New Study: Employer Health Costs Jump 9.2% in 2025
- J. Price McNamara
- 26 minutes ago
- 3 min read
Health costs expected to rise 9.2% in 2025
Small businesses face a 10.3% spike, vs. 8.3% for large firms
Family premiums reached $25,572 in 2024, up 7% YoY
Health costs are growing twice as fast as wages
Pharmacy costs now 24% of employer budgets
51% of employers plan to raise deductibles and copays by 2026
Health care costs are rising faster than ever, creating a crisis for businesses and workers. A new study by J. Price McNamara shows that employer health care costs are set to increase by 9.2% in 2025. Even after companies make changes to their health plans, costs will still rise 7.3%.
Small businesses will be hit the hardest, with projected increases of 10.3%, compared to 8.3% for large companies. At the same time, the average family premium jumped to $25,572 in 2024, growing 7% for the second year in a row. These rising costs are outpacing both wage growth (4.5%) and general inflation (3.2%), squeezing families and business owners alike.
If this trend continues, many small businesses will face a painful choice: raise employee costs, cut benefits, or drop health care coverage entirely. This will affect millions of American workers and could change the future of employer-provided health care.
Employer Cost Impact by Size: 2024 vs. 2025:
Size | 2024 Actual Increase | 2025 Projected Increase | YoY Change | Avg. Family Premium (2024) | Relative Burden Index* |
Small (<500 workers) | 8.9% | 10.3% | +1.4% | $26,100 | 1.35 (High) |
Mid-Sized (500-4,999) | 7.4% | 9.0% | +1.6% | $25,700 | 1.10 (Moderate) |
Large (5,000+) | 6.8% | 8.3% | +1.5% | $25,200 | 0.85 (Low) |
The data shows a clear and growing divide between small and large employers. Small businesses are projected to face a 10.3% increase in health care costs in 2025, placing them at a competitive disadvantage.
With a Relative Burden Index of 1.35, these businesses are far more likely to pass rising costs directly to employees through higher premiums or reduced benefits.
Mid-sized employers sit in the middle, with a 9.0% projected increase, signaling that even mid-market companies will face tough decisions on staffing and wage growth. In contrast, large corporations benefit from their scale, keeping their cost increase to 8.3%, while offering more competitive benefit packages to attract top talent.
Family premiums now averaging $25,572 highlight the growing financial pressure on workers. Since these premiums are rising twice as fast as wages, many employees will be forced to make difficult choices between health care and other essential expenses, leading to delayed care and long-term health consequences.
The growing role of pharmacy spending, now 24% of total health budgets, is a key driver of these unsustainable increases.
The tipping point is here, and there’s no time to waste. Employer health care costs are rising so fast that they could hurt both workers and the economy.
By 2026, 51% of employers plan to shift more costs to employees, leading to higher deductibles, fewer provider options, and much bigger out-of-pocket bills.
For small businesses, the problem is even worse. A 10.3% cost increase could force many to stop offering health coverage, leaving workers without enough insurance or none at all.
This will lead to higher employee turnover, lower productivity, and a growing gap between small businesses and large corporations.
Companies that take action now with solutions like telehealth, pharmacy cost controls, and high-performance networks can keep costs under control and attract top talent. Those that wait will fall behind, as competitors offer better, more affordable benefits.
The next 12 months will decide which businesses adapt and which ones are left struggling in this healthcare cost crisis.
Quote from J. Price McNamara:
"From a legal liability perspective, employers facing these healthcare cost spikes must navigate significant ERISA fiduciary duties and potential discrimination claims. When small businesses are forced to alter benefit structures due to 10.3% cost increases, they risk triggering wrongful termination or benefits discrimination lawsuits if changes aren't applied uniformly across all employee classifications."
"We're seeing increased employment litigation where healthcare cost-cutting becomes the catalyst for broader workplace disputes. The gap between 4.5% wage growth and 9.2% healthcare increases creates legally precarious situations where employees may claim constructive dismissal, making it critical for employers to document their decision-making process meticulously."
Methodology:
Sample Size: 50,000+ employer health plans from all 50 states.
Sources: KFF, Aon, Mercer, FAIR Health, Business Group on Health.
Period: January 2024 – July 2025.
Analysis: Year-over-year trends by employer size and pharmacy costs.
