Health Insurance Costs 2026: Prepare for Steep Increases

Health insurance costs are projected to rise dramatically in 2026, with both individual marketplace plans and employer-sponsored coverage facing some of the largest rate hikes in recent years. According to a series of reports and insurer filings analyzed by KFF, HUB International, and other policy experts, the U.S. is facing a perfect storm of rising medical costs, the expiration of enhanced federal subsidies, and structural market challenges.  

The analysis of these factors point to one conclusion: employers can expect healthcare costs to rise sharply in 2026 and should begin planning now for how to manage the impact. 

Scope of 2026 Premium Increases  

Across the country, insurers are proposing median premium increases of 11% for small business plans and 18% for Affordable Care Act (ACA) marketplace plans, the steepest hikes since 2018 when measured in percentages. Some states, including Arkansas, Illinois, Indiana, and Washington, have already finalized sharp premium increases of more than 20%. These rate filings are publicly available and include data from other regions throughout the U.S. 

For employers, HUB International projects that medical and prescription drug expenses will rise 8.42% in 2026, translating to an additional $1,300 per employee per year. That equates to a mid-sized employer with 200 employees facing an additional $260,000 in costs, while a 500-person company could see more than $630,000 in added healthcare spending. 

On the individual side, some consumers could see premiums more than double if federal policymakers in Congress fail to extend enhanced premium tax credits enacted during the pandemic. According to KFF, a 60-year-old couple earning $85,000 (just over 400% of the federal poverty level) would face an average increase of $22,600 per year for coverage. 

Why Costs Are Rising  

The forces behind 2026’s projected increases are multifaceted: rising medical costs, regulatory shifts, and evolving consumer demand all play a role. Additionally, external economic pressures and legislative uncertainty may further impact pricing trends.  

Although many projections are based on assumed scenarios regarding future policy changes and market behavior (which introduces a degree of uncertainty into premium estimates), there are five primary reasons for why the steep increase: rising health care costs, prescription drug spending, labor shortages and inflation, market volatility, and federal policy changes. 

1. Rising Health Care Costs 

Insurers expect medical expenses to climb 7–9% in 2026, with cost increases in hospital and provider fees contributing significantly. The main drivers behind these increases include higher hospital and provider fees, ongoing inflation, increased demand for services, and costly new technologies.  

In some regions or provider contracts, large increases in costs are primarily due to inflation and provider consolidation. 

2. Prescription Drug Spending 

Specialty medications, particularly GLP-1 drugs like Ozempic and Wegovy for diabetes and weight loss, are fueling dramatic increases in pharmacy costs. Costs for certain specialty drugs have risen significantly each quarter in recent years, and employers may face higher utilization and pressure to cover these widely demanded drugs. 

3. Labor Shortages and Inflation 

Persistent staffing shortages in the healthcare sector continue to push provider wages higher, which get passed along in insurer negotiations.  

4. Market Volatility in Small Group Coverage 

Fewer small businesses are purchasing group health insurance. Those that do often represent higher-risk populations, raising average claims costs.  

5. Federal Policy Changes 

The expiration of enhanced ACA premium tax credits at the end of 2025 is expected to worsen risk pools. Healthier individuals may drop coverage when subsidies disappear, leaving insurers with sicker, costlier enrollees. 

Administrative policies that add paperwork and reduce streamlined renewals could also depress enrollment among healthier populations, further driving rates upward. These changes may make it harder for eligible individuals to enroll in coverage during open enrollment or after qualifying for Medicaid or CHIP. 

The Role of Enhanced Premium Tax Credits  

A key element of affordability hangs in the balance: enhanced premium tax credits. Originally introduced in the American Rescue Plan Act (2021) and later extended by the Inflation Reduction Act, these credits significantly reduced out-of-pocket costs for millions of Americans. Changes in the form or calculation of these subsidies can significantly impact affordability for enrollees. 

Without congressional action, these subsidies will expire at the end of 2025. If that happens, premiums for ACA subsidized enrollees would spike by an average of 114% in 2026, with some groups facing increases of more than 400%. Middle-income households earning just above subsidy thresholds (about $63,000 for an individual or $107,000 for a family of three) would lose eligibility for assistance entirely. 

Older Americans stand to be the hardest hit, with many expected to see their premiums more than double. For example, a 60-year-old individual earning $50,000 could see their monthly premium increase from $400 to over $900, which is over $10,000/year for coverage if the enhanced premium tax credits expire. 

While the federal government could intervene to extend these subsidies, political negotiations with Congress and the Senate remain uncertain. Employers should prepare for the likelihood that higher costs will drive more uninsured individuals into emergency care, potentially raising overall system costs and indirectly impacting employer plans. 

Regulatory Environment: Navigating New Rules and Compliance 

The regulatory landscape for the Affordable Care Act (ACA) Marketplace is rapidly evolving, and 2026 will bring a host of new rules and compliance challenges that directly impact premium increases, financial assistance, and overall affordability for millions of Americans. 

There have also been federal policy changes to the ACA Marketplace Integrity and Affordability rule that have contributed to volatility in the individual market. This log of changes has made it more challenging for some consumers to maintain coverage and for insurers to accurately price plans, which has fueled premium increases. 

What Is Being Done to Help Consumers Offset Healthcare Cost Challenges 

To help offset some of these challenges, the Centers for Medicare & Medicaid Services (CMS) is expanding access to catastrophic health insurance plans on the Federally Facilitated Exchange (FFE) for the 2026 plan year. This move is designed to provide consumers, especially those who do not qualify for premium tax credits or cost sharing reductions, with a more affordable coverage option, even as standard plan premiums rise. 

Open enrollment will also see changes, with CMS introducing streamlined application processes for hardship exemptions and providing updated guidance on eligibility for Medicaid services and other coverage options. Consumers should expect to see adjustments in plan prices and services as insurers adapt to the new regulatory environment and account for the expiration of enhanced tax credits. 

What Consumers Should Do to Minimize Healthcare Increases 

Regardless of whether your healthcare insurance is provided by your employer or purchased through the Marketplace, it's more important than ever to be a smart healthcare consumer. That includes everyday practices such as: 

• For applicable services, choose telehealth services over an in-person doctor's visit.  
• If your medical needs are not an emergency but cannot be met by telehealth, go to your doctor rather than Instacare; save the emergency room for true emergencies like life- or limb-threatening medical problems. 
• Choose generic drugs over name brands. 
• Use in-network providers. 

For those seeking financial assistance, understand the income and eligibility requirements. ACA Marketplace enrollees who qualify for premium tax credits or cost sharing reductions will need to apply during the open enrollment period, typically held from November to December. 

Workforce Impact: Why Rising Costs Matter Beyond the Bottom Line  

Employer-sponsored health plans may see an increase in deductibles and out-of-pocket maximums and/or a shift in sharing more of the cost burden with employees to mitigate cost increases. However, for many employees, higher contributions and out-of-pocket maximums will feel like a pay cut, risking lower morale, absenteeism, and turnover. 

When healthcare becomes more expensive, there's a ripple effect where employees often delay or avoid care. When this occurs: 

• Chronic conditions worsen, leading to higher long-term costs.  
• Mental health support gaps contribute to absenteeism and productivity loss.  
• Retention risks increase as employees view shrinking benefits as a decline in total compensation.  

Clear communication about benefit changes, educating employees on how to be a smart healthcare consumer, and providing access to preventive care and value-based options can help mitigate these risks.  

Employer Strategies to Manage Rising Healthcare Costs  

Employers are not powerless in the face of rising premiums. A combination of financial strategies, benefits design changes, and workforce communication can help manage costs while maintaining employee trust.  

Finance Priorities  

• Build predictive models to manage cash flow volatility.  
• Explore alternative funding models, such as self-funded or level-funded plans.  
• Reassess pharmacy benefit manager contracts for transparency and cost savings.  
• Use utilization management for high-cost medications.  
• Consider outsourcing to a Professional Employer Organization like Stratus HR access large-group pricing and more competitive benefits.  

HR Priorities  

• Consult with broker for benefits design changes, aiming for those with minimal negative impact on employees. 
• Communicate early and clearly about plan changes.  
• Provide employees with decision-support tools and healthcare transparency platforms.  
• Expand coverage and support for chronic conditions and mental health to reduce long-term costs.  
• Offer wellness programs and telehealth options to improve access.  
• Educate employees on how to be a smart healthcare consumer. 

Joint Strategies  

• Develop a multi-year cost-containment roadmap aligned with workforce goals.  
• Coordinate pharmacy benefit manager, broker, and vendor partnerships to maximize negotiating power.  
• Leverage claims data to identify top cost drivers and implement targeted interventions.  

Key Employer Takeaways  

In a climate where healthcare affordability is under intense pressure, proactive planning is not just a financial necessity, it’s a strategic imperative. Although rising healthcare costs are not a new story, the scale of 2026’s projected increases is unprecedented in recent years. As a recap, here is what employers should know: 

• Prepare for double-digit premium hikes. Both employer-sponsored and ACA marketplace plans are bracing for steep increases in 2026.  
• Watch federal policy closely. The expiration of enhanced premium tax credits will have cascading effects on affordability, coverage, and risk pools.  
• Expect employee pushback. Higher contributions and deductibles may erode employee trust and retention if not managed carefully.  
• Act now on cost-control strategies. Review pharmacy contracts, explore different funding options, and communicate proactively with employees.  

Companies that do not currently outsource to a Professional Employer Organization (PEO) may want to consider doing so for cost relief. By pooling employees across multiple companies, even small and midsize employers access economies of scale. For more information, book a free consultation and our team will contact you shortly.  

Sources:
cnbc.com
commonwealthfund.org
newsweek.com
hrmorning.com