Employer healthcare costs are entering another period of significant pressure. According to Aon’s August 2026 published analysis, U.S. employer healthcare costs are projected to rise 9.5% in 2027. That is a projection, not a fixed outcome for every organization, but it signals why benefits planning can no longer sit entirely within annual human resources administration.
Healthcare affects compensation, employee affordability, retention, hiring, workforce planning, operating budgets, and long-term organizational risk. For leaders, the central question is not simply how to reduce spending. It is how to manage a critical business cost while preserving access, trust, dignity, and the ability to attract and support a capable workforce.
The cost trend has become a leadership issue
Aon’s reported historical data shows employer healthcare cost growth increasing from 3.7% in 2022 to 8.8% in 2026. The source report notes that Aon’s 2027 projection assumes a status quo environment before additional mitigation actions, such as plan design changes or care-management programs. Actual results will vary according to workforce demographics, geography, claims experience, utilization, plan structure, vendor contracts, and management decisions.
Aon reports that the average employer contribution represented 82.2% of total plan cost in 2026, or approximately $14,432 of an average $17,562 plan cost. These are weighted averages across the population studied. They do not describe every employer’s contribution, nor do they predict what any individual employee will pay.
The source report also states that average combined costs could exceed $19,000 per employee in 2027. That figure refers to combined employer and employee plan costs in Aon’s analysis, rather than a universal employer expense or an amount every worker will experience. It is best understood as a benchmark for planning discussions.
Industry variation reinforces the need for organization-specific analysis. According to Aon, employer costs increased from 2025 to 2026 by 9.8% in finance and insurance, 9.1% in technology and communications, 8.8% in the public sector, and 6.5% in healthcare. Aon also reported an 8.7% increase for professional services. These comparisons provide context, but they do not explain the claims profile, workforce mix, or plan choices of any particular company.
Benefits influence the total employee experience
Healthcare is not an isolated line item. It competes with wage increases, retirement contributions, paid leave, training, staffing levels, technology investments, and other uses of limited operating capital.
Reducing an employer contribution may lower the organization’s immediate expense, but it can increase payroll deductions or out-of-pocket exposure for employees. That effect may be especially significant for lower-paid workers, employees managing chronic conditions, families with dependents, and people who cannot easily absorb an unexpected medical bill.
Passing through more costs can also alter the practical value of compensation. A nominal pay increase may not feel meaningful if premiums, deductibles, or prescription expenses rise at the same time. Conversely, preserving a generous benefit structure without examining its underlying cost drivers may constrain hiring, development, or business investment.
This is why healthcare belongs in total rewards and workforce strategy. Leaders should examine not only the plan’s total cost, but also:
- How much employees contribute through payroll deductions
- How much they may pay through deductibles, copayments, and coinsurance
- Whether lower-paid employees experience a disproportionate burden
- Whether network design affects access to primary and specialty care
- How benefits influence recruiting and retention in different labor markets
- Whether changes could increase absenteeism, turnover, or employee distrust
SHRM’s 2025 Employee Benefits Survey found that 88% of surveyed HR professionals considered healthcare very or extremely important, while 97% reported offering health coverage. The findings help explain why benefits decisions carry reputational and workforce consequences, even when employees do not see the underlying actuarial analysis.
GLP-1 medicines require disciplined plan governance
Pharmacy spending is one part of the broader discussion. The source material identifies GLP-1 medicines, including Ozempic, Mounjaro, Zepbound, and Wegovy, as contributors to growing pharmacy-cost pressure. Aon and NFP reporting cited in the source article found that 70% of surveyed employers expected pharmacy costs to increase in the coming year, with 51% identifying GLP-1 medicines as one contributing factor. Those results describe survey responses and should not be generalized to every employer or plan.
SHRM’s 2025 survey reported that approximately 23% of employers offered GLP-1 coverage for type 2 diabetes and/or weight management. That does not mean coverage is universal, nor does it establish that a specific coverage approach is appropriate for every workforce.
Public-sector data illustrates the scale of the policy conversation, while also showing why comparisons require care. According to the KFF analysis of Medicaid coverage and spending, Medicaid GLP-1 prescriptions increased from approximately 1 million in 2019 to more than 8 million in 2024. Gross Medicaid spending increased from roughly $1 billion to almost $9 billion over the same period.
KFF defines those figures as gross spending before rebates. Net spending can be substantially lower after manufacturer rebates and other adjustments. Medicaid data is also not the same as employer-sponsored insurance data. Coverage rules, populations, negotiated prices, utilization patterns, and reporting methods differ.
For employers evaluating GLP-1 coverage, responsible governance should include:
- Clear understanding of the clinical indications and applicable coverage rules
- Analysis of pharmacy-benefit terms, rebates, utilization controls, and vendor incentives
- Review by qualified benefits, legal, clinical, privacy, and compliance professionals
- Protection of confidential employee health information
- Plain-language communication that avoids stigma and overpromising
- Measurement of affordability, access, utilization, and employee experience over time
The goal is not to promote or reject a particular medicine. It is to ensure that a major benefits decision is based on reliable data, appropriate expertise, and respect for employees.
Questions leaders should ask before making changes
A disciplined review begins with better questions. Before changing contributions, networks, formularies, or eligibility rules, leadership teams should ask:
What is driving the increase?
Is the pressure coming primarily from utilization, high-cost claims, specialty pharmacy, provider pricing, chronic conditions, plan design, or a combination of factors? A broad average cannot answer that question.
Which parts are controllable?
Some factors may be addressed through vendor negotiations, network evaluation, primary-care access, preventive care, pharmacy-benefit oversight, or improved employee navigation. Others are less controllable in the short term. Separating the two helps prevent unrealistic savings assumptions.
How will changes affect different employees?
Model the effect by pay level, location, coverage tier, age distribution, dependent enrollment, and work arrangement where lawfully and appropriately possible. An equal percentage increase does not create an equal burden for every household.
What data does the organization actually have?
Leaders should understand the difference between aggregated plan reporting and identifiable health information. Employee privacy must be protected, and data should be used only through lawful, appropriate processes.
How are vendors being evaluated?
Review fee structures, performance guarantees, network access, pharmacy transparency, data practices, customer service, and the practical experience employees receive. A low quoted price is not enough if access or administration deteriorates.
How will employees understand the decision?
A benefits change that is technically sound can still fail if employees receive confusing, late, or incomplete communication. Explain what is changing, why it is changing, what employees can do, and where they can obtain qualified benefits assistance.
A balanced approach to sustainable cost management
Cost management should be treated as a multi-year operating discipline rather than a one-time renewal exercise. HR, finance, operations, and executive leadership should share responsibility for reviewing trends and setting priorities.
A responsible framework may include:
- Building several years of cost scenarios rather than relying on one forecast
- Reviewing claims and pharmacy trends in aggregated, lawful ways
- Improving access to preventive and primary care where appropriate
- Evaluating provider networks and pharmacy contracts
- Assessing vendor incentives and administrative performance
- Protecting confidentiality and avoiding stigmatizing communications
- Tracking employee affordability alongside employer cost
- Measuring workforce effects, including recruiting, retention, absence, and engagement
- Revisiting assumptions as utilization, regulation, and market conditions change
Research from WTW also reflects continuing medical-cost pressure. Different firms may produce different estimates because they study different populations, use different methodologies, apply different plan assumptions, and publish at different points in the planning cycle. The value of these projections is not perfect prediction. It is early visibility.
Why this matters for Oakland and Bay Area employers
For a diversified Oakland or Bay Area holding company, workforce considerations can differ substantially across sectors. Hospitality, construction, real estate services, investment, pet care, and nonprofit organizations may have different staffing patterns, eligibility structures, labor-market pressures, and operating constraints.
That does not support a single benefits answer. It supports stronger governance.
McFadden-Finch Holdings Company approaches sustainable growth through operational discipline, long-term planning, and community impact. Those principles are relevant to healthcare strategy because decisions affecting employees can influence household stability, organizational resilience, and the quality of service delivered to customers and communities.
MFHC’s separate portfolio organizations operate in distinct sectors and may face distinct workforce considerations. This article does not make any claim about their benefit plans, costs, employee data, or results.
For general business strategy information, explore the MFHC Resource Library or contact McFadden Finch Holdings Company to discuss organizational planning, governance, and sustainable growth. MFHC does not provide individualized benefits, medical, or legal advice.
Published weekly by The McFadden-Finch Holdings Company. MFHC builds value-driven ventures across hospitality, real estate, community philanthropy, and pet care, uniting expertise across industries to deliver sustainable growth, quality, and trust. To explore partnership or engagement, visit www.m-fhc.com.
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McFadden Finch Holdings Company (MFHC) is a premier holdings and investment management firm dedicated to driving sustainable growth and long-term value. Our mission is to bridge the gap between visionary capital and community-centric development, ensuring tomorrow’s infrastructure meets today’s needs. Through strategic project management and rigorous market analysis, we empower our partners to navigate the complexities of the California economic landscape with confidence and clarity.
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