Health insurance premiums set to rise 8.5% in 2026 due to pricey new drugs

Health insurance premiums are poised to rise quickly due to more Americans using pricey new drugs for weight loss and cognitive disorders, industry insiders say. Here’s what you need to know about the factors driving premium increases and the impact on American health care costs:

Premium increase projections

PwC predicts fastest growth since 2012:

• Global accounting firm PricewaterhouseCoopers International Limited predicts that cost of health insurance provided by private employers will jump by 8.5% in 2026, same rate as this year
• That’s fastest increase since 2012, when PwC found costs for employer-sponsored health care market rose by 8.5% two years after Affordable Care Act became law and began lowering prices
• PwC officials tracked annual price increases of 9% to 12% from 2007 to 2010, which they said helped push ACA through Congress
• Annual increases then slowed gradually to 5.5% in 2017

Pharmaceutical price drivers

High-cost drugs entering market causing increases:

• “Pharmaceutical prices are main reason for higher costs, primarily because number of very high-cost drugs have entered market recently,” Gerard Anderson, health policy and management professor at Johns Hopkins University, told Washington Times
• Last year, Food and Drug Administration approved 50 high-cost treatments for common medical conditions, adding to post-pandemic surge in pharmaceutical spending on ailments ranging from obesity to mental health
• Examples of drugs approved last year under Biden administration include Kisunla — Alzheimer’s disease treatment with manufacturer’s price of $32,000 year, or $695.95 per vial — and Cobenfy, anti-schizophrenia pill that costs $1,850 for 30-day supply
• Mr. Anderson said health insurance companies typically pass on cost increases in form of increased monthly premiums year after such drugs hit market

Key cost factors

Multiple drivers contributing to premium increases:

• PwC blames latest increases on rising hospital expenses, growing demand for diabetes and weight loss medications, and 45% increase in behavioral health service claims from January 2023 to December 2024
• “Compared to year or two ago, we’ve moved from pandemic-related rebound effects to more sustained, structural cost drivers,” said Phil Sclafani, New York-based partner in PwC’s Pharmaceutical & Life Sciences practice
• “The return of in-person care, combined with persistent inflation and strong demand for new treatments, is now firmly embedded in system”

Obamacare marketplace impacts

Tax credit expiration threatens major increases:

• California Democrats say Republican-controlled Congress’ refusal to extend pandemic-era Obamacare tax credits will drive up monthly medical bills for their state’s Obamacare marketplace by 97% in January unless something changes
• “California has led nation in expanding access to affordable health care, but Donald Trump is ripping it away,” Gov. Gavin Newsom, Democrat, said in Oct. 2 statement, referring to so-called One Big Beautiful Bill excluding tax credit
• White House pushed back on claim in email, noting that Democrats twice failed to extend tax credits when they controlled Congress during Biden administration
• “They chose not to,” White House spokesman Kush Desai said Tuesday. “Now Democrats have shut down our government to die on hill of pushing free health care for illegal immigrants”

KFF analysis on premium increases

Independent think tank projects significant marketplace impacts:

• KFF, independent health policy think tank formerly known as Kaiser Family Foundation, reported last month that cutting tax credit would spark median increase of 18% in monthly premiums at nation’s 312 Obamacare providers next year
• That’s up from 7% annual increase last year
• “The expiration of enhanced tax credits will lead to out-of-pocket premiums for ACA marketplace enrollees increasing by average of more than 75%, with insurers expecting healthier enrollees to drop coverage,” KFF said

Mental health treatment costs

Post-pandemic surge in behavioral health claims:

• Medical industry insiders still insist that most of increase stems from rising drug prices and increased mental health problems since pandemic
• “Therapists are full with waiting lists, costs are high with or without insurance,” said Thomas Plante, clinical psychologist and member of American Medical Association
• Mr. Plante, professor at private Santa Clara University in Northern California, said hour of psychotherapy with outpatient therapist now costs up to $600 in Silicon Valley

Weight loss drug impact

GLP-1 medications driving significant cost increases:

• Mr. Sclafani of PwC said that GLP-1 drugs such as Ozempic and Mounjaro “are significantly contributing to sharp rise in pharmacy spending” and will begin to show up in premium increases this year
• His accounting company estimates that 8% to 10% of Americans are currently taking drugs, with another 30% to 35% interested in taking them
• FDA approved Ozempic as insulin-boosting treatment for Type 2 diabetes in 2017. In 2021, agency added Wegovy, version of injection approved for weight loss treatment, without obliging insurance companies to cover it
• That monopoly forces most patients to pay out-of-pocket monthly premium of $300 to $1,300 for injectable drug, which costs about $35 to manufacture

Drug manufacturer responses

Companies defend pricing while seeking expanded coverage:

• Novo Nordisk spokeswoman said in email that company this year has lobbied for FDA approval of new Wegovy capsule that would lower costs
• Company has also called for public and commercial health insurers to lower costs by subsidizing more drug costs for 55 million patients
• Spokesperson for Eli Lilly said single-dose vial of Zepbound costs as little as $25 month for insured patients and $349 month for uninsured patients
• “Denying coverage for these FDA-approved treatments adds to long-term healthcare costs and reinforces stigma,” Lilly spokesperson said in email

Spending projections

Massive increases in GLP-1 drug expenditures:

• Latest estimates show that total spending on GLP-1 drugs in U.S. increased by more than 500% from $13.7 billion in 2018 to $71.7 billion in 2023
• According to San Francisco-based KFF, U.S. health care spending will increase from $5.6 trillion this year to $8.6 trillion by 2033
• Trump administration announced in April that Medicare and Medicaid would not cover GLP-1s, dealing blow to pharmaceutical companies that expected government subsidies

Insurance industry outlook

Claims data reveals multiple cost pressures:

• Lisa Cummings, Oklahoma-based attorney who reviews employee insurance claims for retail, hospitality and health care businesses, said her clients still expect 9% increase in health costs for expensive new treatments next year
• She said they also expect number of claims to increase by 5% to 10% in 2026, reflecting steady growth in recent years
• “Reviewing claims data reveals that some of costs are due to delayed or missed care during COVID, rise of telemedicine, which lowers barrier to treatment, as well as increase in high-cost claimants, those who have claims in excess of $100,000,” Ms. Cummings said

Read more:

• Pricey new drugs set to increase health insurance premiums, industry insiders say