As U.S. companies prepare for their annual open enrollment season, millions of employees are learning that health insurance costs are once again climbing sharply. For Jacob McDonald, a 47-year-old network engineer from Dallas, the latest increase feels particularly steep.
To cover his family of four, McDonald will pay 6.5% more in premiums next year, while his deductible — already $3,300 — will rise by another $100. “I expected to pay more, but this is the largest increase I can remember,” he said.
He’s not alone. Surveys show that health care costs for employer-sponsored insurance plans are expected to rise at their fastest pace in over a decade. A report from Mercer projects an average 6.5% jump in employer health care costs in 2026, while the Business Group on Health estimates a 7.6% rise — the highest increase since 2010.
About 154 million Americans under age 65 rely on health insurance through their jobs. With open enrollment season now underway, many will face higher premiums, deductibles, and out-of-pocket costs. According to a new survey by the Kaiser Family Foundation (KFF), the average annual premium for family coverage will reach $26,993 in 2025, up 6% from last year. Employees will contribute about $6,850 of that total — roughly one-quarter of the cost — while wages have only grown 4% over the same period.
Experts cite several factors behind the surge. As pandemic disruptions fade, more people are visiting doctors and resuming elective procedures. The growing use of expensive GLP-1 drugs for weight loss and diabetes management has also added to costs, while rising hospital wages and inflation are pushing up provider fees.
“A combination of things puts pressure on premiums, but 6–7% is a meaningful increase,” said Matthew Rae, associate director at KFF.
Employers are increasingly struggling to balance budgets as they absorb rising health costs. Many are negotiating with insurers to cut expenses, scaling back benefits, or limiting coverage for high-cost treatments such as GLP-1 medications. Mercer found that 59% of employers plan to make cost-cutting changes to their plans next year, up from 48% in 2025.
For workers, the financial strain is growing. The average deductible has climbed 17% over the past five years and now stands at $1,886 — up 43% from a decade ago. Analysts warn that some employees may drop coverage altogether, turning instead to cheaper, non-traditional plans that do not offer full protection.
McDonald, meanwhile, is reconsidering his plans to retire early. Though he and his wife have saved enough, they worry about losing affordable coverage once his employer plan ends. With federal premium subsidies for Affordable Care Act plans set to expire at the end of 2025, he may have to work another year. “It’s not that we can’t afford to retire,” he said. “It’s that we can’t afford the health insurance.”
