What Are the Forecasted Employer Healthcare Costs in 2026?

The average healthcare cost per employee is projected to exceed $17,000 per year in 2026, representing about a 9.5% increase from the prior year. 

Small businesses could be hit even harder, with median projected growth of 11%. In some states, the spike could be as much as 30% or more. 

Strategic planning is key to avoid financial stress and maintain employees’ access to care. To help you prepare, we’ll explain how healthcare costs are changing and give you a line-by-line breakdown of the expenses you’ll likely face in 2026. 

How Will Employer Healthcare Costs Change in 2026?

Healthcare costs are expected to rise in two key ways. 

• Unit price. The cost of each individual doctor visit, hospital stay, and prescription is rising as service providers and manufacturers increase prices to offset inflation and higher overhead costs. 

• Utilization. Employees are using more healthcare services as they catch up on delayed care, pursue more advanced treatments, and seek support for chronic and mental health conditions, which are becoming more prevalent. Utilization grew 45% between January 2023 and December 2024 and is expected to continue to rise. 

What Are The Forecasted Employer Healthcare Costs in 2026?

On average, employers bear about 80% of the total cost of employee healthcare plans, with employee contributions making up the rest. Here are the different categories that comprise employers’ side of the costs. 

Medical claims

Medical claims cover everything from routine doctor visits to emergency care to chronic disease management, and they make up the biggest chunk of employer healthcare premiums. Premiums are set to rise between 6% on the low end and 10% on the high end in 2026. 

For every dollar spent on premiums, about 42 cents goes to hospital claims and 12 cents goes to doctors. Year by year, the cost of those claims is inching upward.

Why? For starters, providers are billing for more complex and urgent services, more of the time.

In the U.S., Medical claims are coded on a scale ranging from 1 to 5, with 1 being the simplest and least costly claims and 5 being the most complex and expensive. In 2004, the majority of emergency room claims were billed at levels 1, 2, or 3. By 2021, code levels 4 and 5 (and their higher price tags) made up the majority of claims. 

High-cost medical claims for chronic conditions are also growing. Cancer is the top condition driving increased healthcare costs for the fourth year in a row. U.S. healthcare spending on cancer-related care is projected to grow 34% by 2023. 

Pharmaceuticals 

Historically, prescription drugs have accounted for around 9 to 10% of total health expenditures. In recent years, though, pharmaceuticals have seen explosive growth in both cost and demand.

The biggest financial pressure comes from specialty medications. For example, 79% of employers have seen an increase in the utilization of prescriptions for obesity, and 15% expect to see an increase in the future.

In 2024, 24% of healthcare dollars went to pharmacy expenses. Employers project an 11 to 12% increase in pharmaceutical expenses from 2025 to 2026. 

Employer contributions 

A growing number of employers are opting to support employees’ health needs in alternative ways, like by contributing to tax-advantaged health savings accounts (HSAs). Though HSA participation is growing, employer contributions to these accounts have actually declined slightly. 

This discrepancy represents an opportunity for savvy employers, who can use HSAs to help employees offset higher out-of-pocket costs while supporting a high deductible health plan (HDHP) strategy. Employers that pair generous HSA funding with high deductible plan design may see lower premium costs over time, helping balance overall spending. 

Administrative costs

This category includes expenses like benefits manager and HR salaries, Affordable Care Act (ACA) and Employee Retirement Income Security Act (ERISA) reporting, and COBRA administration. 

Administrative expenses represent a smaller portion of overall costs–typically about 5 to 7%–but like most categories of expenses, they’ve also been trending upward. 

Employee wellness programs

Employee wellness programs give workers access to voluntary services that can improve health and wellbeing. Because the services are optional and the costs are typically covered primarily by employees, wellness programs account for a small fraction of total healthcare spend. Yet, they can have an outsized impact on overall costs in the long run. 

By encouraging employees to use lower-cost preventative care in the near term, wellness initiatives help companies avoid more costly care down the road. By helping workers take a more active, confident role in their wellbeing, they can reduce the stress that exacerbates other health conditions. 

In a recent multinational survey of benefits administrators, 86% cited wellness initiatives as the number one strategy companies are using to mitigate rising healthcare costs in 2026. 

How Can Employers Prepare?

To avoid being caught off guard and facing financial uncertainty, employers should treat a 6.5% increase in healthcare costs as the minimum and have a contingency plan in place for if costs rise 8-10%. 

What would those scenarios look like in your organization? Consider:

• Modeling multiple budget scenarios to understand the potential impact on benefits and total compensation cost

• Reviewing plan design and pharmacy benefit structures for opportunities to save

• Strengthening wellness and preventative initiatives to help reduce high-cost claims

• Communicating proactively with employees about upcoming changes and cost increases to help manage expectations

We take a deeper look at various strategies for curbing benefits costs here. 

Mitigate Rising Healthcare Costs with Affordable Wellness Solutions

Keep employees healthy and engaged while reducing the risk for chronic conditions with wellness offerings from OpenLoop Health. We help employers offer a selection of voluntary benefits like weight loss support, mental health assistance, hormone replacement therapy, and more, letting employees pay only for what they want and not for what they don’t. 

Promote flexibility and choice while keeping rising healthcare costs in check in 2026 by partnering with OpenLoop Health.

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*This content is intended for general informational purposes only and should not be construed as legal advice. For guidance on your specific situation, please consult a licensed attorney.