Rising health benefit costs put employer budgets under pressure

Rising health benefit costs are putting compensation decisions under fresh scrutiny: annual premiums for employer-sponsored family coverage average $28,303 in 2026, according to KFF’s Employer Health Benefits Survey, published October 22. That is up 5% from 2025, while workers’ average contributions rose 9% to $7,471. For employers reviewing budgets and hiring plans, the practical question is not just what coverage costs the business, but what employees must pay to use it.

What the latest health benefit costs show

The average family premium includes both employer and worker contributions. Its annual increase was $1,310, while the worker contribution increased by $621, according to KFF’s survey announcement.

Keep those categories separate when discussing the findings internally. The $28,303 figure is not the average employer payment, and the $7,471 worker contribution covers premiums—not every expense an employee could face when receiving care.

The employer takeaway is to review coverage alongside pay rather than treating it as a separate administrative expense. When evaluating a compensation package, put the salary, employee premium contribution and potential out-of-pocket spending in the same discussion. That gives decision-makers a clearer framework for reviewing affordability without assuming that a national average describes their own workforce.

This is also a budgeting conversation with competing demands. The Associated Press reports that small businesses are balancing attractive benefits against rising operating expenses. The survey does not resolve that trade-off, but it supplies useful benchmarks for examining it.

Small firms face a sharper affordability challenge

Covered workers at small firms contribute an average of $9,687 annually toward family premiums, compared with $6,840 at large firms, according to KFF’s survey. KFF defines small firms as those with 10–199 workers and large firms as those with at least 200.

The difference extends beyond average contributions. AP reports that 32% of covered workers at small firms are in plans requiring them to pay more than half the family premium, compared with 6% at larger firms.

Deductibles show another gap, although this measure concerns single coverage rather than family coverage. Among workers whose single-coverage plans have a general annual deductible, the average is $2,624 at small firms and $1,772 at large firms.

For a smaller employer, those findings are a reason to benchmark carefully—not a reason to assume its own benefits are inadequate. Compare your plan with employers of similar size, and examine contributions and deductibles separately. Avoid combining the family-premium figures and single-coverage deductible figures into a supposed total employee cost; they describe different coverage measures.

Review the employee impact before shifting costs

Some large employers have already responded to projected increases by changing what workers pay. Among large firms offering health benefits, 44% increased employees’ share of premiums in response to projected cost increases for their largest-enrollment plan. Another reported response was increasing deductibles or other cost-sharing for most services, an action taken by 21%.

These findings describe employer responses, not a recommendation to follow them. Before making a similar change, ask your broker or benefits adviser to show the employer and employee sides of each renewal option separately.

A benefits budget is incomplete until it shows what employees would pay.

Start with payroll contributions, then review deductibles and other cost-sharing. If an option changes both, consider their combined effect rather than approving each change in isolation. Ask the adviser to distinguish fixed premium contributions from spending that depends on an employee’s use of care.

Bring that comparison into your compensation review. If you are considering pay changes alongside benefit changes, examine them together before describing the overall package to employees or candidates. Do not assume that a lower employer premium expense, by itself, establishes whether an option is affordable for workers.

What to do this week

Begin by gathering your current plan documents, employee contribution schedule and available renewal options. Ask whoever manages benefits to prepare a side-by-side comparison that identifies what would change for the business and for employees.

Use that review to work through these practical steps:

• Benchmark like with like. Compare your employee contributions and deductibles with the survey’s figures for employers of similar size. Keep family and single-coverage measures clearly labeled.
• Request separate cost views. Ask your broker or benefits adviser to show employer spending and employee premium contributions separately for each option, rather than presenting only a combined premium.
• Examine cost-sharing changes. Identify any proposed deductible or other cost-sharing increase, and review it alongside changes in payroll deductions.
• Prepare a plain-language summary. Include employee contributions, deductibles, eligibility and coverage start dates. Check the details against the plan information before sharing them.
• Flag questions that need legal review. If proposed changes raise questions about eligibility, notices or employment obligations, talk to an employment lawyer.

Assign responsibility for resolving unclear details before a renewal decision or hiring conversation. The aim is not to settle every benefits question immediately; it is to ensure that the next decision rests on a comparison that includes employee affordability.

Job Elf tip: Before your next hiring conversation, prepare a benefits summary that puts employee contributions, deductibles, eligibility and coverage start dates alongside the pay information.

For candidate conversations, replace a vague description such as competitive benefits with the specific information you have confirmed. If a renewal decision is still pending, distinguish current coverage details from proposed changes rather than presenting an unsettled option as final.

Use the survey as a benchmark, not a forecast

KFF surveyed 1,937 nonfederal public and private employers with at least 10 workers. Fieldwork ran from January through July 2026, and the overall response rate was 11%.

Those boundaries matter. The survey measures coverage offered in 2026; it is not a forecast of your next renewal. It also excludes employers with fewer than 10 workers, so those businesses should not treat the small-firm averages as a direct description of their own employer group.

Use the findings to frame questions for your adviser: How do our worker contributions compare? What changes under each renewal option? Where would employees face additional costs? Use your own plan documents and renewal proposals to answer those questions for your business.

The bottom line

Family premiums are rising, and workers’ average contributions are increasing faster than the total premium. The affordability gap between small and large firms makes a size-appropriate comparison especially important.

This week, bring benefits and compensation into the same review. Separate employer costs from employee costs, examine contributions alongside cost-sharing, and prepare clear coverage details for employees and candidates. The goal is a deliberate decision about the full package—not simply a decision about the premium bill.