The cost of keeping a family insured through work has reached a new, uncomfortable milestone: it’s now about the same as buying a brand-new Toyota Corolla hybrid.
According to a new report from KFF, the average annual premium for family health coverage offered by employers rose to $26,993 in 2025 — a 6% increase from last year, and up 26% over the past five years. It marks the first time in two decades that the cost of employer-sponsored family insurance has risen by 6% or more for three consecutive years.
More than 154 million Americans receive health coverage through their jobs. And for many of them, the rising cost of insurance is becoming as concerning as the price of health care itself.
The Cost of Coverage Keeps Climbing
The KFF Employer Health Benefits Survey — one of the most comprehensive annual studies of workplace health insurance — paints a sobering picture. While wages have risen by roughly 29% over the past five years and inflation by 24%, family insurance premiums have kept pace, eating up more of the average household’s income.
For workers covering themselves alone, the average premium rose 5% in 2025 to $9,325 — nearly $3,000 higher than in 2016. The report also found that more workers are facing larger deductibles, meaning higher out-of-pocket costs before insurance even begins to pay. Over one-third of insured employees now have a deductible of $2,000 or more for individual coverage, a 77% increase over the past decade.
“It’s a concern as health costs just keep going up,” said Eric Trump (no relation to the former president), controller at Steve Reiff Inc., a small sandblasting and painting company in Indiana. “There’s not a lot we can do, as we don’t have enough employees to spread out the costs.”
Trump said his company’s health insurance costs rose another 8% this fiscal year, a pattern that’s repeated itself for several years. Workers at his firm pay about half the premium themselves — a cost many can no longer afford. “About half of our 20 employees decline the insurance because they get coverage elsewhere or go without,” he said.
What Workers Pay Now
Even when employers contribute, the average worker’s share of the bill is significant. In 2025, employees are paying roughly $1,440 toward their individual coverage or $6,850 for family coverage, according to KFF. Deductibles and co-pays add another layer of financial strain, especially for households dealing with chronic conditions or frequent medical visits.
And those costs are expected to rise again next year. “Early reports suggest that cost trends will be higher for 2026,” the KFF report warns, “potentially leading to higher premium increases unless employers and plans find ways to offset costs through changes to benefits, cost sharing, or plan design.”
In other words, companies may soon start asking employees to shoulder even more of the burden — whether through higher deductibles, narrower networks, or reduced coverage for certain medications.
Why Premiums Are Rising
The steady climb in premiums is fueled by two main culprits: hospital costs and prescription drug prices. Both continue to grow faster than inflation, driven by expensive new treatments, labor shortages, and industry consolidation that gives large hospital systems more leverage to negotiate higher prices.
One of the most immediate cost drivers is the surge in coverage for GLP-1 weight-loss drugs such as Wegovy and Ozempic. These medications have shown strong results for managing obesity and diabetes, but their prices — often exceeding $1,000 a month — are straining employer health plans.
“Large employers know these new high-priced weight-loss drugs are an important benefit for their workers,” said Gary Claxton, senior vice president at KFF and lead author of the study. “But their costs often exceed expectations. It’s not a surprise that some employers are rethinking coverage for these drugs.”
Some companies have begun restricting or eliminating coverage for GLP-1 drugs altogether, fearing runaway costs. Others are introducing stricter eligibility rules or requiring employees to share a higher portion of the price.
The Big Picture: A System Under Pressure
While employer-sponsored health insurance remains the foundation of the U.S. health system, it’s also becoming more fragile. Companies, especially smaller ones, face growing challenges balancing rising premiums against limited budgets. When costs rise, the options are limited: reduce benefits, shift more expenses to employees, or drop coverage entirely.
“Employers typically respond by increasing workers’ share of the costs,” Claxton said. “But it’s unclear how much more financial pain employees can take.” Nearly half of large employers surveyed said their workers have “moderate” or “high” concerns about their ability to afford their current health plans.
For workers, the result is an uneasy paradox: they have coverage on paper but often can’t afford to use it. High deductibles and co-insurance mean many avoid seeing doctors or filling prescriptions, effectively making them “underinsured.”
Politics Adds to the Uncertainty
The rising cost of job-based health insurance comes amid political turmoil over the future of coverage for other groups. The federal government shut down on October 1 following a congressional stalemate over funding extensions for Affordable Care Act (ACA) subsidies. Those subsidies currently help roughly 22 million Americans afford marketplace insurance, but they’re set to expire without new legislation.
Without congressional action, the tax credits will vanish at the end of the year, causing premiums to double for many consumers starting in January. Meanwhile, the government’s new tax and spending package reduces federal Medicaid funding by billions — cuts expected to leave millions more Americans uninsured over the next decade.
In short, while Washington debates the politics of health care, millions of families are already paying the price.
Coverage Costs vs. Real Life
The KFF survey underscores a growing disconnect between what insurance costs and what it covers. Premiums now consume a larger share of household budgets than ever before. The average cost of a family plan — nearly $27,000 — is roughly equal to the sticker price of a new Toyota Corolla hybrid. For many families, that comparison makes the cost of “affordable” coverage painfully tangible.
It also raises questions about sustainability. If premiums continue to outpace wages, even middle-income workers may begin dropping employer coverage, echoing trends once limited to lower-income populations. And once coverage erodes, rebuilding it becomes far harder.
At smaller companies like Steve Reiff Inc., that shift is already happening. “We’ve tried everything we can to keep costs down,” Trump said. “But at the end of the day, if prices keep climbing like this, something’s got to give.”
Looking Ahead to 2026
Health policy experts predict that 2026 will bring another round of steep increases unless major reforms intervene. Employers may expand the use of high-deductible plans, narrow networks, or cost-sharing models tied to income. Others may explore on-site clinics, telemedicine partnerships, or alternative insurance structures such as reference-based pricing.
But those solutions only go so far. Without broader changes in hospital pricing, pharmaceutical regulation, and care delivery, premiums are expected to keep climbing — leaving workers to foot an ever-larger bill for the same level of coverage.
The Bottom Line
Health insurance through an employer has long been considered a core part of the American social contract — a benefit that rewards work and provides financial protection against illness. But with family premiums closing in on $27,000 a year, that promise is feeling increasingly out of reach.
“When your health coverage costs the same as a new car, something is fundamentally broken,” Claxton said.
For millions of workers, that reality has already arrived. The question now is whether employers, lawmakers, and insurers can find a way to steer the system before the wheels come off entirely.