Aon: U.S. Employer Health Care Costs Expected to Rise 9.5 Percent in 2026
Rhea-AI Summary
Aon (NYSE:AON) projects U.S. employer health care costs to increase by 9.5% in 2026, marking the third consecutive year of near double-digit growth. The analysis reveals that total plan costs will exceed $17,000 per employee, with employers absorbing approximately 81% of these costs.
For 2025, employers face a 7.2% cost increase to $12,893 per employee, while employee premiums will rise 4.7% to $2,967. The technology sector shows the highest employer cost increase at 8.8%, while finance and insurance lead employee cost increases at 6.8%.
Key drivers include rising chronic conditions, increased hospital workforce capacity, and growing prescription drug costs, particularly GLP-1 therapies. Aon introduces new tools including Health Price Transparency Analysis and Health Risk Analyzer to help employers manage these escalating costs.
Positive
- Employers continue to absorb 81% of healthcare costs, protecting employees from full cost impact
- New Health Price Transparency Analysis tool enables better cost management
- Advanced predictive analytics can identify 50% of high-cost claimants in advance
- Extensive data analysis covering 7.7 million employees and $120 billion in healthcare spend
Negative
- Healthcare costs projected to rise 9.5% in 2026, reaching record levels
- Third consecutive year of near double-digit cost increases
- Rising costs limit employers' ability to invest in other workforce benefits
- 5% of members account for 60% of all medical and pharmacy spend
- Costs unlikely to return to manageable levels due to ongoing healthcare landscape changes
News Market Reaction – AON
In the Sep 10 session, AON declined 1.09%, reflecting a mild negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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
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
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
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.
Plan Cost | 2024 | 2025 | Change from |
Employer Cost | 7.2 % | ||
Employee Premiums from Paycheck | 4.7 % | ||
Total Plan Cost** | 6.7 % | ||
Employer Subsidy | 80.9 % | 81.3 % | 0.4 % |
The analysis indicates that employees are expected to pay
Employee Costs*** | 2024 | 2025 | Change from |
Employee Premiums from Paycheck | 4.7 % | ||
Employee Out-of-Pocket Costs | 6.9 % | ||
Total Employee Costs | 5.5 % |
Increase by Industry to
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.
Projected 2024 to 2025 Increase | Employer | Employee | Total |
Public Sector | 5.7 % | 4.6 % | 5.6 % |
Retail and Wholesale Trade | 5.4 % | 3.7 % | 5.0 % |
Finance and Insurance | 7.7 % | 6.8 % | 7.5 % |
Manufacturing | 7.2 % | 4.9 % | 6.8 % |
Health Care | 8.3 % | 6.3 % | 7.9 % |
Technology and Communications | 8.8 % | 2.2 % | 7.5 % |
Professional Services | 7.4 % | 2.9 % | 6.4 % |
* The projection is applicable in a status quo environment when employers do not make changes or implement care management programs. Aon consultants expect many employers to implement cost-saving changes or programs to help mitigate this increase. |
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,
Optimizing Health Plan Spend through Price Transparency
Plan sponsors have a legal duty under ERISA to make informed, responsible decisions about how health plan dollars are used. Aon's new Health Price Transparency Analysis provides employers with greater visibility into provider pricing. By translating public pricing data into actionable insights, the solution enables employers to identify cost variation across networks and providers, make more informed contracting decisions and enhance the value of their health benefits.
Predictive Analytics Brings Greater Precision in Forecasting
Aon's data shows five percent of members account for 60 percent of all medical and pharmacy spend, and over 50 percent of high-cost claimants are predictable. Aon's Health Risk Analyzer uses the latest advanced machine learning methods to predict health plan claim spend and future high-cost claimants, providing increased precision to health care forecasts, giving clients the confidence they need to tailor their stop-loss provisions to the risk level they are most comfortable with.
"Health Risk Analyzer enables employers to understand their future claims risk and forecast health care costs with greater confidence," Ashford said. "By proactively identifying risks earlier and understanding the drivers, employers can adopt a more targeted approach to cost management. This enables them to more confidently plan for the enhanced care management of employees and ultimately work towards building a healthier and more resilient workforce."
Aon's Health Value Initiative
The historical information and projections shown above were developed using Aon's Health Value Initiative database, which captures healthcare costs and benefit designs for more than 1,000
About Aon
Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.
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Disclaimer
The information contained in this document is solely for information purposes, for general guidance only and is not intended to address the circumstances of any particular individual or entity. Although Aon endeavors to provide accurate and timely information and uses sources that it considers reliable, the firm does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of any content of this document and can accept no liability for any loss incurred in any way by any person who may rely on it. There can be no guarantee that the information contained in this document will remain accurate as on the date it is received or that it will continue to be accurate in the future. No individual or entity should make decisions or act based solely on the information contained herein without appropriate professional advice and targeted research.
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SOURCE Aon plc