Open enrollment is on the horizon, and a lot of employers are bracing themselves for higher benefit costs—again. Health insurance premiums are expected to increase by 7–8% for 2026, surpassing the overall inflation rate. For many, it feels like costs continue to rise year after year, even if the company or staff size remains the same.
So, what’s driving these price hikes? Primarily, it comes down to rising medical costs, more expensive prescriptions, increased use of health services, and workers seeking greater benefits from their plans.
Big-picture trends like these are beyond the control of any one employer. But you can take steps to manage the impact on your business. The best approach is to utilize your data, maintain a flexible plan design, communicate openly with employees, and collaborate with partners who understand the market.
Healthcare costs have been growing faster than regular inflation for some time now. This isn’t tied to just one industry or business. Instead, several factors are pushing prices up:
These factors all come together to push health plans—and your bill—higher. But there’s room to get creative. With smart planning, you can maintain sustainability without compromising the perks your team values. Questco helps by providing custom solutions and real market data, so you don’t have to guess.
One major reason for rising benefit costs is simple: hospitals and medical providers are charging more for their services. Healthcare systems are dealing with staffing shortages, which means they’ve raised wages to attract and keep workers. Additionally, supply chain issues have driven up the cost of medical equipment and supplies. These higher costs are being passed down to insurers, employers, and ultimately, employees.
At the same time, more people are using their health benefits. Since the pandemic, there has been a surge in elective procedures and preventive care appointments that were previously delayed. Plus, with an aging workforce, more employees are managing chronic conditions, which often require ongoing and expensive care.
So how do you manage these rising costs? It begins with understanding how your employees utilize their benefits. By monitoring claims data, you can identify trends and adjust your plan structure to meet your needs. That’s where a PEO like Questco can help. With detailed claims reporting and benchmark data, you’ll know exactly where your healthcare dollars are going—and how to make smarter decisions about your benefits.
Another significant driver of these increasing costs is the use of specialty medications. These are high-cost drugs for serious, long-term conditions like cancer or autoimmune diseases. Although they account for only a small percentage of all prescriptions, they consume a significant portion of total pharmacy spending.
You can rein in these rising costs through smart benefit design. Here are a few ways to effectively manage your pharmacy spending:
At Questco, our experts are ready to help you dig into your pharmacy data. We can then work together to create a plan that fits both your team's needs and your budget.
Today's employees are looking for more from their benefits packages. Services like mental health support are in high demand, and benefits such as fertility treatments and paid family leave are becoming key to attracting and retaining top talent. While offering these can make your company more competitive, they also tend to increase your costs.
Before adding new benefits, it's really smart to understand what your team actually cares about. Employee surveys and focus groups are excellent ways to gain a clear understanding of what benefits your employees value most.
This information helps you invest in offerings that truly boost satisfaction and retention, all while keeping costs in check. Questco can help guide you through this process, ensuring your benefits strategy aligns with both your budget and your employees' needs.
While you can’t slow national healthcare inflation, there’s plenty you can do with your own plan. Some ideas:
Rising costs are a headache, but you’re not powerless. With the right approach—utilizing your own data, collaborating with the right partners, and maintaining honest and straightforward communication—you can offer compelling benefits at minimal cost.
Questco provides you with the tools, market insights, and expertise to make it happen. Get a benefits review ahead of your renewal, and see how your strategy stacks up.
How much will costs go up in 2025?
Most businesses are expected to see premiums increase by 7–8%, with the rate potentially higher for smaller companies or those with a history of high claims.
Why are some companies hit harder than others?
Small groups often feel the pinch because a single big claim can drive up their rates. Partnering with a PEO like Questco can help by giving you access to larger group plans.
Which benefits see the biggest cost jumps?
Medical and prescription benefits, particularly specialty drugs, are driving the majority of the increase.
What should employers do before open enrollment?
Pull your claims data, compare plan options, and get your communication materials ready early. Offer choices that align with your budget and employees' needs.
How does communication help control benefits costs?
When employees understand their choices, they select plans that meet their actual needs and utilize options like telemedicine or preventive care—both of which help keep costs down for everyone.