Aon plc (NYSE: AON), a leading global professional services firm, revealed today that U.S. employer health care costs are projected to rise 9.5 percent* in 2026, exceeding $17,000 per employee. This marks the third consecutive year of elevated health care cost trends near double digits.

The continued rise in chronic conditions, such as musculoskeletal and cardiovascular disease, alongside an increase in high-cost conditions like cancer remains a primary driver of escalating medical costs in the U.S. Simultaneously, hospital workforce expansion is enabling greater patient throughput, further contributing to higher levels of health care utilization.

Prescription drug spending is also rising, driven by greater use of costly brand-name and specialty medications. Notably, demand for GLP-1 therapies has surged, as uptake accelerates for treatment of diabetes, obesity and other chronic conditions.

"We are seeing medical cost inflation levels at their highest in years. But the overlooked reality is that employers continue to act as a stabilizing force. They absorb the bulk of the increase while making smart, targeted adjustments that protect employees and preserve plan value," said Farheen Dam, head of Health Solutions for North America at Aon. "We help employers navigate this volatility by identifying emerging risks within their employee health data, enabling them to make more resilient decisions on behalf of their workforce through predictive analytics and proactive planning."

Employers are expected to continue absorbing the largest share of health care cost increases, mitigating the rising expenditures through strategies such as benefit design changes, employee payroll contribution increases, partnerships with point solution vendors and targeted chronic condition management. However, as medical inflation persists, it is also placing pressure on employers' ability to invest in other total rewards and people priorities — from compensation and career development to wider well-being initiatives — making it increasingly difficult to balance workforce needs holistically.

"Health care costs have evolved from a benefits challenge into a larger workforce strategy issue," said Dam. "This data is a powerful example of how we help employers understand the ripple effects of rising medical spend, not just on plan design, but on their ability to invest across total rewards and broader people priorities."

Increase to U.S. Health Care Plan Costs from 2024 to 2025
Both employer and employee cost increases are the highest in the last five years, when average annual increases were 5.8 percent for employers and 3.9 percent for employees. On average, employers are responsible for about 81 percent of the plan cost, with employees covering the rest.

The analysis indicates that employees are expected to pay $4,920 for health care coverage in 2025. This cost is made up of $2,967 in premiums from paychecks and $1,953 in out-of-pocket expenses like deductibles, copays and coinsurance.

Increase by Industry to U.S. Health Care Plan Costs from 2024 to 2025
The rate of health care cost increases vary by industry, as does the proportion of cost shared by the employer plan sponsor and employee. The technology and communications industry has the highest average employer cost increase at 8.8 percent, while the finance and insurance industry has the highest average employee cost increase at 6.8 percent.

The technology and communications industry and professional services industry have the lowest average change in employee contributions, after being in the top three last year. The retail and wholesale trade industry has the lowest increase in employer subsidy towards medical benefit cost.

Looking Ahead: 2026 Projections
Many employers are concerned that health care cost trends will remain elevated as they prepare for 2026 and beyond, with costs projected to rise 9.5 percent* this year. Ongoing changes in the health care landscape and external economic pressures make it less likely that cost increases will return to more manageable levels in the future. To mitigate this uncertainty, employers are turning to data-based solutions which offer a clearer picture of workforce health care trends and what they can expect in years to come.

"Employers are facing a future of persistent cost pressure, and the old playbook won't cut it," said Debbie Ashford, North America chief actuary for Health Solutions at Aon. "By combining actuarial rigor with predictive analytics, we're helping organizations move from reactive budgeting to proactive risk management."