The Real Reason Healthcare Costs Keep Rising

Most self-insured employers and other large risk-bearing groups are facing higher renewal rates for 2027, and if sustained, these increases may become unsustainable. To understand how to address this trend, we must first understand why it is happening, and the data makes the answer clear. Hospital utilization, not price, is the primary driver. From 2022 to 2024, hospital spending accounted for 40% of the total increase in national health spending, grew faster than overall healthcare costs, and was driven largely by increased use and intensity of services following COVID, while prices rose only modestly (Godwin et al., 2026). This reinforces a simple conclusion: reducing preventable hospital admissions, particularly those tied to chronic conditions, is the most effective path forward. That requires a shift toward more proactive, high-value care by removing barriers that lead members to ration necessary care, redesigning benefits to reduce cost-sharing for high-value services, improving the member experience, and enabling providers to spend more meaningful time with patients. Employers should also align with high-quality providers, share data to continuously refine care delivery, and prioritize rising-risk populations with targeted engagement strategies. Annual health benefit costs will continue to rise if utilization trends persist, but the solution is clear: invest in PROACTIVE CARE. Increasing primary care investment is not part of the problem; it is the cure.

Godwin, J., Levinson, Z., & Neuman, T. (2026, February 11). Hospital spending accounted for 40% of the growth in national health spending between 2022 and 2024. KFF. https://www.kff.org/health-costs/hospital-spending-accounted-for-40-of-the-growth-in-national-health-spending-between-2022-and-2024/