Austin workers weigh health coverage as insurance costs are forecast to rise

Fall is the time when many employees get the chance to pick a health insurance plan offered by their company. The cost of employer-based health insurance is expected to increase by 9.5% in 2027, according to Aon, global professional services firm. Plans will cost employers on average $19,000 per employee, the firm predicts.

Half of Americans get their insurance from their workplace. Employers with 50 or more full-time employees are required by federal law to provide health insurance and one that fits an affordability standard laid out by the Affordable Care Act.

Faced with rising costs of insurance, employers are finding different ways to handle the increases, said Louise Norris, a health insurance expert with Healthinsurance.org. Employees are trying to figure out how to afford their portion of the premiums while having insurance they can actually use.

Employers might increase both the employees' portion and the employer's portion. They might absorb the increased costs, but then not be able to give as much in other benefits such as wage increases, Norris said. They also might increase deductibles, copays, change the network and out-of-network providers, or decrease prescription reimbursements.

In 2026, KFF, the healthcare research center, found that employees pay an average of $7,471 for their insurance, which was an increase of 9% from 2025. With employees' and employers' contributions, total annual premiums for family coverage now average $28,303, up 5% or $1,310 from 2025.

Since 2021, the 200 large employers surveyed have increased what they pay for employees' insurance by 44% on average and increased the deductibles or other cost-sharing items that workers pay by 21%, according to KFF.

"More spending on health benefits means less spending on salary increases and other things to make employee experience better," said Katrina Daniel, the founder of Daniel Health Strategies and the former manager of Teacher Retirement System of Texas' employee health care. She and other health leaders discussed the rising price of healthcare at the recent Healthcare Summit from the Austin Chamber and Austin Healthcare Council.

This is frustrating to employers and employees, said Meredith Duncan, the president and CEO of Texicare, which manages healthcare for small businesses. "Healthcare is one of largest line items in the budget," she said. Employers "get frustrated. They spend a lot of money to support employees, and then employees complain that the co-pays are too high, the deductibles are too high. Employees can't afford to use it."

When employees skip taking their medications or skip doing their well-checks, companies end up paying more for health benefits in the long term, said Julie Harrison, the chief people officer at University Federal Credit Union, because the cost of their medical treatment increases once they can no longer ignore their symptoms.

How should employees pick a plan?

Choose a plan you will actually use. Often, people will choose a plan that has the least amount deducted from their paychecks. That might end up costing you more.

Consider how much you will need to pay before insurance kicks in: That's your deductible.

Consider what the maximum out-of-pocket expense is and what goes into that expense. Are medications part of that? Copays?

Are your doctors, hospitals, radiology centers and therapists in-network?

How much are the copays for primary care, specialists and therapists' visits?

Are your prescriptions covered and at what cost? Do you need to use a certain pharmacy? What about mail-order benefits?

What expenses can you plan for? Are there any upcoming procedures or surgeries? Are there chronic conditions you need to manage?

What happens if you are in a car crash or have an unexpected health problem? Do you have enough savings to cover the maximum out-of-pocket expense?

What other benefits are included in the plan? Does it cover a gym membership or give a bonus to get an annual well-check?

Why is health insurance so expensive?

Most employee health insurance, especially at large companies, is owned by the employer, not the insurance company. The employer picks an insurance management company like United HealthCare or Blue Cross Blue Shield of Texas to facilitate the plan that the employer negotiates based on their employees' needs. The employer holds the risks of that insurance.

The cost of each insurance plan is determined by who is in the risk pool: What is the health status, ages and even genders of the employees and family members that are covered by that insurance? A healthier risk pool reduces the cost of everyone's premiums. A risk pool of people with a lot of expensive health needs will increase everyone's premiums.

Recently, the cost of health insurance has gone up because of these factors:

Texas has the highest rate of people who are uninsured, 19.2% in 2026, according to KFF. When hospitals have to treat people without insurance, they need to negotiate higher rates for employer insurance plans to be able to make a profit, even among hospitals that are considered nonprofits. University of Texas System Chancellor Dr. James Zerwas estimated at the recent Healthcare Summit that 12% to 14% of healthcare costs get shifted to providing care for the uninsured or underinsured.

The number of uninsured people is expected to continue increasing because of changes in federal funding to Medicaid from "One Big Beautiful Bill Act," Norris said

Dennis Ellis, the CEO of United HealthCare for Oklahoma and North Texas, told the Austin Chamber, "$911 billion in federal funding was removed from the system," he said of the projected decrease in funding during the next decade. "Where do we go to make up that revenue?"

People who do have insurance can expect to see higher negotiated rates for care and procedures.

Austin has fewer major health system competitors than some other large Texas cities.

"Hospital system are really the price setters," said Dr. Clay Johnston, the chief medical officer of the medical practice Harbor Health, which is now offering insurance to employers. "Competition helps and drives down the price."

Austin has three major health systems: Ascension Texas, St. David's HealthCare and Baylor Scott & White Health. Compared with other cities, like Houston or Dallas, there are fewer major players in the health market, which makes it more difficult for employer-based plans to negotiate lower rates. This doesn't just apply at the hospital level. As hospital systems acquire primary care practices, specialty practices, urgent cares and stand-alone emergency centers, less competition means less negotiation leverage.

"All healthcare is local," said Ken Janda, the former CEO of Community Health Choice and current board member of Texas Employers for Affordable Health Care. "Market variability is incredible."

Costs of cancer care and other specialized care are going up. Modernized treatments have decreased death rates, but treatments such as stem cell transplants, immunotherapies and CAR T-cell therapy come with six- and seven-figure price tags.

Medications costs are increasing: The GLP-1s are prime examples. Yes, they help with diabetes, weight loss, addiction, heart disease, sleep apnea and so many other potential uses for them. These and other medications including biologics for treatment of autoimmune diseases such as arthritis, lupus and multiple sclerosis come with big five- to six-figure yearly costs and most don't have generics available.

Greater use of more expensive care: As insurance premiums, copays and deductibles increase, people delay doing preventive care, taking medications as advised or going to specialists. Instead they end up using urgent care centers and emergency rooms as their care, which increases the cost of care. People also might choose to get their preventive care such as colonoscopies and mammograms in hospital settings rather than less-expensive outpatient surgery centers or radiology sites. If many people in the employer's risk pool are doing that, everyone will pay more for their insurance in future years.

How can employees reduce health costs?

Practice healthy behaviors: Don't smoke. Limit alcohol use. Exercise regularly. Eat healthy foods. Do stress-relief activities. Get good sleep.

Schedule an annual physical. That visit sometimes is at no-charge depending on your insurance.

Do regular screenings including blood work, colonoscopies, mammograms, etc. Catching cancer early often makes it less expensive to treat and increases survival chances.

Manage chronic conditions with regular doctor visits and management at home.

Use primary care services as much as possible, including telehealth, nurse lines or in-app services for asking questions. These can help steer you to the right care or answer questions without needing a visit.

Use your insurance company's nurse line or nurse managers that are offered for free.

Use generic medications and ask for 90-day supplies, rather than one-month supplies and brand-named medications.

Pay attention to which pharmacy your insurance plan wants you to use. Compare prices at different pharmacies and compare cost-saving plans like GoodRx with using your insurance.

Consider using a mail-order pharmacy for lowering costs.

Ask your doctor's office for samples of medications.

Contact the pharmaceutical company to see if you qualify for reduced or free medication.

Use a health spending account, which is pretaxed money you can set aside for health spending throughout the year.

Avoid using the emergency room when a primary care visit the next day or an urgent care visit could solve the problem.

Know your health story. Keep a running list of all your medications, all the tests you've had and the results. A lot of health expenses are wasted when the same test is ordered by three different doctors or doctors can't see a patient's full health record because the patient sees doctors in different health systems. Or a doctor doesn't know that you already tried a medication unsuccessfully and prescribes it again.

Use the services your company provides to encourage good health. Some companies offer free diabetes management programs, free high blood pressure measuring, free virtual therapy for chronic pain programs, free behavioral health visits, etc. Companies do this because they know that healthier employees cost them less in health insurance premiums.

What are companies doing to reduce their costs?

Some companies, especially small businesses, are deciding not to provide their own health insurance and instead are giving their employees a stipend to buy their insurance on the Affordable Care Act Marketplace or through a broker. The Centers for Medicare and Medicaid Services has rebranded this as the CHOICE plan (Custom Health Option and Individual Care Expense Arrangement).

Employers who continue to offer insurance also should be asking their insurance management company to give them data on how their employees are using their insurance, said Charles Miller, the director of health and economic mobility policy at Texas 2036, a nonpartisan public policy organization. Employers often hit roadblocks in getting that data from the insurance manager, he said.

Even with the price transparency laws, for each procedure "there is massive pricing variation depending on what your health benefit plan is," Miller said. It's up to employers to negotiate those rates, but they are often negotiating without having the information about what they are paying.

"We need a better deal," Janda said. "We have to get better data."

That can help the employer not only negotiate with hospital systems better but see where there are could be cost savings such as spending 20% to 30% less for the same service by using an outpatient center instead of a hospital for a screening.

With that knowledge, they can educate employees to use less expensive care, such as using primary care clinics instead of the ER for non-emergency care. They can let employees know which hospital systems cost more for the same services than other hospital systems.

Some companies hold education sessions or offer case management to show employees how they can afford their prescriptions or manage chronic diseases.

"We want them to be aware of what's available to them," UFCU's Harrison said. "It's not just about healthcare, we have a responsibility for their wellbeing."

Employers can incentivize employees to make the less expensive decision by charging much more in emergency room copays than a primary care copay or an urgent care copay, for example.

"People have to be incentivized to seek out high-quality care," Miller said. "There are levers available. A $50 gift card moves behavior."

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