Health Insurance Costs Set to Surge in 2026, Perhaps Limiting Coverage
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Pricey prescriptions and rising medical costs are putting a strain on insurers and employers, and patients may soon feel the impact. Health insurance is projected to become more expensive in many markets in 2026, with potential reductions in coverage. This could translate to higher out-of-pocket expenses for doctor visits and changes to prescription drug benefits.
The anticipated increases are especially concerning in individual coverage marketplaces, where insurers are bracing for the potential end of federal subsidies that currently help people afford coverage. “We’re in a period of uncertainty in every health insurance market right now, which is something we haven’t seen in a very long time,” notes Larry Levitt, an executive vice president at KFF, a non-profit health care research organization.
What’s Driving Up Costs?
Insurers are reporting a confluence of factors contributing to rising costs:
Increased Utilization: More people are seeking care, leading to higher claim volumes. Emergency Room Visits: A surge in expensive emergency room visits is driving up costs.
Mental Health Claims: Claims related to mental health treatments are also on the rise.
Adverse Selection: A decline in enrollment from healthier individuals in the individual market is leaving a higher proportion of sicker patients, who generate more claims.
COVID-19 Era Adjustments: A crackdown on fraud and stricter eligibility verification following the easing of requirements during the COVID-19 pandemic are impacting coverage rates.
Expensive Medications: prescription drugs, particularly popular and costly treatments for diabetes and obesity (GLP-1 drugs like Ozempic, Mounjaro, wegovy, and Zepbound), are a major concern.
* Gene Therapies & Cancer Treatments: New, high-cost gene therapies – some exceeding $2 million for a single treatment – and advanced cancer treatments are significantly impacting overall costs. Sun Life Financial, for example, covered 47 claims exceeding $3 million last year, a dramatic increase from a decade ago.
“Pharmacy just gives me a headache, no pun intended,” says Vinnie Daboul, a managing director at RT Consulting.
Marketplace Challenges & Employer Responses
KFF analysis of state regulatory filings indicates insurers are proposing premium increases around 20% in the Affordable Care Act’s individual marketplaces for 2026. However, this figure could be significantly higher if enhanced tax credits expire at the end of the year, potentially increasing consumer costs by 75% or more.
Business owners like Shirley Modlin, who reimburse employees for marketplace coverage, are worried about the impact. “My employee may not want to go to work for a large corporation,but when they consider how they have to pay their bills,sometimes they have to make sacrifices,” she explains.
Employers offering coverage are also facing rising costs. While they typically absorb the majority of premium increases, Mercer reports that about half of large employers are considering shifting more costs to employees through higher deductibles or increased out-of-pocket maximums. Changes to drug coverage are also a possibility.
Healthcare Costs Expected to Rise Significantly in 2026
Healthcare costs are poised for substantial increases in 2026, impacting individuals and employers alike, according to recent analyses and industry experts. A key driver of thes rising costs is a new class of expensive drugs, particularly those for obesity and diabetes, alongside broader trends in medical expenses.
Medical Cost Growth Accelerating
“It’s adding to medical (cost growth) in a way that we haven’t seen in the past,” stated Jeff Collier, a consultant with the benefits firm Mercer, highlighting the unprecedented impact of these new medical expenses.
The most immediate impact will be felt by those purchasing coverage through the Affordable Care Act (ACA) marketplaces. Insurers are planning to raise premiums by approximately 20% in 2026,based on an analysis of state regulatory filings by the Kaiser Family foundation (KFF). https://www.kff.org/health-policy/health-insurance-marketplace/
However, this figure could be significantly understated. The enhanced tax credits currently helping millions afford marketplace coverage are set to expire at the end of 2025 unless Congress acts to extend them. If these credits lapse, KFF estimates that consumer costs could increase by 75% or more. https://www.kff.org/health-policy/issue-brief/key-facts-about-health-insurance-subsidies/
This potential price surge is causing concern for individuals and small business owners. Shirley Modlin, owner of 3D Design and Manufacturing in Powhatan, virginia, currently reimburses her roughly 20 employees $350 per month towards their marketplace coverage. She fears further premium increases could force her employees to seek jobs with more comprehensive benefits packages. “My employee may not want to go to work for a large corporation, but when they consider how they have to pay their bills, sometimes they have to make sacrifices,” Modlin said.
Employer-Sponsored Plans Also Facing Pressure
While employees in employer-sponsored plans are typically shielded from the full brunt of premium increases due to employer contributions, they may still experience changes. Mercer’s survey of large employers revealed that about half are considering shifting more costs to employees through higher deductibles or increased cost-sharing. https://www.mercer.com/ This means employees may have to pay more out-of-pocket before their coverage kicks in.
Prescription Drug Costs Driving Changes
A major factor in rising healthcare costs is the price of prescription drugs,particularly new medications for conditions like obesity and diabetes. To manage these costs, health plans may implement strategies such as:
Caps on Obesity Treatments: Limiting coverage or imposing caps on expensive weight-loss drugs.
Utilization Management: Restricting access to certain medications based on criteria. Separate Deductibles: Implementing separate deductibles for pharmacy and medical benefits.
Increased Copays: Requiring patients to pay a larger share of the cost of their prescriptions.
Daboul, a benefits consultant, noted these potential changes.
Emily Bremer, president of The Bremer Group, a St. Louis-based autonomous insurance agency, believes employers are hesitant to drastically cut benefits.https://thebremergroup.com/ However, she warns that important changes may become unavoidable if pharmaceutical costs continue to escalate. “If something doesn’t give with pharmacy costs, it’s going to be coming sooner than we’d like to think,” Bremer said.