The annual survey by Mercer, a major employer benefits consulting firm, found health benefit costs per employee are expected to rise 6.5% in 2026, which would be the highest increase since 2010. Total plan costs-per-employee will increase nine percent, which employers will partially offset by “raising deductibles and other cost-sharing provisions, which can lead to higher out-of-pocket costs for plan members when they seek care.”
One of those “other cost-sharing provisions” — the one that will hit everyone and not just those who get sick — are the co-premiums for their plans, which are taken each week or month out of their paychecks. Historically, employers pick up about 75 percent of the cost of family plans. So when the total costs goes up 6.5 percent, so does the 25 percent share paid by employees.
How much will that cost workers? According to the Kaiser Family Foundation annual survey of employer-based insurance, the average worker paid $6,850 for a family plan in 2025. A 6.5 percent increase in 2026 will sap paychecks by an average of $445. That’s nearly a one percent reduction in the median worker’s take-home pay.
Source: Kaiser Family Foundation
This has gone on for the decades, and will continue as long as health care costs rise faster than wages. A study published in JAMA Network Open last year calculated lost earnings from the growth in health insurance premiums between 1988 to 2019 cost the average family over $125,000 in inflation-adjusted dollars, or nearly 5% of total earnings over the entire 32-year period.
Low-wage workers bear the brunt
But averages don’t tell the whole story. The income-sapping surge in co-premiums for health insurance hits low-income workers much harder than high-income workers because of the way employers structure their health insurance plans.
Most employers that offer health insurance to their employees provide three plan options. The most expensive is the preferred provider organization (PPO) plan. The middle-priced option is usually a health maintenance organization (HMO) plan, which places limits on provider choice. And then there is the high-deductible plan, which is the least expensive but can leave plan participants with huge and unaffordable bills when they get sick.
Not surprisingly, the lowest cost high-deductible option is most attractive to employers’ lowest-paid workers, who are desperate to hold down their upfront health care costs because they need the cash to pay other bills. Middle-income workers may opt for the HMOs, while upper income employees are the most likely to opt for the PPO plans. They can afford them, and they appreciate the ability to see any doctor they choose.
Most employers unwittingly exacerbate this class stratification in private health insurance. More than three-quarters of employers charge every employee, no matter what their income, the same co-premium within each plan option, according to a 2019 Bureau of Labor Statistics survey. Everyone who choose an HMO plan, for instance, faces the same co-premium. That means lower wage workers are paying a higher share of their income for health insurance compared to others who choose the same plan.
Time to graduate
There is a way to bring greater equity to employer-based health insurance. It is something more employers should consider given the growth in income inequality over the past half century.
They could adopt income-based co-premiums, which are sometimes called tiered co-premiums. In a tiered system, those with the lowest incomes pay lower co-premiums for any of the three choices, while those with higher incomes pay more for the same plans. Tiered co-premiums operate like a graduated income tax.
For example, Honolulu-based Alexander & Baldwin, a real estate firm, dropped its one-size-fits-all co-premium structure in 2023. It established three tiers for its more than 100 employees. A single worker in the lowest salary range paid $42 a month for an HMO plan; the middle salary range paid $67 a month for the same plan; and the highest paid workers paid $92 a month.
Universal tiering of co-premiums — something that could be mandated by federal regulation — will not address the burden placed on all Americans by rising health care costs, which this year are being driven by exorbitant hospital and drug prices, rapid uptake of weight-loss drugs, and soaring costs for imported medical products due to Trump’s tariffs. But it will bring equity when it comes to bearing the burden of those rising costs.
Merrill Goozner, the former editor of Modern Healthcare, writes about health care and politics at GoozNews.substack.com, where this column first appeared. Please consider subscribing to support his work.
Reprinted with permission from Gooz News
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