Rising healthcare costs are a top concern for employers, yet an often-overlooked factor driving those costs is tariffs. From medical equipment to pharmaceutical ingredients, tariffs can ripple through the supply chain and inflate expenses that directly affect employer-sponsored plans.
A survey of 200 healthcare industry professionals found that 82% expect tariff-related import expenses to drive up hospital and health system costs by 15% within six months. Knowing how global trade policies will impact costs is important to your bottom line.
Find out how tariffs can affect healthcare costs and how working with an employee benefits consulting professional can help protect your future healthcare costs.
Healthcare Tariffs Fundamentals
Tariffs are taxes imposed on imported goods, and in the healthcare sector, they can apply to everything from medical devices to raw materials used in drug manufacturing. Learning about the impact of tariffs on healthcare costs can help businesses better understand how these taxes may impact their operations in the future.
Current Tariff Outlook
As of May 2025, the U.S. has implemented a 10% universal tariff on imports, with additional sector-specific tariffs affecting medical supplies and pharmaceuticals. While pharmaceutical products are currently exempt, medical devices are subject to these tariffs, leading to increased costs and potential supply chain disruptions.
A national security investigation under Section 232 is underway to assess the impact of pharmaceutical imports, which could result in future tariffs on these products. Employers should stay informed about these developments, as changes in tariff policies can significantly influence healthcare costs and employee benefits planning.
Supply Chain Dependencies
The U.S. healthcare industry heavily relies on imported materials and equipment, making it vulnerable to disruptions in global trade. For example, over 50% of components used by some U.S. medical device manufacturers originated in China, including essential items such as medical-grade metals and electronics.
Additionally, nearly 30% of the raw ingredients used in drug manufacturing are sourced from China. This dependence means that tariffs and other trade barriers can significantly impact the availability and cost of important healthcare products.
Direct Cost Implications
Tariffs on medical supplies and pharmaceuticals can lead to immediate cost increases for healthcare providers, insurers, and, ultimately, employers. These added expenses often translate into higher premiums, reduced plan options, or increased cost-sharing, directly impacting their overall benefits strategy.
Medical Device Price Changes
Tariffs introduced in 2025 are significantly impacting the cost of essential medical equipment and supplies. With a universal 10% tariff on imports and additional levies up to 25% on medical devices from countries such as Canada and Mexico, the financial strain on healthcare providers is mounting.
Major companies, such as Johnson & Johnson and Abbott, anticipate incurring hundreds of millions of dollars in additional costs this year due to these tariffs. These increased expenses are likely to be passed on to employers and employees through higher insurance premiums and out-of-pocket costs, emphasizing the need for strategic benefits planning to mitigate these effects.
Pharmaceutical Cost Impact
Tariffs are increasingly influencing prescription drug pricing, affecting both production and accessibility. With the U.S. healthcare system heavily relying on imported pharmaceutical ingredients, particularly from China and India, tariffs on these imports can increase domestic production costs by approximately 4.1%, potentially leading to higher prices for consumers.
In addition, recent executive actions aimed at reducing drug prices, such as the “Most Favored Nation” policy, introduce further complexity and uncertainty into the pharmaceutical market. These factors highlight the importance of employers closely monitoring trade policies, as shifts can have a direct impact on healthcare expenses and employee benefits planning.
Strategic Response Options
As tariffs continue to influence healthcare costs, employers must use proactive strategies to manage their benefits budgets. Focusing on essential areas, such as plan design adjustments and vendor partnerships, can help minimize the financial impact while maintaining strong, competitive employee benefits offerings.
Supply Chain Alternatives
To reduce exposure to tariffs, many businesses are considering domestic manufacturing options and diversifying their supplier base. Shifting to U.S.-based or tariff-free sources for medical supplies and pharmaceuticals can help stabilize costs and strengthen long-term resilience in benefits planning.
Cost Management Solutions
Healthcare providers and insurers are implementing several strategies to offset tariff-related price increases. These include renegotiating supplier contracts, increasing the use of generic medications, leveraging group purchasing organizations (GPOs), and adopting value-based care models.
Such approaches help control rising costs, allowing employers to preserve benefit quality while managing the financial impact of evolving trade policies and global market pressures.
Safeguard Your Healthcare Costs With New City Insurance
In today’s unpredictable economic and geopolitical climate, tariffs are becoming a significant factor in rising healthcare costs. Added expenses, such as for medical devices and prescription drugs, can quickly impact employee benefits and overall business budgets.
Recognizing the potential implications and proactively addressing them is essential for achieving long-term success. Partner with New City Insurance today to find strategies to keep your healthcare costs under control.