Opinion: Hidden inflation: Health insurance’s rising cost

Joe Shearrer

Every year, families adjust to the rising cost of groceries, gasoline, utilities and housing. These are the expenses we see regularly, and they tend to dominate conversations about inflation. But there is another expense that deserves just as much attention, and in many households, it may be one of the biggest financial pressures of all: health insurance.

As a wealth adviser, I spend a lot of time talking with families about their household budgets, long-term financial goals and preparing for retirement. One thing that stands out is how easy it can be to underestimate the impact of healthcare costs. We often focus on investment returns and savings rates, however, the rising cost of health insurance can quietly take a larger bite out of a family’s income each year.

The numbers are worth paying attention to. According to the 2026 Employer Health Benefits Survey published by KFF, the average annual premium for employer-sponsored family health insurance reached $28,303. That represents a 5% increase from the previous year. Workers are now contributing an average of $7,471 annually toward family coverage, a 9% increase in just one year.

For perspective, wages increased 3.7%, while overall inflation was 2.7% over the same period. Look back five years, and the numbers become even more interesting. Family health insurance premiums have increased 28%, compared with 24.4% overall inflation. While those differences may not seem dramatic at first glance, they add up when families are already dealing with higher costs across nearly every category of their household budgets.

And premiums are only part of the story.

The true cost of healthcare is much larger than the monthly premium that comes out of a paycheck. Many families are also facing higher deductibles, copays, prescription costs and out-of-pocket expenses. In other words, they may be paying more every month just to maintain coverage, while still having to spend more when they actually need medical care.

There is also an interesting wrinkle in how inflation is measured. The Bureau of Labor Statistics uses an indirect method to calculate the health insurance component of the Consumer Price Index. Rather than simply tracking changes in insurance premiums, it separates the portion of premiums used to pay medical claims from the portion retained by insurers for administrative costs and other expenses. Medical benefit costs are reflected in other healthcare categories of the index.

This means the headline inflation figure may not always reflect what families experience when they receive their annual insurance renewal or see another increase in their payroll deductions.

This issue becomes particularly important as people approach retirement. Someone leaving the workforce at age 62 may have three years before becoming eligible for Medicare. During that time, they need a plan for covering health insurance premiums and potential out-of-pocket expenses without the benefit of employer-sponsored coverage.

Even after turning 65, healthcare isn’t free. Medicare premiums, supplemental insurance, prescription medications and other medical expenses still need to be included in a retirement budget.

I believe healthcare costs are one of the most overlooked forms of inflation because they are often treated as a separate expense rather than a long-term financial threat. Yet these costs can have a meaningful impact on how much money families have available to save, invest and eventually spend in retirement.

When we talk about preparing for retirement, the conversation shouldn’t stop at how much someone has saved or what rate of return they need to earn. We also need to consider what it will cost to maintain their lifestyle, including the expenses that are often hardest to predict.

After all, a retirement plan isn’t just about having enough money to retire. It’s about having enough money to stay retired.

Joe Shearrer is a vice president and wealth adviser at Fervent Wealth Management LLC in Springfield. He can be reached at joe@ferventwm.com.