4 Reasons for Rising Costs of Healthcare

Organizations today face mounting financial burdens due to healthcare costs, and it’s a trend that is projected to continue in the foreseeable future. Why? The continued rise in healthcare costs stems from several causes, including heightened demand for medical care, increasing medication prices, an aging population, and lifestyle. It’s no surprise, then, that many HR managers are concerned with how to keep healthcare expenses under control while still offering quality benefits to employees. 

The United States has one of the most expensive healthcare systems in the world. Reducing the total cost of health care can save organizations millions and keep them competitive in attracting valuable talent by offering quality healthcare benefits – even despite decreasing budgets. Are you interested in exploring the reasons for rising cost of healthcare and learning about strategies to reduce healthcare costs without compromising on care quality? 

When you understand why healthcare costs will continue to rise in the future, you can begin to prepare.

How much does health insurance cost?

For employers, The average annual health insurance premiums in 2025 were $9,325 for single coverage and $26,993 for family coverage. The average single coverage premium increased 5% in 2025 while the average family premium increased 6%. The average family premium has increased 26% since 2020 and 53% since 2015.

4 reasons for rising healthcare costs in the US

Healthcare expenses have increased due to various causes – studies show that major contributing factors include administrative costs and costlier pricing of drugs and procedures. In addition, technological advances in health care mean more expensive diagnostic procedures and treatment plans that were not available before. Let’s dig a little deeper into each of these factors.

On top of that medicine use has increased. Total prescription medicine use increased 1.7%, reaching 215 billion days of therapy in 2024.

1. Cost of medication

Healthcare costs will rise in the future because of prescription medication costs that have steadily increased over the years. In 2026,  drugmakers plan to raise U.S. prices on at least 350 branded medications including vaccines against COVID, RSV and shingles and blockbuster cancer treatment Ibrance, even as the Trump administration pressures them for cuts. The median of this year's price hikes is around 4% - in line with 2025.

2. Merging of facilities and doctors

There has been a surge of mergers among medical facilities and doctors’ offices. This gives more leverage when negotiating with insurers over reimbursement rates, resulting in higher costs for consumers as providers pass on their increased expenses to patients via higher copays or deductibles on services rendered within their networks. Higher consumer costs can add to financial and emotional stress, affecting workplace environment, productivity, and more.

3. Administrative costs on the rise

Another reason for rising healthcare costs is administrative overhead associated with managing claims processing and billing activities related to patient care services. Insurance companies must pay fees associated with verifying eligibility, processing claims, collecting payments, etc. – all of which add up over time, resulting in them charging higher premiums.

4. Aging population

The US Census Bureau estimates that a whopping 21% of the population in the country will be 65-plus by the year 2030. An aging population substantially impacts healthcare costs due to the rise in chronic – and expensive to manage and treat – illnesses like diabetes, heart disease, and cancer that necessitate ongoing medical care. Moreover, seniors usually need more health care services than those in younger age brackets, thus augmenting the total cost of care.

How can organizations reduce their healthcare costs?

There’s no denying that organizations feel the pinch when providing health care for their employees. As a result, companies of all sizes must figure out ways to reduce their healthcare costs while still providing quality treatment for their teams.

One solution is Advanced Primary Care

What is Advanced Primary Care (APC)? In short, APC is an innovative approach to primary care that focuses on helping organizations manage spend by removing barriers to primary care.

APC provides employers with:

• A patient-centered approach to care 
• Flat fee (PMPM or PEPM) access to onsite or a community-based network of nearsite primary care providers, instead of fee-for-service care delivery 
• Advanced analytics to target the right care at the right time
• Population health management solutions 
• Regular in-depth reporting 

APC keeps employees healthier through a preventive approach to care. It means addressing issues before they become serious or require costly medical interventions. This translates to healthier, happier employees who are more productive and at work more often, while organizations can take advantage of powerful population health management tools and tech-driven analytics that offer unparalleled data. 

All of this translates to less time taken off from work and more satisfied and productive employees. And when employees are healthier, it’s the ultimate win-win, saving bottom-line dollars while decreasing the total cost of care. 

Control your cost of care with Marathon Health

Healthcare costs in the U.S. have been increasing steadily, leaving employers scrambling to find ways to curb their healthcare expenses. Advanced Primary Care from Marathon Health can help organizations reduce overall healthcare costs and guarantee employees have access to best-in-class health care when they need it most. Low overhead costs and a low-risk approach mean APC is quickly becoming popular with employers who want healthier employees who enjoy competitive healthcare benefits, without breaking the bank.