PwC’s latest annual analysis forecasts that group health insurance costs will increase by 8.5% in 2026—the third straight year at this elevated trend. This sustained rise means health care expenses are now similar to those seen 15 years ago, after a brief dip post-pandemic.
Researchers gathered data from actuaries at 24 major U.S. health plans, covering more than 125 million employer-sponsored members and 12 million ACA marketplace members. The “medical cost trend” refers to the expected annual increase in health plan spending.
Key factors driving this growth include:
- Hospital expenses: Wages for healthcare workers, supply prices, and rising operational costs all contribute. Many hospitals are intensifying revenue cycle management activities, increasing inpatient admissions, and pushing more costs onto commercial health plans.
- Prescription drugs: Spending is up, notably driven by new therapeutics such as GLP-1 medications for chronic illnesses and rare genetic conditions. Drug spending soared by $50billion in 2024, with GLP-1s poised for further approvals.
- Behavioral health services: Inpatient behavioral health claims jumped nearly 80%, and outpatient claims rose almost 40%. One in three actuarial leaders cited behavioral health as a top driver of rising costs, projecting a 10%-20% trend for this segment in 2026.
Offsetting factors, though limited in impact, include:
- Biosimilars: For the third straight year, biosimilar drugs are cited as a leading cost deflator. Their adoption continues to grow and may help moderate spending.
- Care management: Health plans are finding success with cost management strategies, such as utilization management, pharmacy oversight, and AI-powered claims review—tools that could dampen the medical cost trend.
The report also highlights upcoming federal policy changes, like the One Big Beautiful Bill (OBBB) Act, which may bring more cost pressure through adjustments to Medicaid eligibility, lapsing ACA subsidies, and proposed tariffs on imported pharmaceuticals.
Ultimately, industry analysts anticipate medical costs will keep climbing into 2026 and likely beyond, forcing employers to pursue affordability strategies while managing the growing burden of health coverage costs.