Why health insurance premiums are rising, according to experts

Like groceries, gas and other everyday necessities, annual premiums for employer-provided healthcare coverage are expected to rise sharply next year, with workers shouldering more of the costs.

Analysts predict that premiums will jump as much as 9.5% in 2027, though experts say the resulting costs may not be as high as projected.

This year, the average cost of an employer-based family healthcare plan was $28,303. That amounted to a 5% increase from 2025, a KFF analysis found. And workers contributed on average 9% more than last year, or around $7,470 annually.

"Many people with job-based coverage have real affordability issues," said Matthew Rae, associate director of the KFF's healthcare marketplace program.

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Americans pay high prices for healthcare in general, said Meredith Rosenthal, professor of health economics and policy at the Harvard T.H. Chan School of Public Health. That's both relative to actual costs for delivering care, like drugs and medical tests, as well as to what other developed nations pay.

Over the last five years, while inflation, wages and healthcare premiums have all increased at roughly the same rate, workers still contributed around a quarter of the premiums for their employer-provided family health insurance. KFF also found that 44% of large firms that offer health benefits said they increased employee contributions as the cost of insurance rose.

Here are three reasons why the cost of healthcare is rising for the 157 million Americans who get their insurance through work.

Providers are charging patients more for care

Fifteen years ago, average premiums for family coverage were lower — totaling $15,220, with workers contributing about $4,190.

While experts told PBS News that the rise in premiums is due to both long-term and more recent factors, one cause that can be largely ruled out is insurer markups, said Zack Cooper, associate professor of public health and economics at Yale University. In 2011, insurers imposed an average markup of about 19%. By 2024, that was down to nearly 15%.

In reality, prices are the main reason for the high cost of health insurance in the U.S., Rosenthal said.

Health spending accounted for 91% of the growth in average premiums between 2011 and 2024, Cooper's work has found.

Tariffs and high energy prices affect healthcare providers, he said.

Providers, like hospitals and pharmaceutical companies, also set their own prices without much regulation, Rosenthal said. That means competition in the market is the primary mechanism for keeping prices down, which "mostly does not work very well," she added.

Because Medicare is able to negotiate some costs, the price of an MRI in the private market is about double what Medicare pays, she said.

A related issue is the relative lack of antitrust regulation, Cooper said, adding that more hospitals and physician practices are consolidating each year.

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

"Those mergers generally benefit the parties merging, but don't really bring much benefit to the public," who often see prices go up, particularly when the companies used to be competitors, Cooper said.

"Fundamentally, if you want to get premiums under control, you've got to get healthcare spending under control," he added.

People are getting more care

Hospital costs are negotiated over long periods of time, Rae said, so spikes in spending can be more accurately attributed to people using more healthcare.

Why are people getting more care?

It's not totally clear, Cooper said. One possible explanation is that insurance companies are reacting to public pushback over prior authorizations by relying on them less, he said.

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

More people also used prescription drugs in 2025 than in 2019, according to the Centers for Disease Control and Prevention.

The population is also aging, which is accompanied by more chronic conditions and more sickness. That's more of a longer-term driver for increased healthcare spending, Rae said.

The GLP-1 factor

GLP-1 agonists, which can manage or treat conditions like diabetes and obesity, are still relatively new, under patent and in high demand — a perfect storm for sky-high prices, experts said.

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These breakthrough drugs aren't the only emerging medical technology to break the bank. Specialty pharmaceuticals, like promising new cancer treatments, are also often expensive, Rosenthal said.

"Specialty pharmaceuticals in the last decade have been a really important driver of overall healthcare spending. It's a small share of total spending, but it's growing more rapidly," she said.

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

The nation's obesity rate reflects the growing uptake, Gallup found. While almost 40% of Americans had obesity in 2022, the rate ticked down to 36.8% this year. The rate of people who have been diagnosed with diabetes remained steady at 12.8%.

Employers often don't cover GLP-1 drugs, KFF found. Fewer than 1 in 5 companies with 200 or more employees offer coverage for GLP-1 agonists for weight loss. Among firms with 5,000 or more employees, about one-third cover the medications for weight loss.

That may be because companies view them as expensive: 56% of companies say the medications have a significant or moderate impact on prescription drug spending. That jumps to 93% of employers with 5,000 workers or more, with 61% saying they have a significant impact. In focus groups and interviews last year, many employers told KFF that the drugs were prohibitively expensive, and said they would no longer cover them for weight loss.

The GLP-1 effect may be a short-term spike, however.

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

But the problem may not go away entirely, he added, as newer and more advanced GLP-1 medications come online.

"One of the perennial stories about healthcare 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 new pharmaceutical companies bring next-generation medications to market, there's the possibility for brand-on-brand competition bringing down prices, Rosenthal said.

But that's also not a guarantee. Companies can use formulary restrictions, or the list of medications insurers and employees will cover, to maintain a strong user base or use clinical trials to show how the medication works particularly well for smaller groups of patients, Rosenthal said.

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

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