As Americans prepare their healthcare budgets for 2026, many are confronting markedly higher health insurance premiums, intensifying the ongoing nationwide struggle with affordability. Key groups including employees with employer-sponsored coverage, beneficiaries of Medicare, and enrollees in ACA exchange plans are all experiencing steeper premium hikes than usual.
Consultants forecast that employer health benefit costs will surge by approximately 9% next year - the largest increase observed in recent years. Employers plan to mitigate some of this impact for their workforce, but the increase remains significant.
Meanwhile, marketplace insurance under the Affordable Care Act, specifically the benchmark plans, is set to see premium growth averaging 26%. This represents one of the sharpest premium escalations since the inception of the ACA over a decade ago. Beyond this base increase, the expiration of enhanced federal subsidies means that actual out-of-pocket payments for enrollees are projected to rise by about 114% on average, as reported by the Kaiser Family Foundation (KFF).
Medicare is not exempt from these rising costs. Part B premiums, which finance outpatient services such as doctor visits and related care, have jumped nearly 10%. This increase is the largest in four years and ranks as the second-largest in dollar terms in the program's history. The monthly standard premium for Part B now stands at $202.90, an increase of $17.90 compared to the previous year, according to the Centers for Medicare and Medicaid Services.
The premium surge occurs amid heightened scrutiny from policymakers. President Donald Trump has announced plans to engage healthcare industry leaders to advocate for lower premiums. Separately, congressional hearings have challenged the leadership of major insurers to justify their escalating costs despite their expansive footprints that integrate providers, pharmacy benefit managers, pharmacies, and other related healthcare services.
Legislators from both parties questioned insurers on their ability to better control costs given their substantial vertical integration. Additionally, insurance executives were rebuked for practices believed to manipulate profits by delaying or denying coverage recommended by physicians. Insurers defended their conduct by citing improved care coordination and the legal requirement to allocate at least 80% of premium income toward medical claims. They also noted reforms underway aimed at streamlining prior authorization processes to accelerate care approvals.
Nonetheless, incentives to constrain costs may be diluted, particularly among larger employers who self-fund healthcare claims but outsource plan administration. Health economist Vivian Ho from Rice University explained that such arrangements reduce the pressure on insurers to negotiate aggressively since they do not bear the full financial burden of price increases.
Factors Driving Increased Healthcare Utilization
A prominent shared driver across these insurance segments is heightened healthcare utilization. Americans are visiting doctors more frequently and receiving more intensive treatments. This trend partly reflects deferred care during the Covid-19 pandemic, which has resulted in the detection of more advanced disease stages in many cases. For example, usage of mental health services has expanded following intensified employer focus on behavioral health benefits. Mercer’s research on employer-sponsored plans showed that 10.1% of plan members had a behavioral health office visit in the second quarter of 2025, rising from 7.1% in the same quarter of 2019.
In addition, the proliferation of medical clinics, telehealth services, and various providers such as physician assistants has lowered barriers to access care, contributing further to increased utilization. Sunit Patel, Mercer’s U.S. chief actuary for health and benefits, linked these elements to the observed rise in healthcare consumption.
Growing Prevalence of Chronic Diseases
Another substantive pressure on insurance premiums stems from an increase in chronic illnesses among Americans. Hans Leida, principal at Milliman focusing on healthcare, highlighted conditions such as obesity, diabetes, cardiovascular and pulmonary diseases, cancer, and Alzheimer’s disease as particularly impactful. Data from 2023 indicated that over 75% of American adults had at least one chronic condition, and more than 50% were living with multiple chronic ailments, as published in the CDC journal Preventing Chronic Disease.
The period from 2013 to 2023 saw rising obesity and depression rates among young adults, while middle-aged adults experienced upward trends in diabetes, chronic kidney disease, and stroke incidence. Chronic kidney disease also became increasingly prevalent in senior populations during this timeframe. Leida observed these trends as indicative of an overall decline in population health status.
Conditions driving employer healthcare spending include cancer, musculoskeletal disorders, and heart disease, according to findings from the Business Group on Health. Early onset of cancers in younger workers and diagnoses made at more advanced stages are further complicating the cost landscape.
Hospital Consolidation and Its Pricing Effects
Rising hospital prices significantly contribute to premium increases. Like insurers, hospitals have engaged in extensive mergers and have acquired outpatient facilities, physician practices, and laboratories, resulting in consolidated market power. By 2023, nearly half of U.S. metropolitan areas had inpatient care largely controlled by just one or two health systems. Moreover, more than half of physicians were employed by hospitals in 2024.
Research, including a 2022 RAND study, confirms that such consolidation typically elevates prices, particularly when hospitals absorb physician practices. These newly integrated entities often add facility fees or other charges to outpatient visits, increasing overall costs.
Health systems also leverage their size by demanding insurers include all their hospitals within a network or exclude them entirely, even across various regions, creating challenges for insurers and employers aiming to offer broad networks. Larry Levitt from KFF described this dynamic as large employers and insurers being held hostage by dominant hospital systems.
The American Hospital Association, in response to inquiries, emphasized that insurance market consolidation is also a factor leading to higher premiums and cost shifting, underscoring complexities in the healthcare ecosystem.
Escalating Pharmacy Costs Impacting Premiums
Pharmaceutical expenses are another critical component driving premium growth. Particularly noteworthy are the blockbuster medications targeting obesity and diabetes, such as GLP-1 receptor agonists, which experienced rapid uptake among employers. Coverage for obesity drugs among very large firms rose from 28% in 2024 to 43% in 2025, according to KFF's Employer Health Benefits Survey. Concurrently, around 60% of these firms reported higher usage than anticipated, with two-thirds characterizing the drugs’ impact on prescription spending as significant.
ACA insurers have identified obesity medications as one factor elevating 2026 premiums. Notably, Blue Cross Blue Shield of Massachusetts announced plans to discontinue coverage for weight-loss medications starting in 2026, projecting a related 3% premium reduction.
Other costly medications, including cancer therapies and advanced gene treatments, further contribute to rising costs. Increased spending on physician-administered drugs, such as chemotherapy, plays a notable role in the growth of Medicare Part B expenses, alongside outpatient hospital care.
In response to concerns, the pharmaceutical trade group PhRMA argued that insurers unfairly shift premium pressures onto drug costs, pointing to data indicating that hospital care costs are rising at rates exceeding those of retail pharmaceuticals.
Conclusion
The landscape of health insurance premiums in 2026 is shaped by a convergence of demand-side factors—greater healthcare utilization, an aging and increasingly chronically ill population—and supply-side dynamics including extensive provider consolidation and surge in expensive pharmaceuticals. Each insurance market segment faces specific nuances, but the common trajectory is toward substantially higher costs for consumers and employers alike, further complicating the challenges of healthcare affordability.