The Quiet Pay Cut: Rising Health Insurance Costs Are Eroding Worker Compensation

The average annual family premium for employer-sponsored health insurance reached $26,993 in 2025, according to KFF's (Kaiser Family Foundation) annual benchmark survey of employers. Workers contribute $6,850 of that cost out of their paychecks. Family premiums rose 6% this year, continuing a pattern of 6 to 7% annual increases over the past three years, outpacing both general inflation (2.7%) and wage growth (4%). Costs are expected to accelerate: Aon estimates that employer coverage will surge approximately 9.5% in 2026, the largest single-year increase in at least 15 years. About 154 million Americans under 65 depend on employer-sponsored coverage, making this a compensation crisis hiding in plain sight.

The Hidden Pay Cut

Every dollar an employer spends on health insurance premiums is a dollar unavailable for wages. This is well-established economics, and the scale of it is staggering. A January 2024 study published in JAMA Network Openfound that from 1988 to 2019, the mean cumulative lost earnings associated with growth in health insurance premiums was $125,340 per family, nearly 5% of total earnings over that 32-year period. If employer-sponsored insurance costs had remained at the same proportion of the 1988 compensation package, the median family with employer coverage could have earned $8,774 more in annual wages by 2019.

This cost falls hardest on the people who can least afford it. The same JAMA Network Open study found that by 2019, health care premiums consumed 19.8% of compensation for Hispanic families and 19.2% for non-Hispanic Black families with employer-sponsored insurance, compared to 13.8% for non-Hispanic White families. At the 20th percentile of earnings, premiums consumed 28.5% of compensation, compared to just 3.9% at the 95th percentile. Because most employers do not adjust premium contributions by income, rising health insurance costs function as a regressive tax on lower-wage workers, widening racial and economic inequality through a mechanism that rarely gets the attention it deserves.

Fresh data from the Federal Reserve Bank of New York confirms this dynamic is accelerating. In February 2026 regional business surveys, firms reported health insurance cost increases averaging more than 13%. Those same firms reported that absent the cost increases, they would have raised wages by roughly an additional percentage point, representing a 20% drag on wage growth. To put the numbers in perspective: the average annual premium for employer-sponsored family coverage is now roughly equivalent to the full-time annual wage of a worker earning $15 per hour.

When Workers Bear the Burden

As premiums climb, employers pass costs along through higher deductibles and out-of-pocket expenses. The average single-coverage deductible in 2025 stands at $1,886, up 17% over five years, according to the KFF 2025 Employer Health Benefits Survey. Workers at small firms face average deductibles of $2,631, and more than half of covered workers at those firms now face deductibles of at least $2,000. Nearly three-quarters (72%) of covered workers face out-of-pocket maximums above $3,000, with one in five facing maximums above $6,000.

The consequences are measurable and immediate. A March 2026 Employee Benefit Research Institute (EBRI) survey found that four in ten privately insured adults reported higher healthcare costs in the past year. Among those, roughly a third had trouble covering their bills, and a quarter reduced retirement contributions. People are delaying and avoiding care because of cost. As EBRI director Paul Fronstin noted, affordability now shapes both access to care and longer-term financial security.

For people living with HIV and other chronic conditions, delayed care carries compounding risks. Interrupted treatment, missed appointments, and medication non-adherence can undermine viral suppression and lead to worse health outcomes, higher long-term costs, and greater strain on the healthcare system.

What's Driving the Increase

Employers point to multiple converging cost drivers. Among large firms in the KFF survey, 36% say prescription drug prices contributed "a great deal" to higher premiums in recent years, followed by the prevalence of chronic disease (30%), higher utilization of services (26%), and hospital prices (22%). GLP-1 medications for weight loss have become a particular flashpoint: among the biggest employers covering these drugs, 59% say utilization exceeded expectations and two-thirds report a significant impact on prescription drug spending.

The problem for employers is that their usual playbook is running out of room. Strategies like changing plan designs and managing vendors more tightly are likely to shave only two or three percentage points from the average increase, according to Aon. When costs are rising 9.5%, that arithmetic does not work, and 64% of CFOs and CEOs say an 8 to 10% cost increase is the threshold for making significant changes to their coverage offerings. Those changes typically mean workers pay more.

The Small Business and Nonprofit Squeeze

Small businesses face an even sharper version of this crisis. Half of the nation's smallest employers do not offer health insurance at all, and those that do are struggling to hold on. Rachel Bernier-Green, who started the financial consulting firm EJ Consortium in Chicago in 2023, began offering health benefits to her six workers in 2025. By the time premiums spiked, she was forced to drop coverage entirely. In the nonprofit sector, where mission-driven organizations serve communities affected by chronic conditions and health disparities, this dynamic is particularly concerning.

At the Community Access National Network (CANN), we take a different approach. "Given the work that we do, it is critical in actualizing our values — our goals for the rest of the patient community — to ensure our employees are well-covered and able to realize their full compensation value," said Darnell Lewis, CANN Board Chair. "This means providing our employees with high-quality, low deductible, low co-pay / co-insurance, and low maximum out of pocket health insurance coverage with 100% of the monthly premium assumed by CANN for all employees. We also recognize the need for ensuring our employees' families are well covered, which is why we covered 50% of dependent premiums for the same quality of coverage. We are actively modeling the best practices in compensation and coverage that we urge the rest of the non-profit sector and all businesses to adopt."

Too many nonprofits treat employee benefits as an afterthought. When an organization's mission centers on health access and health equity, the benefits it provides its own people should reflect that mission. Taking care of the people who do the work is a core organizational value, and it is a standard the sector should rise to meet.

PBM Reform: A Policy Opening

A significant share of premium growth traces back to prescription drug costs, and 2026 has brought the most meaningful federal action on pharmacy benefit manager (PBM) reform in decades. Three converging actions deserve attention. On January 29, 2026, the U.S. Department of Labor (DOL) proposed a rule requiring PBMs to disclose rebates, spread pricing, and pharmacy claw-backs to plan fiduciaries of self-insured group health plans, covering approximately 90 million Americans. Days later, the 2026 Consolidated Appropriations Act (CAA) was signed into law on February 3, requiring 100% rebate pass-through for Employee Retirement Income Security Act (ERISA) plans and delinking PBM compensation from drug prices in Medicare Part D beginning in 2028. On February 4, the Federal Trade Commission (FTC) settled with Express Scripts, requiring elimination of spread pricing and point-of-sale rebate pass-through in its standard offerings by January 2027, while litigation continues against Caremark Rx and OptumRx.

These reforms target an opaque layer of the drug supply chain that has long driven up costs for plans and the people they cover. For people living with HIV, where antiretroviral therapy is both lifesaving and lifelong, PBM practices affect formulary design, out-of-pocket costs, and pharmacy access in direct and material ways. Comments on the DOL proposed rule are due March 31, 2026, and patient advocates, employers, and labor organizations should submit them.

Where Employer and Labor Interests Align

Rising premiums represent one of the clearest points of alignment between employers and labor. Unions have historically secured better health benefits for members. Bureau of Labor Statistics data show that 96% of union workers have access to medical care benefits compared to 69% of non-union workers, with lower premium contributions and lower deductibles. Some unions have gone further, partnering with employers to address the root causes of cost growth. A Boston hotel workers' union built provider networks excluding the highest-cost hospitals and offered no-deductible plans at premiums one-tenth the national average, with emergency room use dropping significantly in the first year. In New Jersey, public-sector unions used a PBM "reverse auction" model that secured a contract 10% below projections and saved $1.5 billion over three years.

These examples demonstrate that cost containment does not have to mean cost-shifting. Unions, as both purchasers and users of health benefits, are positioned to push for reforms that target provider prices and supply-chain opacity rather than asking workers to accept higher deductibles and thinner coverage.

What We Can Do

The policy window is open. Here is where we need action:

Policymakers should strengthen PBM transparency reforms, ensure the DOL proposed rule includes robust enforcement mechanisms, and monitor implementation of the 2026 CAA provisions. State-level cost commissions and hospital price transparency initiatives deserve expanded support.

Employers should review PBM contracts now, well before the CAA requirements take effect for plan years beginning January 1, 2029. Coalition purchasing strategies and value-based plan designs that target price rather than utilization offer more sustainable paths than continuing to shift costs to workers.

Advocates and labor organizations should submit comments on the DOL proposed rule before the March 31 deadline. We should push for extending commercial drug pricing reforms and advocate for policies that address the underlying drivers of premium growth.

The math here is straightforward: rising health insurance costs reduce wages, deepen inequality, and force people to delay or forgo care. For those of us working in patient advocacy, health equity, and public health, this should be a unifying cause. We all share an interest in a system where comprehensive coverage is the standard, not the exception.

ACA Subsidies in Limbo: What the Senate Framework Means for Patients

The enhanced Affordable Care Act (ACA) premium tax credits expired on January 1, 2026, and millions of Americans are now facing the consequences. According to the Kaiser Family Foundation, subsidized enrollees are seeing their out-of-pocket premium payments increase by an average of 114%. For a single mother in social work like Katelin Provost, that means watching her monthly premium jump from $85 to nearly $750, a ninefold increase that forces an impossible choice between her own coverage and her daughter's.

This is the reality for more than 20 million Americans who benefited from the enhanced subsidies first enacted in 2021 as a COVID-19 pandemic response. The Wall Street Journal reports that roughly four in ten ACA enrollees had been paying nothing toward their premiums under the enhanced credits—more than double the share in 2020. That era ended last week, and Congress is now scrambling to respond amid growing political pressure and the specter of another government shutdown deadline on January 30.

The House Vote: Forcing the Issue

Last Thursday, the House passed a three-year extension of the enhanced subsidies, a bill that has no chance of becoming law in its current form. The Senate rejected an identical measure in December. So why hold the vote?

The answer lies in a procedural rebellion that caught House leadership off guard. Four swing-district Republicans—Reps. Mike Lawler of New York and Robert Bresnahan, Brian Fitzpatrick, and Ryan Mackenzie of Pennsylvania—signed a Democratic discharge petition to force the vote over Speaker Mike Johnson's objections. Last Wednesday, nine Republicans joined Democrats on a procedural motion to advance the bill.

These centrist Republicans are calculating political survival. As Rep. Fitzpatrick told The Hill, "Everyone's lamenting discharge petitions. There's an easy way to fix that: Put bills on the floor that have majority support. It's not hard." The vote serves a strategic purpose: it creates a legislative vehicle the Senate can amend and sends a clear signal that inaction carries electoral consequences in November's midterms.

The Senate Framework Takes Shape

While the House engages in political theater, a bipartisan Senate group led by Sens. Bernie Moreno (R-Ohio) and Susan Collins (R-Maine) has been negotiating a compromise. According to Politico, legislative text could be ready as early as today.

The emerging framework includes a two-year extension of enhanced subsidies with several Republican-demanded reforms. The Wall Street Journal outlines the key elements: an income cap excluding households earning more than 700% of the federal poverty level (approximately $225,000 for a family of four), a requirement that enrollees pay at least $5 per month toward their coverage, and $100,000 fines on insurers who sign up "phantom enrollees" without their knowledge. In the second year, enrollees would have the option to direct their subsidy funds into a pre-funded health savings account instead of having them flow to insurance companies.

The framework also reportedly includes measures to directly fund cost-sharing reductions (CSRs), which could generate significant savings. The Committee for a Responsible Federal Budget estimates that direct CSR funding would reduce deficits by over $50 billion over a decade while lowering silver plan premiums by 10% to 20%. This would end the practice of "silver loading," where insurers inflate silver plan premiums to compensate for CSR costs the federal government stopped paying in 2017.

Sen. Moreno told NPR, "We're in the red zone. But that does not mean a touchdown. It could mean a 95-yard fumble."

The Barriers to a Deal

Two sticking points threaten to derail negotiations: abortion coverage and the elimination of $0 premium plans.

On abortion, Republicans want explicit language preventing subsidies from flowing to plans that cover the procedure. Democrats counter that current law already addresses this concern—ACA plans that cover abortion must charge enrollees a separate $1 per month, segregating federal funds from abortion services. Sen. Ron Wyden (D-Ore.) warned Fox News, "I am not going to open the door to Hyde, given what happens and what has been seen historically when you do that. If you open the door, it will get drafty in a hurry."

President Trump complicated matters when he told House Republicans to be "flexible on Hyde," drawing pushback from conservatives. Sen. Moreno has since indicated the framework does not change current abortion policy, calling the issue "peripheral" to the core negotiations.

The second obstacle carries more direct implications for patient access. The proposed $5 monthly minimum premium—designed as an anti-fraud measure—would eliminate $0 premium plans that currently cover millions of low-income enrollees. Sen. Wyden called this a "rate hike" affecting 8 million people. Sen. Jeanne Shaheen (D-N.H.) noted, "Data shows that you lose a lot of people at the lowest income levels when you do that."

This concern is grounded in evidence. The NIH Clinical Guidelines on Antiretroviral Therapy are direct: "Out-of-pocket costs for people with HIV can be prohibitive, creating a barrier to the initiation and continuation of ART. Cost sharing results in higher rates of people not initiating ART, prescription abandonment at the pharmacy, decreased adherence, and more frequent drug discontinuation." The guidelines note that in 2022, the CDC's Medication Monitoring Project found that among people with HIV who had stopped taking antiretroviral therapy, 34% reported that money or insurance problems contributed to stopping treatment. For people managing chronic conditions requiring consistent care, even modest cost-sharing can disrupt treatment continuity with serious downstream consequences for both personal health and public health goals.

Why This Matters for People Living with Chronic Conditions

The evidence on cost-sharing and health outcomes should inform how we evaluate any compromise. The Commonwealth Fund's 2023 Health Care Affordability Survey found that 37% of marketplace enrollees reported delaying or skipping needed care due to cost in the prior 12 months. Among those who delayed care, 61% said a health problem got worse as a result. One-third of marketplace enrollees reported paying off medical debt.

These affordability challenges fall disproportionately on certain communities. The Center on Budget and Policy Priorities notes that 23% of Black enrollees and 18% of Hispanic enrollees in private insurance reported problems paying medical bills, compared to 15% of white enrollees.

For people living with HIV, coverage continuity directly affects health outcomes. The NIH Clinical Guidelines emphasize that "health insurance and prescription drug coverage can directly affect clinical outcomes for people with HIV; changes to coverage can result in lapses in viral suppression and should be anticipated as best possible." The guidelines specifically warn that disengagement from care occurs more frequently during transitions in coverage, including when people switch insurance plans or experience changes in employment status. With wholesale acquisition costs for commonly prescribed single-tablet antiretroviral regimens ranging from approximately $2,800 to $4,700 per month, the stakes of coverage disruption are substantial.

As CANN's December analysis detailed, New York City's 2024 HIV surveillance data showed diagnoses rising for the fourth consecutive year, with 86% of new diagnoses among Black or Latino people and 48% of those interviewed lacking health insurance. The Ryan White HIV/AIDS Program and AIDS Drug Assistance Programs (ADAPs) provide critical safety net support, but these programs work best when complementing stable insurance coverage rather than substituting for it.

The KFF analysis of proposed Medicaid cost-sharing requirements offers a window into what happens when cost barriers are introduced for vulnerable populations. Under a maximum cost-sharing scenario, Medicaid expansion enrollees with three or more chronic conditions could face average annual costs of $1,248—potentially exceeding the 5% of income cap for those at 100% of the federal poverty level.

What Comes Next

Any Senate deal requires 60 votes to overcome a filibuster, meaning at least seven Democrats must join all 53 Republicans, or significant bipartisan support must materialize. Sen. Moreno has indicated he needs 35 Republican senators on board to feel confident in the level of GOP support. Senate Majority Leader John Thune has said any deal must get a "big vote" among Republicans.

The political calendar adds pressure. The January 30 government funding deadline looms, and neither party has appetite for another shutdown after last fall's 43-day standoff. An extended open enrollment period would likely accompany any deal, giving people who dropped coverage due to premium spikes a chance to re-enroll.

For advocates, the coming days demand close attention. The specific legislative text—particularly provisions around minimum premiums, income verification, and any changes to covered services—will determine whether a compromise actually improves access or introduces new barriers. Contact your Senators to emphasize that affordability must remain central to any reform. Monitor for the final text expected early next week. And prepare to help community members navigate an extended enrollment period if one materializes.

The enhanced subsidies enabled record ACA enrollment of 25.2 million in early 2025, according to KFF data. What happens in Congress over the next two weeks will determine whether that progress holds or unravels, and whether the people who depend on affordable coverage can continue accessing the care they need.