April 21, 2026 Building Sustainable Benefits Amid Rising Healthcare Costs

Manufacturers can tackle rising benefits costs and recruitment challenges with a health reimbursement arrangement (HRA).

By Jack Hooper

American manufacturers are still reeling from this year’s health insurance renewals.

The cost of delivering coverage reached new heights in 2026 — an increase reflected in employers’ group insurance premiums. Many manufacturers are now locked into their group health plans for the year ahead, and they’re running out of ways to mitigate the escalating expense.

Rising healthcare costs come at a challenging time for U.S. manufacturers. With tariffs increasing production costs, many businesses are having to raise prices, reduce other expenses, or accept lower profits. Every option makes it harder for manufacturers to invest in innovation and compete in global markets.

Despite the financial pressures, manufacturers can’t afford to abandon their health benefits strategies. The industry is facing a labor shortage, and an aging workforce means that shortage will only increase. Manufacturers need to offer competitive benefits packages in order to attract a new generation of employees and encourage long-term loyalty.

There’s a better way forward. Manufacturers can tackle rising benefits costs and recruitment challenges with a health reimbursement arrangement (HRA). With an HRA, employers can take control of their benefits budget while empowering employees to make their own healthcare decisions.

Why employers are facing steep insurance renewals 

Insurance companies adjust premiums annually to reflect the total cost of delivering coverage to enrollees. When medical fees and medications get more expensive, so does health insurance. Most employers expect moderate increases to their group health plan and prepare by building flexibility into their budget. But this year’s premium renewal rates are exceptionally high, driven by a combination of economic and political factors.

Enhanced premium tax credits expired at the end of 2025, meaning millions of enrollees must now pay a significantly larger proportion of their ACA health plan premiums. While more people than expected signed up for an ACA plan after the subsidies were cut, enrollment is lower than in 2025. Many existing enrollees kept their coverage but switched to cheaper, less comprehensive plans. Reduced coverage means hospitals are facing higher uncompensated care costs and raising rates for insurers to limit the losses. Insurance companies pass those costs onto customers in the form of higher premiums. 

Inflation impacts every part of the manufacturing process, pushing up the cost of raw materials, energy, and labor. Inflation also affects how much manufacturers pay for employee health benefits, with medical prices typically outpacing growth in the rest of the economy. As coverage becomes more expensive, insurance companies raise premiums to cover expected claims and stay profitable.

Most U.S. manufacturers are small businesses — more than 93% have fewer than 100 employees, and 75% have fewer than 20. Decreased enrollment in small group plans generates higher costs for the rest of the risk pool as insurers spread expected costs across fewer premiums. To make matters worse, some insurers are offering fewer small group plans or exiting the market altogether in favor of more lucrative markets. The result is a limited, more expensive selection of group plans for small manufacturers to choose from.

With so many factors at play, there’s no simple way to stop healthcare costs from rising further. Employers who have been hit hard this year could face even higher renewal rates 12 months from now. To continue offering competitive health benefits, manufacturers need to consider changing their group plan for a sustainable long-term solution.

Building a sustainable benefits strategy with an HRA

Manufacturers can limit the impact of rising healthcare costs with an HRA. The benefits model allows employers to offer employees fixed pre-tax dollars to spend on individual health premiums. Instead of insurance companies dictating renewal rates, employers decide how much to contribute to their employees’ coverage and whether to increase that amount each year. Manufacturers stay in control of their benefits budget even as overall healthcare costs rise.

For manufacturers, switching to an HRA isn’t just about cost control. The flexible benefits solution can also help companies attract the young workers they need to address labor shortages. Gen Z prioritizes employers that support their physical and mental well-being, and they expect a level of personalization that group plans can’t provide. With an HRA, each employee can choose the health plan that meets their medical needs and budget, whether that’s a high-deductible bronze plan or comprehensive platinum coverage.

A typical manufacturing workforce includes everyone from finance managers to production workers. Different roles place different demands on employees’ health, and that makes it difficult to find a group plan that meets everyone’s needs. By empowering employees to make their own healthcare decisions, manufacturers can make sure workers in every role get the right level of care. With an individual coverage HRA (ICHRA), employers can set different reimbursement amounts for full-time, salaried employees and those who work part-time or earn an hourly wage.

For many small manufacturers, offering group health insurance is out of the question. Strict participation requirements, high premiums, and unpredictable renewals make it impossible to get started. With the qualified small employer HRA (QSEHRA), manufacturers with fewer than 50 full-time employees can provide competitive benefits without worrying about participation or spiralling costs. Businesses without a dedicated HR team can work with a QSEHRA administrator to help manage their plan and stay compliant.

U.S. manufacturers face numerous challenges, but health benefits don’t have to be one of them. HRAs turn benefits from a burden into an asset, providing the predictability and flexibility manufacturers need to support employees and build a workforce for the future.

About the Author:
Jack Hooper is the CEO and co-founder of Take Command, a Dallas-based SaaS company that offers health reimbursement arrangement administration. Jack is a founding member of the HRA Council and has served as Chairman of the Board. He is a graduate of the Wharton School of Business and has been featured in The New York Times, BenefitsPro, Dallas Morning News, Bloomberg, and more.

Read more from the author:

What does the presidential election mean for ICHRA and the health insurance market? | STAT News, 9/13/24

Amid health insurance unpredictability, off-exchange plans offer a secret path to stability | Employee Benefit News, 9/11/25

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