Healthcare costs are rising faster than wages and inflation, squeezing employer budgets and putting pressure on employee benefits strategies. At the same time, employees expect better coverage, while changing regulations create additional challenges.
In fact, health insurance premiums through Covered California are projected to increase by an average of 10.3% in 2026, marking the first double-digit rate hike since 2018. For many businesses, finding the balance between offering competitive benefits and controlling costs feels like managing a constantly moving target.
Here is what to expect, and how the right employee benefits strategy can protect your business and workforce.
Healthcare Costs Keep Outpacing Inflation: What It Means for Your Budget
Healthcare spending in the U.S. has grown at a concerning rate over the last two decades. Employer-sponsored premiums have increased by over 297% since 2000, while average wages have grown more slowly. The rising costs for outpatient care, advanced procedures, and specialty medications strain company budgets. Administrative expenses, such as billing, compliance, and insurance processing, add even more pressure.
For many employers, the relentless rise in healthcare costs has presented significant challenges in managing compensation and approaching long-term workforce planning. With premiums and overall plan costs increasing, many businesses have been forced to make difficult decisions, such as shifting more expenses to workers, absorbing higher costs, or scaling back benefits altogether.
Small and mid-sized companies that lack larger businesses’ resources or bargaining power are especially feeling the strain. Higher healthcare expenses continue to eat into profits, reduce flexibility in offering competitive wages, and limit investments in other growth areas. Sometimes, businesses are left offering less generous benefits, affecting employee retention and morale.
In response, many employers are implementing high-deductible health plans, limiting provider networks, or increasing employee cost-sharing. Unfortunately, these cost-containment strategies typically have trade-offs that can negatively impact employee satisfaction.
Brokers can help employers find creative funding options and plan designs, such as self-funded or level-funded plans, to control costs without sacrificing benefit quality.
Compliance Rules are Changing: How to Stay Ahead Without Getting Buried
Regulatory changes continue to evolve, from federal mandates to state-level rules. Employers must stay compliant with reporting requirements, ACA mandates, and new state regulations, all while managing rising healthcare costs. Falling behind can lead to fines or penalties and create headaches for HR teams.
Brokers act as strategic partners, keeping you ahead of regulatory changes and checking to confirm that your benefits plans meet all compliance requirements.
Meeting Workforce Expectations: Benefits Beyond the Basics
Today’s workforce expects more than basic health coverage. Employees seek benefits supporting mental health, wellness, and financial well-being. Rising premiums and out-of-pocket costs can make even well-intended benefits feel out of reach. Without engaging benefits, companies risk lower morale and higher turnover.
This growing financial burden means employees are frequently forced to make difficult decisions, such as skipping prescriptions, delaying care, or foregoing medical visits to avoid high costs. Even small co-pay increases or deductibles can create real hardships for many lower- and middle-income employees. In some cases, workers may perceive their benefits as less valuable, even when businesses invest more than ever.
Working with a reputable broker can help your business customize a benefits package that meets employee expectations and improves retention, creating value for staff and employers.
From Data to Strategy: Why Employers Need More Than a Quote
Analyzing claims trends, utilization patterns, and cost drivers is essential for effective benefits planning. Employers need data-driven insights to design benefit plans that encourage appropriate care, lower claims, and promote employee health. Simply comparing quotes is not enough in today’s complex healthcare environment.
Employers can make informed decisions about plan design, wellness programs, and preventive care initiatives by examining which services employees use most and identifying high-cost areas. This proactive approach helps manage costs and supports a healthier, more engaged workforce.
Brokers bring expertise in examining your business’s data, turning insights into actionable strategies that manage and improve employee well-being.
What’s Next: Market Signals Every Employer Should Watch
Healthcare costs fluctuate due to inflation, medical advancements, and state-level insurance changes. For example, Nevada premiums are expected to rise 17.5% next year, reflecting broader market pressures. Employers need to anticipate trends and adjust benefits proactively.
Monitoring national and regional cost trends, prescription drug price shifts, and emerging care models can help businesses anticipate unexpected increases. Staying informed allows employers to make strategic plan design choices and maintain competitive, affordable employee benefits.
Employee benefits brokers can help you interpret market signals, ensuring your business can plan and make informed decisions about benefits offerings.
Receive Long-Term Cost Solutions With New City
The world of healthcare benefits is rapidly evolving. Employers who plan ahead can manage costs while protecting their workforce. A strategic broker is not just a middleman, but an advisor who helps you manage rising costs, regulatory shifts, and evolving employee needs. If you are ready to find ways to improve your benefits plan while controlling costs, contact New City Insurance today to learn more.