The average annual premium for employer-sponsored family health coverage in the United States has soared to $26,993 in 2025, according to the Kaiser Family Foundation (KFF).
The 6% jump from last year — roughly $1,400 higher — outstripped both general inflation (2.7%) and average wage growth (4%), prompting concern that rising health costs could soon translate into lower wage growth and fewer employee benefits.
Rising Costs Outpace Inflation and Pay
Under the new figures, workers are now contributing around $6,850 toward their annual family premiums, with employers paying the remainder. The data show that health insurance costs continue to grow faster than pay, putting pressure on both employees’ take-home income and corporate payroll budgets.
The gap between healthcare inflation and wage growth has widened sharply since 2020. Employers warn that without policy intervention, continued increases in medical costs — particularly hospital care and prescription drugs — could make it harder to sustain annual pay rises.
Why Employers Say Health Costs Threaten Wages
In KFF’s 2025 Employer Health Benefits Survey, 36% of large firms cited rising drug prices as the primary driver of higher premiums, while 26% blamed increased healthcare utilisation, and 22% pointed to the cost of new therapies.
‘Healthcare costs are the single biggest line item after wages,’ one benefits consultant told Reuters. ‘When premiums climb this fast, it comes directly out of the wage pool.’
According to the Peterson-Kaiser Health System Tracker, families with employer-based insurance now spend between 4% and 9% of their income on premiums and out-of-pocket costs. For low-income households — those earning less than twice the poverty threshold — that figure rises to nearly 10%, underscoring the regressive nature of US healthcare financing.
Prescription Drugs and Hospital Prices Drive Increases
The total cost of covering a typical family of four — including premiums, drugs, inpatient and outpatient care — now exceeds $35,000 annually, according to an index by the Milliman Medical Index. Outpatient costs have surged by nearly 286% over the past two decades, while the use of new medicines such as GLP-1 weight-loss drugs has further inflated spending.
Employers report limited room to absorb additional increases. Many are preparing to shift more costs to workers by raising deductibles, increasing copayments, or scaling back non-wage benefits. While employees’ premium contributions have grown more slowly than total plan costs, rising out-of-pocket maximums and deductibles continue to erode household finances.
Financial Strain on Families and Future Outlook
The financial squeeze on families is expected to intensify next year. A survey by consulting firm Mercer found that employers anticipate a further 6–7% increase in health insurance costs in 2026. To contain spending, companies are exploringplan redesigns, narrower provider networks, and greater utilisation controls.
Economists warn that the combination of rising healthcare costs, tight labour markets, and slowing productivity could lead to weaker wage growth and fewer bonuses in 2026. Without structural changes to drug pricing, hospital charges, or insurance regulation, experts say the upward spiral in US healthcare premiums will continue.
Originally published on IBTimes UK
