-sponsored health insurance climbed to record levels, with the average family premium reaching $28,303, while employers shifted a larger share of the expense onto workers.

Family premiums rose 5% overall, but the amount taken from workers’ pay jumped 9%, according to the KFF 2026 Employer Health Benefits Survey. Deductibles are also continuing to rise. For Black workers and families who already face wage gaps and long-running barriers to affordable care, these increases can force difficult tradeoffs between paying for necessities and getting medical treatment.

Average employer health insurance costs

KFF surveys thousands of employers each year to measure health insurance costs. For 2026, the average annual premium came to $9,804 for single coverage and $28,303 for family coverage, both up 5% from the previous year.

That figure represents the total cost of coverage, divided between workers and employers. On average, employees paid $1,672 a year for single coverage and $7,471 for family coverage.

The long-term increase is substantial. Over the past five years, family premiums have climbed 28%, while wages rose 26.9% and inflation increased 24.4% during the same span.

Premiums tend to follow the underlying cost of care. Ron Peck, chief legal officer at The Phia Group, a healthcare cost-containment company that works with self-funded employer plans, said the chain is straightforward: when the price of healthcare rises, the cost charged by third parties to cover that care also rises.

Insurers also spread risk across all the employers they cover. That means a relatively healthy employer can still face higher costs if other companies in the same insurance pool generate large claims, Peck said.

Hospital prices

Joel Selanikio, MD, a practicing pediatrician and former CDC epidemiologist, said hospital pricing remains the largest long-term driver. He said hospital prices are both an older problem and a bigger one, made worse as hospital systems merge and competition declines in many markets.

GLP-1 drugs

Weight-loss medications such as Ozempic and Zepbound are a newer source of pressure on employer health spending. Selanikio said they are effective, costly, used by many eligible workers and often taken for a long time.

Only 18% of large employers cover GLP-1 drugs for weight loss, KFF found. Even so, among employers that do cover them, 29% said the drugs had a major effect on prescription spending. Among large employers that do not cover them, 12% said they ended that coverage during the past year.

Selanikio expects the medications to reduce other healthcare costs over time, but employers are paying for the drugs now while the savings may come later.

How much workers pay for family coverage

In 2026, workers paid an average of $7,471 annually toward family coverage, according to KFF. That is $621 more than in 2025, or about $52 more each month, before deductibles or copays.

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

The burden is not evenly distributed. At firms where at least 35% of workers earn $38,000 or less, employees pay 31% of the family premium, KFF found. At other firms, the worker share is 27%. That means lower-paid workers often give up a larger portion of their wages.

Deductibles at large companies and small businesses

A deductible is the amount you pay out of pocket before insurance begins covering most care. For single coverage, the average deductible is $1,955. But workers at small firms face an average deductible of $2,624, compared with $1,772 at large firms, according to KFF.

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

Company size explains much of the difference. Large employers often self-fund their plans, meaning they pay claims directly instead of buying insurance from a carrier. Peck said bigger employers are naturally drawn to that arrangement because they have enough workers to spread risk.

Rami Sneineh, a licensed health insurance producer and co-president of the independent brokerage Insurance Navy Brokers, said smaller companies often rely on higher deductibles to keep premiums manageable.

Those deductibles can hit some families harder than others. KFF polling shows 49% of Black adults say healthcare is hard to afford, compared with 39% of white adults. Sneineh said that when someone is already struggling with rent, groceries or childcare, even a doctor’s visit can feel nearly as risky as going without insurance.

How rising costs affect wages

Higher employer health costs also leave less room for raises. Every dollar an employer spends on health benefits is a dollar that cannot go toward pay. KFF found that wages rose 3.7% this year and inflation rose 2.7%, while family premiums increased 5% and workers’ share rose 9%.

Employers can respond in several ways. Peck said they may raise the premium workers pay through payroll deductions, or trim other benefits such as bonuses and redirect those savings to insurance costs.

KFF also found that 44% of large firms increased the share of premiums paid by workers to manage higher expected costs. Another 21% raised deductibles or other forms of cost sharing. Peck said employees also feel the impact when copays and deductibles rise.

How to choose an affordable plan during open enrollment

With employer health insurance this expensive, open enrollment deserves careful attention. The lowest premium is not always the lowest-cost plan overall. Sneineh said the goal is not simply to pay less for insurance, but to avoid paying more when you actually need care.

He recommends comparing a full year of costs rather than just the amount taken from each paycheck. For each plan, consider three scenarios: a healthy year with few medical bills, a normal year with routine care, and a year with a major unexpected expense.

Numbers are only part of the picture. Louise Norris, a health policy analyst for healthinsurance.org who has covered health insurance since 2006, said workers should review each plan’s provider network and drug formulary, both of which can change. She also suggests asking how the plan handles prior authorization, especially if another plan already approved a treatment.

HSA-qualified plans vs. PPOs

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

But HSA-qualified does not automatically mean PPO. Norris said HSA eligibility depends on cost-sharing and benefit design, while a PPO describes a type of plan structure. In other words, an HSA-qualified plan can also be a PPO or HMO. HSA funds are tax-deductible going in, grow tax-free and can be withdrawn tax-free for qualified medical expenses.

Even so, you will usually pay more out of pocket before coverage begins. An HSA-qualified plan can work well if you are healthy, have savings to cover the deductible and receive an employer HSA contribution. A PPO may be cheaper overall if you take regular medications or expect surgery, pregnancy or ongoing treatment. Sneineh also said to subtract any employer HSA contribution when comparing options.

When a traditional plan may be the better fit

Some people simply want predictable costs. Norris said those who expect a modest amount of care often prefer copays because they know what they will owe for office visits or prescriptions. If your employer will not contribute to an HSA and you do not plan to add money yourself, she said an HSA plan may not be the best choice, even if its premium is lower.

Your Open Enrollment Checklist

• Calculate the annual premium, not just the monthly deduction.
• Review the deductible and out-of-pocket maximum, which is the most you could pay in a bad year.
• Confirm that your doctors are in network, check prescription coverage and see whether treatments need prior authorization.
• Estimate how many visits, therapy sessions and procedures you expect.
• Subtract any employer HSA contribution.
• Compare a healthy year, a typical year and a worst-case year.

If the math feels overwhelming, ask your HR team for a comparison tool.

Bottom line

Employer health insurance costs have reached a new high, driven by hospital prices, expensive new medications and insurers passing costs along. Workers are absorbing more of the burden through higher premiums, larger deductibles and smaller wage gains. During open enrollment, compare each plan’s total yearly cost rather than focusing only on the premium.

Frequently Asked Questions

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

Yes, but Marketplace subsidies, also called premium tax credits, depend on how affordable your employer’s plan is. 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 if I cannot afford my deductible when I need care?

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

Citations

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

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

KFF. Americans’ challenges with health care costs. 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. 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. https://www.yeoandyeo.com/resource/2026-aca-affordability-rules-key-updates-for-employers