Experts explain why health insurance premiums keep climbing

WATCH: Health care costs remain a major concern for voters

The average cost of an employer-sponsored family health plan reached $28,303 this year, according to a KFF analysis, marking a 5% increase from the prior year. Workers also paid more, contributing about 9% more than before, or roughly $7,470 a year.

“Many people with job-based coverage have real affordability issues,” said Matthew Rae, associate director of KFF’s health care marketplace program.

Americans generally face high health care prices, said Meredith Rosenthal, a professor of health economics and policy at the Harvard T.H. Chan School of Public Health. She said the cost is high both compared with the actual expense of delivering care, such as drugs and medical tests, and compared with what people in other developed countries pay.

Over the past five years, inflation, wages and health insurance premiums have all risen at about the same pace, yet workers still have been paying about a quarter of the premium for employer-provided family coverage. KFF also found that 44% of large companies offering health benefits said they raised employee contributions as insurance costs increased.

Here are three reasons health care costs are rising for the 157 million Americans who get insurance through their jobs.

Providers are charging more for care

Fifteen years ago, the average family premium was much lower, at $15,220, and workers contributed about $4,190.

Experts interviewed by PBS News said the rise in premiums reflects both long-running and more recent forces. One factor that can largely be ruled out is insurer markups, said Zack Cooper, an associate professor of public health and economics at Yale University. In 2011, insurers added an average markup of about 19%. By 2024, that figure had fallen to nearly 15%.

Rosenthal said the main driver is simply the price of care.

Cooper’s research found that health spending accounted for 91% of the growth in average premiums between 2011 and 2024.

He said tariffs and high energy prices also affect health care providers.

Hospitals and pharmaceutical companies largely set their own prices with limited regulation, Rosenthal said. As a result, competition is the main tool for holding costs down, though she said it “mostly does not work very well.”

Because Medicare can negotiate some prices, an MRI in the private market costs about twice as much as Medicare pays, she said.

Cooper also pointed to weak antitrust enforcement, noting that hospitals and physician practices continue to consolidate.

More than 1,000 hospitals merged between 2002 and 2020, but the Federal Trade Commission brought enforcement in just 13 cases, according to a 2024 study co-authored by Cooper.

“Those mergers generally benefit the parties merging, but don’t really bring much benefit to the public,” he said, adding that prices often rise when former competitors combine.

“Fundamentally, if you want to get premiums under control, you’ve got to get health care spending under control,” he said.

People are using more care

Rae said hospital costs are negotiated over long periods, so sudden increases in spending are more likely tied to people using more health care.

Why are people getting more care?

Cooper said the answer is not entirely clear. One possibility is that insurers are responding to public criticism of prior authorization by relying on it less.

“When you dial back prior authorizations, utilization goes up,” he said.

According to the Centers for Disease Control and Prevention, more people used prescription drugs in 2025 than in 2019.

The population is also aging, bringing more chronic illness and more health needs. Rae said that is more of a long-term force behind rising spending.

The GLP-1 effect

GLP-1 agonists, which can treat or manage conditions such as diabetes and obesity, are still relatively new, remain under patent and are in high demand — a combination that pushes prices very high, experts said.

These drugs are not the only new treatments adding to costs. Rosenthal said specialty pharmaceuticals, including promising cancer therapies, are also often expensive.

“Specialty pharmaceuticals in the last decade have been a really important driver of overall health care spending. It’s a small share of total spending, but it’s growing more rapidly,” she said.

A Gallup poll in July found that 15% of Americans have ever used a GLP-1 medication for weight loss, while 11% were currently using one of the drugs in 2026, up from 3% in 2024.

The rising use is reflected in the nation’s obesity rate, Gallup found. While nearly 40% of Americans had obesity in 2022, the rate fell to 36.8% this year. The share of people diagnosed with diabetes held steady at 12.8%.

KFF found that employers often do not cover GLP-1 drugs. Fewer than one in five companies with 200 or more employees offer GLP-1 coverage for weight loss. Among firms with 5,000 or more employees, about one-third cover the medications for that purpose.

Companies may be avoiding coverage because of the cost: 56% said the drugs have a significant or moderate effect on prescription drug spending. That figure rises to 93% among employers with 5,000 workers or more, and 61% of them said the impact is significant. In focus groups and interviews last year, many employers told KFF the medications were too expensive and said they would no longer cover them for weight loss.

The GLP-1 effect may be temporary, however.

“Once GLP-1s start coming off patents, this problem’s going to go away,” Cooper said. Those patents begin expiring in the U.S. in 2032.

Still, he said the issue may not disappear entirely because newer and more advanced GLP-1 drugs are likely to emerge.

“One of the perennial stories about health care spending is it’s driven by the adoption and diffusion of new technologies. This just happens to be the flavor of the moment,” he said.

As pharmaceutical companies introduce next-generation treatments, Rosenthal said there is a chance that brand-to-brand competition could lower prices.

But she warned that outcome is not guaranteed. Companies can use formulary restrictions — the list of medications insurers and employers cover — to protect market share, or run clinical trials that highlight how a drug works especially well for certain patients.

“There could be some benefit to having multiple new drugs, but often it’s more like an arms race,” she said.