From Federated Insurance via Zywave
Health care costs have been growing at an alarming rate in recent years, and they’re not slowing down. As such, surveys project that health care costs in the United States are likely to increase by 6.5% to, in many cases, as much as over 10% in 2026. Here’s a breakdown of cost predictions:
Furthermore, individual Marketplace plans are likely to go up even higher, as much as 15%-20%. Regardless of the exact figure, employers can expect their health care costs to continue to skyrocket throughout 2026. As the next year approaches, many employers remain curious about what is driving these increases. Here are key factors that will impact rising health care costs in 2026.
GLP-1s
Growing demand for glucagon-like peptide-1 (GLP-1) drugs continues to be a top factor in rising health care costs. Although initially approved as Type 2 diabetes treatments, GLP-1 drugs have been found to be effective for weight loss when paired with diet and exercise. These drugs have gained rapid popularity from plan participants eager to lose weight and improve their overall health. Mounjaro (which has the active ingredient tirzepatide), Ozempic and Rybelsus (which both use the active ingredient semaglutide) are approved for treating diabetes but are commonly prescribed off-label for weight loss. Zepbound (tirzepatide) and Wegovy (semaglutide) are drugs that use the same active ingredients but are approved to treat obesity for qualifying patients.
In addition to treating Type 2 diabetes and obesity, the active ingredients in these medications have shown promise for treating other conditions, including Alzheimer’s disease, heart disease and even sleep apnea. While these use cases are still undergoing clinical trials for approval, the potential applications of GLP-1s could lead to these costly drugs being used to treat even more patients.
GLP-1 medications typically cost around $1,000 per month and are intended to be taken in perpetuity to achieve their benefits. This means that GLP-1 users may experience health benefits but will be required to use these high-cost treatments on an ongoing basis. In response to the popularity of GLP-1s, more employers may require employees who use these medications for weight loss to get prior approval, participate in weight management programs or meet other requirements.
GLP-1 use for weight loss is already widespread, but these costly medications are expected to grow in popularity. A recent RAND report revealed that 12% of Americans have used GLP-1 medications for weight loss, and 14% are interested in using the drugs. Moreover, the number of prescriptions for the drugs has more than tripled since 2020.
It’s important to note that additional GLP-1 drugs are expected to hit the market by 2026, which could further drive up employers’ health plan costs. With pharmaceutical companies recognizing the success of semaglutide and tirzepatide, more than 100 drugs are in clinical development for obesity.
Specialty Medications
Concerns about pharmacy trend are nothing new, but they’re intensifying. As such, GLP-1s are not the only high-priced drugs driving up health care costs. Core factors of health care inflation in 2026 are also attributed to specialty medications.
The specialty drug market continues to expand rapidly in 2025, driven by a surge in approvals by the U.S. Food and Drug Administration (FDA) and a robust pipeline of innovative therapies. These high-cost, high-impact treatments are reshaping the pharmaceutical industry, with specialty drugs now accounting for the vast majority of new drug approvals. Industry experts estimate that nearly 80% of all FDA approvals in 2025 fall into the specialty category, reflecting a shift toward more targeted, complex therapies for chronic and rare conditions.
This rapid growth is being fueled by more plan participants using these key specialty drugs:
The complexity of these therapies—often requiring special handling, administration and monitoring—and their unique payment structures add to the challenge. Still, the momentum behind specialty drug innovation shows no signs of slowing, signaling a continued evolution in how health care is delivered in the years ahead.
Chronic Health Conditions
According to the U.S. Centers for Disease Control and Prevention (CDC), around 90% of U.S. health care spending is for people with chronic and mental health conditions. These chronic conditions include heart disease, stroke, cancer, diabetes, arthritis and obesity. An increasing percentage of the population has two or more chronic, high-cost diseases.
Cardiovascular diseases are one of the most significant contributors to health care costs. The American Heart Association estimates that heart disease and stroke could affect over 60% of older adults in the United States by 2050 and reach $1.8 trillion in related expenses. After adjustments for inflation, this estimate suggests that costs related to cardiovascular diseases would triple over the coming decades.
Other conditions, such as obesity, also drive higher health care costs. The CDC reported that more than 2 in 5 adults in the United States have obesity, which is defined as having a body mass index of 30 or higher. Obesity is correlated with other costly chronic conditions, including heart disease, Type 2 diabetes and sleep apnea. The agency published a report that found annual obesity-related medical care costs in the United States were estimated to be nearly $173 billion.
Keep in mind that these are just two examples of chronic conditions among Americans. In general, chronic disease is increasing in prevalence in the United States and is projected to continue to do so in 2026 and the upcoming decades.
Aging Populations
While life expectancy in the United States has increased significantly over the past 50 years, birth rates have trended down consistently. According to Congressional Budget Office projections, life expectancy at birth is expected to increase from 78.9 years to 82.3 years from 2025 to 2055, and life expectancy at age 65 is forecast to increase from 19.7 years to 21.8 years. On the other hand, the most recent data from the CDC revealed that the birth rate in the United States hit a record low in 2024, with fewer than 1.6 children per woman. These factors contribute to a U.S. population with an average age that is slowly rising.
In general, health care costs increase as people age. Adults over 65 use health care more frequently and are more likely to incur costs. The Centers for Medicare & Medicaid Services reported that per-person personal health care spending for the 65 and older population is around five times higher than spending per child and almost 2.5 times the spending per working-age person. Despite making up a smaller percentage of the population, this category accounts for a sizable proportion of health care spending, largely driven by their likelihood of having one or even multiple chronic conditions. Every year, more Americans enter the 65 and over category. With more Americans entering retirement age, the impact of an aging population is likely to continue increasing overall health care spend.
Cancer Care
According to BGH, cancer care has been the top driver of employer cost increases for four years in a row. The spending has worsened due to the growing prevalence of cancer diagnoses and the escalating cost of treatment. Cancer is complex; therefore, its diagnosis and treatment don’t follow the same path for every individual.
Cancer diagnoses are increasing, not just among older adults but also among younger working-age individuals. This means more employees and dependents are entering treatment, often requiring long-term and intensive care. Additionally, new and innovative therapies—including CGTs, immunotherapies, targeted drugs and personalized medicine—may offer better outcomes but come with high price tags. These treatments often cost hundreds of thousands of dollars per patient, especially in late-stage cases.
Medical Inflation
As inflation increases, costs are expected to rise. However, medical inflation is outpacing regular inflation. The consumer price index (CPI) is an economic indicator widely used to gauge inflation and inform policymaking, investment decisions and cost-of-living adjustments. The CPI’s medical care index, one of eight major groups in the CPI, measures the change in prices paid by consumers for medical goods and services.
The latest West Health-Gallup research revealed that 11% of U.S. adults—nearly 29 million people—can’t afford or access quality health care, the highest level since 2021. Furthermore, more than one-third of Americans feel they’re paying too much for the quality of care they receive and that their most recent experience was not worth the cost.
The medical care index was at 3% in May 2025, exceeding general inflation, and has crept up to 3.4% as of August 2025. However, this medical inflation does not account for all factors that employers and plan participants end up paying for. Keep in mind that employers are reporting as high as more than 10% due to other key drivers (e.g., increased spend, rising demand for services and inflationary pressures) factored in.
Health Care Labor Costs
Lastly, the supply of health care workers continues to fall short of the growing demand for utilization. This shortage is due to rising health care demands, an aging population, retiring workforces and insufficient talent entering the health care industry. When key players in the health care industry are required to spend more on labor, those expenses are often passed on to both employers and users of the health care benefit: employees and their dependents.
Employer Takeaway
Offering quality health care to employees carries a significant financial cost for organizations, comprising a substantial part of an overall budget. It’s more than just organizations that pay the price for growing health care costs; such expenses are often shared between employers and employees.
Rising health care costs may be unavoidable, but informed employers can better understand these trends and act appropriately.
The goal is to allow you and your broker a chance to offer you another type of insurance coverage that could help you reduce your overall costs for health care insurance and costs for you and your employees. This plan does not require you to change your current broker. This is a direct access offer through Indiana PHCC.
As the demand for skilled labor grows across industries, employers are looking for creative ways to support and retain trades workers — from electricians to machinists to HVAC techs. One lesser-known but powerful tool in the tax code is Internal Revenue Code (IRC) §132, which allows employers to offer certain tax-free fringe benefits to employees.
While not specific to trades alone, Section 132 includes key provisions that are especially relevant for employers of skilled workers, particularly when it comes to training, tools, and equipment required for the job.
Section 132 allows certain fringe benefits to be excluded from an employee’s taxable income, provided they meet the IRS definition of:
In the context of skilled trades, the most useful is the working condition fringe.
A working condition fringe benefit is any property or service provided to an employee that would be deductible as a business expense if the employee had paid for it themselves.
In other words, if a tradesperson needs something to perform their job — and would normally deduct it on their taxes — the employer can instead provide it directly, and it will be non-taxable to the employee under §132.
| Benefit | Tax Treatment | Notes |
|---|---|---|
| Employer-paid licensing or certification fees | Tax-free under §132 | Must be job-related |
| Continuing education or recertification | Tax-free | As long as it maintains/improves job skills |
| Tools or equipment required for the job | Tax-free | Cannot be personal-use items |
| Safety gear (gloves, helmets, boots, etc.) | Tax-free | Must be necessary for the job |
| Job-specific uniforms | Tax-free | Only if not suitable for everyday wear |
| Employer-provided cell phones or devices | Tax-free | Must be primarily for business use |
✅ Example: An electrical contractor buys $600 worth of specialized testing tools for a technician to use on the job. The employee does not pay tax on this benefit — it qualifies under §132 as a working condition fringe.
While Section 127 covers formal educational assistance (like trade school tuition), Section 132 covers practical, on-the-job expenses related to current job functions.
| Provision | Covers | Annual Limit | Written Plan Required? |
|---|---|---|---|
| §127 | Tuition, fees, books | $5,250 | Yes |
| §132 | Tools, certifications, training, safety gear | No specific limit | No (but documentation is key) |
Together, §127 and §132 provide a well-rounded approach to supporting employees' education and day-to-day needs without increasing their tax burden.
Section 132 is a flexible and underused tool for employers in the skilled trades. From certification costs to job-specific tools and equipment, offering non-taxable working condition fringe benefits helps reduce employee out-of-pocket expenses and boosts morale — all without increasing taxable wages.
For employers competing for talent in the trades, it’s another way to stand out — and do right by the workers who keep the country running.
How do employer-paid tuition benefits for apprentice school tuition work? The answer lies in Internal Revenue Code (IRC) §127 — the Educational Assistance Program.
IRC §127 allows employers to provide tax-free educational assistance to employees, up to $5,250 per calendar year. This benefit can be applied toward a broad range of educational expenses, including:
Historically, this provision was associated with traditional college courses, but it is not limited to degree programs. Vocational and trade education — such as plumbing apprenticeship, as well as the Indiana PHCC Academy courses like Fast Track to Service and Repair certification — can also qualify, provided certain requirements are met.
Employers may pay or reimburse the cost of job-related training that improves or maintains skills necessary for an employee’s current role or prepares them for advancement. In the skilled trades context, this includes:
As long as the program is educational in nature and not simply an employer-required license or compliance course, it can fall under §127.
For employees:
For employers:
Employers who invest in trade-related tuition assistance under §127:
Meanwhile, employees in the trades gain career-advancing credentials without taking on student debt.
Maria, a maintenance technician, wants to attend a local HVAC certification program. Her employer agrees to pay the $4,800 tuition under their Section 127 EAP. Because it falls under the annual $5,250 cap:
Vocational and trades training is vital to economic growth — and Section 127 offers a powerful, tax-efficient way to fund it. Employers interested in supporting skilled workforce development should establish or review their §127 Educational Assistance Program to ensure it covers eligible trades training.
Joshua Siler is CEO of HiringThing, a modern recruiting PaaS that enables seamless hiring with integrated applicant tracking.
Data shows that skilled trades jobs experienced double-digit growth in 2022, making it ripe with opportunities for those joining the workforce. But despite these upwardly trending numbers, many skilled trades industries face hiring challenges. For example, 80% of construction companies need help recruiting. In fact, for the past six years, they’ve cited hiring as their number one business challenge.
Skilled trades include trade occupations requiring specific training and/or certifications but typically not a college degree. While the terms “skilled trades” or “skilled labor” cover a wide breadth of work, they're most commonly associated with the manufacturing or construction fields. However, the Bureau of Labor Statistics considers other roles like home health aides or application software developers to be skilled trades workers.
At HiringThing, we partner with a number of software companies that serve skilled trades, so I've seen up close the hiring and recruiting strategies needed to best attract these workers. Here are some of the best tips and tricks for finding talent in this unique field.
According to a study by Snagajob, nearly 36% of hourly workers—who make up a significant portion of skilled labor roles—reported that flexibility was the most critical work perk. But only around 50% of employers offer meaningful job flexibility.
Traditionally, skilled labor jobs have had set shifts, days, times and tasks, but slowly that’s starting to change. As the demand for workers grows, many skilled trades employers are realizing that current and potential talent are leaving for more flexible jobs. This is especially true of younger generations, which prioritize having control over their work hours more than older workers.
While the nature of skilled trades roles often means they can’t be as flexible as, say, an accountant who can work remotely, savvy employers are getting creative with split shifts, transparent scheduling, flexible PTO or just more leniency with breaks.
When recruiting, advertise your flexibility and demonstrate it in real time during your hiring process by giving candidates options for interview modalities and when they take place. This will help ensure potential talent knows you're committed to providing a work environment they value.
In today’s competitive recruiting landscape, you must make the hiring process easy and enjoyable for candidates. However, there’s often a discrepancy between what companies and employees think that means. For example, around 74% of construction companies say workers can easily attend their interviews, but more than half of job candidates disagree. Consult former and current job seekers when making your application process people-centric.
To be people-centric, treat candidates as people and not assets or commodities. It's all about meeting them where they are, which includes how they can apply to open positions. For instance, 79% of job seekers utilize social media as part of their job search, and nearly 70% of them do so on mobile devices. So having a people-centric hiring process would include having mobile-friendly applications.
Beyond the application process, how you engage with candidates must center on their experience. Provide clear communication to every candidate. This includes showcasing your company benefits, highlighting your safety standards and discussing professional growth opportunities.
While this overlaps with being people-centric, a speedy hiring process is so important that it deserves particular focus.
Today’s job candidates have been groomed by our technologically advanced world; whether it's their streaming service of choice or applying for a job, they want things quick, easy and efficient. About one in five candidates cite long hiring processes as a significant job search challenge, and 92% don't even finish online applications due to length or complexity.
So do everything you can to make your hiring process fast. Limit the steps it takes to complete an application, and keep the interview process at a length that respects candidates’ time. Remember: The best talent is applying for multiple jobs, and these people will move fast to accept offers.
Technology is designed to make our lives easier, yet many skilled trades sectors are infamous for being slow adopters. Digitizing hiring makes it faster, more dynamic and more people-centric, and it gives companies a competitive advantage. A digitized hiring process also sends the message that you’re a technologically forward organization, which today’s job seekers want. For example, digital technology is the number one skill that today’s construction workers want to acquire on the job.
According to a study by BCG, 60% of company leaders intended to increase digital tech investments in 2023 to counter current economic pressures. However, it's key to ensure you’re investing in technology that works well and is tailored to your industry. Of 2,000 senior executives surveyed, nearly half don't feel their organizations are getting significant value from the tech currently employed.
Skilled trades jobs are struggling to connect with younger generations. The application rate for young people seeking technical jobs like plumbing, HVAC, construction and electric work dropped 49% between 2020 and 2022. Compounded with Baby Boomers starting to retire, connecting with younger workers is essential for the skilled trades.
This is where some education is needed. Skilled trades often get a bad reputation for having low wages, long hours and no real room for advancement, but that’s not the reality. In fact, job satisfaction is remarkably high in the skilled trades, with 83% of tradespeople either somewhat or extremely satisfied with their career choice. So be sure you're promoting the perks of the job and high satisfaction rate in the job posts, recruitment marketing and interview process.
One mistake we’ve seen skilled trades make is to only recruit when they have a big project or need labor. Forward-thinking organizations will be more proactive with recruiting, developing an employer brand that attracts candidates and hiring from within to promote engagement and company morale. Recruiting is cyclical, and developing a pool of quality candidates prepares you for whenever you need to hire.
Recruiting for skilled trades may seem daunting. But with the right strategy and mindset, you can find quality candidates and set your organization up for success.
New roles support new product lines, expansion into residential market
Ferrer Mechanical & Electrical has announced a new leadership structure to support its continually growing organization, adding the positions of Commercial Service Manager and Residential Service Manager. The strategic move is part of Ferrer’s commitment to scaling effectively, delivering exceptional customer service, and supporting the company’s continued growth as it adds services and expands into the residential market. Filling the new roles are:
Tim Reis, who joins the Ferrer team as Commercial Service Manager, bringing over 30 years of experience in
HVAC and refrigeration. Reis most recently served as Service Manager at Climate Pros in Indianapolis. Other
past roles were at Freije Engineered Solutions, TP Mechanical, and DEEM. “Tim is a seasoned professional
with a proven track record,” said Ferrer President and Chairman Kris Griffith. “He’s driven by a commitment to
training, integrity, and quality workmanship — values that align with our company’s mission and goals.”
David Carpenter will now serve as our Residential Service Manager after serving as Service Coordinator and
Service Manager at Ferrer. Carpenter will focus on growth initiatives for Ferrer’s strategic entry into the
residential market. “David has filled an important role for us by managing the software system, personnel, and
procedures that help us deliver exceptional customer service,” said Griffith. “His ability to innovate will help us
identify improvements to enhance the residential client experience.”
Griffith said these changes “set the stage for exciting growth opportunities for our company. Given our recent
acquisition and product expansions, these focused roles enable us to serve our clients better, respond more
quickly, and ultimately increase our revenue potential.”
Ferrer, an independent, employee-owned company, recently expanded its residential offerings to include Trane
HVAC and Cummins whole house generators. In February, Ferrer strengthened its growing electrical team by
acquiring LEEPER-LESCO Electric, Inc., a family-owned company that has served the central Indiana market
since 1945. In May, the acquisition of Todd's Mechanical Service added refrigeration services to the company
and expanded its existing HVAC services. Ferrer will also partner with its sister company, Cooper’s Water, to
offer a full range of residential plumbing, water conditioning, HVAC, and electrical services for the home.
