How Trump’s Tariffs Could Increase Health Insurance premiums

Small businesses may expect that the recent tariffs levied by President trump will drive up the price of multiple imported goods from various countries. but less expected is how these trade policies may ripple through employee health benefits.Most recently, President Trump indicated that the administration will phase in tariffs on pharmaceutical imports-starting with a “small tariff,” climbing to 150% within roughly 12 to 18 months, and eventually rising to as much as 250%-as part of an effort to bring drug manufacturing back to the U.S.

Tariffs can indirectly affect health insurance premiums by increasing the cost of imported medical goods, especially prescription drugs. When pricing plans, insurers must make assumptions about future medical costs, often months in advance. In the absence of clear policy guidance, some insurers take a cautious approach by incorporating potential cost increases into their proposed rates for the upcoming plan year. Rather than waiting for final decisions, some carriers preemptively accounted for these risks to avoid underpricing.This can be particularly true when the affected drugs are brand-name or specialty medications with limited alternatives, many of which are imported. By building in assumptions about possible cost increases, tariffs can influence premiums even before any measurable price change has occurred, particularly in markets where insurers may already operate on tighter margins.

The share of total health claims attributable to pharmaceuticals varies by market segment but generally makes up between one-sixth and one-fifth of total claims after adjusting for pharmaceutical rebates.

Pharmaceuticals comprise a slightly larger share of total health care claims in the small group market compared to the individual and large group markets.In the small group market, pharmaceuticals account for just under one-fifth of all claims (19.2%), while the share is slightly lower in the individual (18.2%) and large group (17.9%) markets.

Health insurance companies must submit their proposed premium changes for the coming year to state regulators in the spring and summer. As part of this process, some insurers in the Affordable Care Act (ACA)-compliant guaranteed-issue small group market – just as in the individual market – are explicitly citing tariffs, particularly those affecting pharmaceuticals.