Health insurance costs are poised to continue their upward trajectory in 2026, adding financial strain to families and employers alike. Experts point to a complex interplay of factors, including rising prescription drug prices, increased healthcare utilization following a period of deferred care during the COVID-19 pandemic and a growing concentration of power within the health insurance market itself.
The average cost of family health insurance through an employer has already seen significant increases. According to a recent KFF survey, the average annual premium for family coverage reached , $25,572, a 7% jump from the previous year. This marks the second consecutive year of a 7% increase, a notable acceleration after a decade of more modest gains. Individual plans also saw a 6% increase, reaching an average of $8,951 annually.
These rising costs are outpacing wage growth and overall inflation. The KFF survey found that health insurance costs rose at a higher rate than the 4.5% increase in workers’ wages and the 3.2% jump in inflation. This disparity places a heavier burden on both employers and employees, with many families already struggling to afford essential expenses.
Market Concentration and its Impact
A key driver of these escalating costs may be the increasing consolidation within the health insurance industry. As fewer companies control a larger share of the market, competition diminishes, potentially leading to higher premiums. A recent report from the Government Accountability Office (GAO) highlights this trend, noting that market concentration is growing in many areas. This lack of competition can reduce the incentive for insurers to offer lower prices or innovative plans.
The Role of Prescription Drugs
Prescription drug costs continue to be a major contributor to overall healthcare spending. Pricey medications, particularly specialty drugs for conditions like cancer and rare diseases, are significantly impacting insurance premiums. While specific figures weren’t provided in the source material, it is noted that drug costs for cancer and rare diseases are increasing by an average of 10% per year, with new drug costs rising even faster, at an average of 13% annually.
The emergence of expensive new treatments, such as weight-loss drugs like Wegovy, is also playing a role. These medications, while potentially beneficial for patients, come with a substantial price tag that is being passed on to insurers and to consumers.
Rebound in Healthcare Utilization
Another factor contributing to rising costs is the rebound in healthcare utilization. During the COVID-19 pandemic, many people postponed routine checkups and elective procedures. As restrictions have eased, there has been a surge in demand for healthcare services, leading to increased spending. According to Matthew Rae, associate director of KFF’s health care marketplace project, people are now “rebounded to normal levels” of healthcare access, contributing to the overall cost increases.
Looking Ahead: Anticipating and Managing Costs
The Segal 2026 Health Plan Cost Trend Survey offers insights for plan sponsors looking to anticipate and manage rising medical and pharmacy costs. The survey findings reveal projected cost trends for both medical and prescription drug plans, providing data on key cost drivers like specialty drugs. PwC is also actively working to help providers, payers, pharma companies, and employers determine medical cost trends and the factors influencing spending in .
While the outlook for health insurance costs remains challenging, understanding the underlying drivers is crucial for both employers and individuals. Employers are likely to continue seeking strategies to control costs, such as negotiating with insurers, implementing wellness programs, and exploring alternative plan designs. Individuals can also take steps to manage their healthcare spending, such as utilizing preventative care services, comparing prices for medications, and understanding their insurance coverage.
The increasing cost of health insurance is a complex issue with no easy solutions. Addressing this challenge will require a multi-faceted approach involving policymakers, insurers, healthcare providers, and individuals working together to create a more sustainable and affordable healthcare system.
