Employers are facing another year of rising health care costs, and employees are feeling more of the impact. According to KFF's 2026 Employer Health Benefits Survey, released October 22, 2026, the average annual premium for employer-sponsored family coverage increased 5% to $28,303. Employee contributions rose faster, increasing 9% to $7,471. That follows a 7.6% increase the prior year. Over the same period, wages grew 3.7% and overall inflation was 2.7%.

Health coverage remains an important employee benefit, but keeping it affordable is becoming more difficult for both employers and employees.

KFF found that 44% of employers with 200 or more workers increased employee premium contributions over the past year. Other cost control strategies included raising deductibles, changing insurers, requiring preapproval for certain services, and narrowing provider networks.

Smaller employers face additional challenges. The average individual deductible at firms with fewer than 200 employees was $2,624, compared with $1,772 at larger organizations.

The ASE 2026 Health, Welfare and Retirement Plans Survey shows a similar focus on employee cost sharing. The survey includes 194 Michigan organizations, with a median employer size of 150 to 200 employees.

More than half of respondents (53%) identified plan design and employee cost sharing as their primary strategy for managing health care costs. Provider and network strategies (10%), wellness and engagement (8%), funding and administration (7%), and pharmacy management (5%) were cited less frequently.

Employers are putting these strategies into practice through several cost-sharing measures:

• 75% increased or are actively pursuing a higher employee premium share.
• 71% implemented or expanded a high-deductible health plan.
• 65% increased deductibles, copayments or coinsurance.
• 64% increased cost sharing for dependent or family coverage.
• 40% implemented spousal restrictions or surcharges.

ASE asked about actions implemented or actively pursued, not just changes made during the past year. As a result, these figures are not directly comparable to KFF's annual results.

The outlook suggests more pressure is ahead. Aon projects employer health care costs could rise 9.5% in 2027. Marsh projects an 8.2% increase per employee after planned cost-reduction measures, the largest increase since 2003. The Business Group on Health expects a median increase of 9.2% before plan changes.

Michigan employers are anticipating similar increases. Among the 122 ASE respondents who provided a projection, the median expected premium rate change for 2027 is 8%. Expectations vary considerably: one-quarter anticipates increases of 4% or less, while another quarter expects increases of 15% or more.

Rising utilization, prescription drugs, and hospital prices are contributing to the increases. GLP-1 medications are another factor. In the KFF survey, 29% of employers said coverage of these medications had a significant effect on prescription drug costs.

Increasing employee contributions and out-of-pocket expenses can help employers manage costs, but there are limits. Employees are already facing higher expenses, and shifting more of the burden to them raises questions about affordability, recruitment, and retention.

The challenge for employers is finding ways to manage rising costs without making health coverage less affordable for employees. As increases continue into 2027, reviewing plan design, funding arrangements, and other cost-management strategies will be increasingly important.

ASE Connect

The ASE 2026 Health, Welfare and Retirement Plans Survey is available to ASE members at no cost through the ASE Survey Library. Non-members may purchase the survey.