Workforce Trends Raising Employer Health Plan Costs

Hospitals and clinics continue to face staffing gaps, burnout, and elevated labor costs in 2026. These operational pressures are increasingly reflected in employer-sponsored health plans. When facilities don’t have enough clinical staff, appointment wait times grow longer. Insufficient clinical staffing contributes to longer appointment wait times, and when employees are unable to access timely primary or specialty care, utilization shifts toward higher-cost settings, such as emergency departments (EDs) and hospital outpatient departments (HOPDs). This migration to more expensive sites of care ultimately drives higher costs for employers.

According to the American Hospital Association’s Cost of Caring report, labor expenses now account for more than half of total hospital operating costs—a trend that directly affects employer health plans through:

• Higher unit costs for inpatient, outpatient, and professional services as providers work to cover higher wages, contract labor, and overtime
• Episodes that cost more when routine conditions that could be handled in an office visit end up in ED or HOPD settings
• Access challenges that discourage employees and contribute to delays in care and repeat visits when workers must wait longer for primary, behavioral health, or specialty appointments.

Why today’s workforce pressures raise health plan costs

Even as patient volumes stabilize, hospitals are still working through staffing shortages and burnout, both of which directly affect what employers pay for health care.

Higher labor costs mean higher provider rates

Labor is the biggest line item in most health‑system budgets, and when wages rise or staffing gaps persist, providers look to commercial plans to help close the gap. As a result, higher wage bills often show up in the form of higher contracted rates for inpatient, outpatient, and professional services.

At the same time, contract labor and overtime spending, while lower than the pandemic peak, remain higher than before 2020 in many markets. Some systems have reduced clinic hours, paused certain services, or even closed beds, which concentrates patient volume into fewer sites that typically come with higher contracted rates.

Burnout and vacancies increase reliance on premium staffing

When hospitals can’t fill permanent roles, they turn to overtime, per‑diem, and locum tenens coverage. Those staffing approaches carry significantly higher hourly costs, raising the overall cost of delivering care and, ultimately, plan claims. Burnout also drives turnover, further elevating reliance on temporary staff. Gaps in staffing can reduce continuity of care, increasing the likelihood of complications, readmissions, or unmanaged chronic conditions that raise downstream spending.

Bottlenecks push more care into high‑cost sites

When employees can’t get timely primary or specialty appointments, more care spills into costly ED or HOPD settings. These bottlenecks also discourage employees and can mean more time away from work.

Behavioral health demand is amplifying the impact

Demand for mental health services remains high, and these visits require timely access to prevent issues from escalating. In a strained workforce, delays are common, and when needs intensify, care often shifts to higher‑acuity, higher‑cost settings, such as urgent psychiatric visits or inpatient stays.

How these pressures show up in health plans

Employers see the impact of workforce strain well before renewals. Here’s where it can show up:

• Higher allowed amounts – Higher labor and staffing costs get built into contracted prices, pushing allowed amounts higher across inpatient, outpatient, and professional services.

• Increased episode costs rise – When employees can’t get timely appointments, routine issues worsen and migrate to higher acuity settings, increasing the cost per episode and reducing opportunities for early, lower‑cost treatment.
• Higher per member per month (PMPM) spending – Longer wait times can turn manageable behavioral health needs into urgent or high‑acuity episodes, increasing PMPM spending and complexity across the plan population. National CDC data show that in 2026, 5,023 out of every 100,000 ED visits are related to mental health crises.
• Elevated costs for imaging and procedures – Limited capacity at lower‑cost ambulatory sites shifts more procedures like MRIs and colonoscopies to hospital settings, elevating outpatient facility spend.
• Rising facility claims – Facility claims typically rise faster than professional or ancillary services, causing facility trend to drive overall medical trend.

What our data shows

The Baldwin Group’s client data makes the drivers of current medical trend clear and closely aligned with national patterns.

Medical trend drivers

Variance by care service category — Per 1,000 members vs. PMPM

What employers can do

By working together with knowledgeable benefits advisors, employers can take steps to mitigate workforce impacts on their benefits costs. Advisors at The Baldwin group recommend these considerations:

Expand virtual and hybrid care

• Use virtual‑first primary care to add capacity, shorten wait times, and divert non‑urgent issues away from ED/HOPD settings
• Lean on digital access points, including behavioral health, to meet rising demand
• Make sure virtual care connects to local networks for referrals, shared records, and in‑network follow‑up
• Consider hybrid models that blend virtual primary care with onsite or near‑site clinics to expand access

Strengthen navigation so employees go to the right place first

• Use navigation tools and guided scheduling to steer employees toward in‑network, lower‑cost options
• Reduce reliance on self‑navigation through nurse triage lines and concierge teams that can book appointments directly
• Use targeted outreach to high ED users with education and pre‑booked care visits

Make primary care easier to use

• Expand next‑day/after‑hours access and offer longer new‑patient slots to reduce delays that push care into costlier settings
• Consider reduced or zero cost‑share for high‑value primary care and preventive visits to remove financial barriers
• Support models that use panel management and team‑based care to stretch limited clinician capacity

Steer employees to lower‑cost sites of care

• Use benefit tiers and prior‑authorization pathways in plan designs that favor lower‑cost, high‑value settings
• Review provider cost and quality data to identify preferred facilities
• Provide easy-to-use tools that highlight cost differences and allow easy booking

Measure what matters

• Track access and utilization, such as average days to the next available primary care physician, specialist, or behavioral health (BH) appointment; ED visits per 1,000 and the % that are low‑acuity/avoidable; and virtual‑visit share for primary care and BH
• Monitor cost and site‑of‑care indicators like allowed‑amount trend by category (e.g., inpatient, outpatient, professional, BH), the ambulatory surgery center (ASC) vs. hospital outpatient share for shoppable procedures, and per‑episode costs for common conditions like back pain, migraines, minor injuries, across different settings
• Track quality and outcomes including readmission rates, follow‑up after BH‑related ED, and adherence to chronic‑care guidelines
• Tie vendor guarantees and fees to results and sunset programs that are not cost effective

Let The Baldwin Group guide you

As labor shortages, burnout, and access delays continue to push costs higher, employers need a mix of innovation, expertise, transparency, specialization, and high‑touch support to help control trend and improve access to care. Experienced advisors at The Baldwin Group can help:

• Analyze market intelligence and data to quantify how labor and access pressures show up in claims, and benchmark results against peer employers to pinpoint where interventions can have the greatest impact
• Provide clinical and network strategies by evaluating and negotiating virtual, hybrid, and center‑of‑excellence solutions that expand capacity and relieve local constraints
• Curate vendors and hold them accountable by vetting navigation, virtual care, and behavioral‑health partners, and tying fees to measurable outcomes, such as ED diversion, time‑to‑appointment, ASC‑shift percentage, and BH access
• Implement ongoing stewardship with clear performance reviews and actionable course corrections

Let’s work together to turn today’s workforce pressures into smarter benefits strategies.