As Health Insurance Costs Soar CFOs Seek Ways to Dull the Pain

Companies face a roughly 9.5% surge in costs this year, the biggest rise in at least 15 years.

The Wall Street Journal

By Jennfier Williams

March 12, 2026

Surging health insurance costs are forcing executives to make tough decisions on how to blunt the impact to the bottom line, from making changes to plans that could result in reduced coverage to requiring employees to pay more out of pocket for healthcare.

Mediterranean food chain Cava Group raised employees’ healthcare premiums for the first time in years in 2025 and is now considering covering healthcare costs itself rather than relying on an insurance provider, an option known as self-insurance.

Like Cava, many U.S. businesses are grappling with higher expenses to provide health insurance to employees. Costs for employer coverage are expected to surge about 9.5% this year, which would be the biggest increase in at least 15 years, according to an estimate from Aon. They are projected to remain high next year too.

“For CEOs and CFOs, we’re at that tipping point to take significant action,” said Janet Faircloth, senior vice president of health solution thought leadership at Aon.

Companies’ healthcare costs tend to increase from year to year and until recently, any major spikes often come with a one-off explanation, said Faircloth.

“There’s nothing on the horizon that we would say is going to bring these drivers of trend down in the next few years, so we’re definitely looking at a sustained period.”

Rising premiums for health insurance are driven primarily by higher prices for care, expanding use of services and pricey prescriptions, including GLP-1s used for weight-loss and diabetes. For employers, tactics to limit the increases include changing plan designs, negotiating lower costs with vendors and pushing more costs to employees through larger payroll deductions for premiums or higher out-of-pocket charges such as deductibles.

At Cava the impact to employees last year was fairly modest and didn’t cover all of the company’s higher costs, Chief Financial Officer Tricia Tolivar said. “So Cava absorbed more of the increase than we passed along,” she said, declining to share the impact on employees and the company. Cava will renew its health coverage in August, and executives are considering whether to self-insure, she said.

Companies choose to self-insure because it gives them more control over benefits and can lower costs. Self-insured businesses pay their workers’ medical costs directly instead of paying premiums for insured medical coverage. Typically, they hire benefits firms or insurance companies just to administer their plans.

Tolivar said the company’s aim is to provide the same level of care to workers, whether Cava goes that route or not. “We are not trying to cut the coverage for our team members,” she said.

Some 64% of CFOs and CEOs said an 8% to 10% cost increase is the threshold for making major changes to their coverage offerings, according to an Aon survey of 65 executives early this year.

Strategies typically used to lower costs, such as changing plan designs and managing vendors more tightly, are likely to shave 2 or 3 percentage points from the average increase, said Farheen Dam, Aon’s CEO of enterprise clients and chief client officer who was previously health solutions leader in North America. That’s not enough to meaningfully decrease costs, which is why some are considering more significant changes like more aggressively managing prescription costs, particularly for GLP-1 medications, as well as steering employees to more cost-effective care, she said.

“You’re just not going to get yourself from a 9.5% to something that’s more reasonable and manageable and more aligned with sort of other increases in your P&L without taking some more significant action,” according to Dam. 

Costco Wholesale is used to rising healthcare expenses, but the three months ended Nov. 23 were different, as costs increased more significantly and at a faster pace than sales. “We’ve always seen year-over-year increases in healthcare costs, but typically, they’re not growing faster than our overall sales growth,” said finance chief Gary Millerchip.

Those costs normalized in the three months ended Feb. 15, Millerchip said. “But we’ll continue to watch them closely.”

Ethan Allen’s average healthcare cost for a worker in the U.S. is around 10 times more than for those in Mexico, 35 times more than that of employees in Honduras and double that of workers in Canada. The home furnishings and interior design company is self-insured for medical costs to a limit in a calendar year at some point above $500,000 per claim that the company didn’t specify.

That means the company absorbs the cost for a medical claim up to that limit and then an insurance provider pays the claim, according to Chief Executive Farooq Kathwari.

The cost of an injury or illness in the U.S. has gone up considerably in recent years because of higher costs for each claim rather than more of them, according to Matt McNulty, Ethan Allen’s CFO. For instance, the expense of covering a broken arm now is up between 15% and 25% from a couple of years ago, according to the CFO. Overall U.S. costs have risen 10% to 15% over the past several years, he said, declining to provide a dollar amount for the increase.

Efforts to reduce costs without cutting the care offered include safety training, encouraging preventive care and on-site health screenings.

Higher healthcare costs mean Americans are delaying care and over 100 million are in debt due to medical expenses, said Sophia Tripoli, senior director of health policy at Families USA, a nonprofit consumer healthcare advocacy organization. Some businesses pass along steeper expenses to their employees. Others absorb most of the cost but then have to limit wage increases and other benefit options, she said.

“We’re seeing increasing numbers of people around the country saying that they have to make trade-offs with a tighter and tighter budget because of rising healthcare costs,” Tripoli said. “It’s, ‘Do I buy the groceries, or do I see my doctor? Do I pay the rent, or do I get my kid’s prescription medication?’”