Health Plans Brace for Rising Costs Through 2026

Healthcare costs are expected to remain high through 2026, with spending to rise by 8.5% for those in the group market (with job-based insurance) and 7.5% for those in the individual market (folks who buy their own plans). The increase is mostly due to rising drug prices, more hospital stays and more intensive care, according to a new report sharing insights from major U.S. health plans.

The annual report gathered insights from actuaries at 24 health plans covering more than 137 million people. Most expect medical cost trends to stay the same or grow in 2026. A significant reason is the surge in spending on GLP-1 weight loss drugs and other expensive therapies, the report shared.

Drug spending alone rose by $50 billion in 2024, up 11.4%—more than double the growth seen in 2023.

To calculate this data, the actuaries provided estimates and perspectives on key cost drivers, cost reducers, new regulations and changes in how care is delivered.

As expenses climb, it’s important for plans to balance short-term savings with long-term solutions.

Many of today’s rising costs are being driven by weight loss medications and high-cost specialty drugs. Drugs such as GLP-1s, used for weight loss and diabetes, are adding major pressure. These drugs alone could account for up to 1% of the total medical cost trend in 2026. With new therapies for cancer, heart disease and immune conditions also hitting the market, plans expect drug spending to keep rising.

The report revealed that many plans are tightening oversight of GLP-1 prescriptions and adding services, including nutrition coaching, to improve adherence. They’re also concerned about high-cost gene and cell therapies—especially since reinsurance options are shrinking.

In addition to prescription drugs, hospitals and mental health services are also contributing to rising spending.

It was found that inpatient hospital admissions and care intensity are both climbing. Behavioral health needs are also rising. From January 2023 to December 2024, inpatient behavioral health claims jumped 80%, and one in three plans now lists behavioral health as a top cost concern.

While digital tools and AI offer long-term hope, they may drive up costs in the short term.

Researchers claim that digital tools and artificial intelligence (AI) could help in the long run by boosting efficiency and improving care. However, the upfront costs of adopting these tools today may actually increase medical spending. Even so, health plans see AI as a way to improve care management and cut down on fraud.

On the positive side, biosimilars and cost-control strategies are helping curb trend growth.
The report shared that biosimilars remain the top cost deflator.

In 2024, low-cost alternatives to Humira (adalimumab) quickly grabbed market share and saved money. Similar savings are expected in 2025 with cheaper versions of Stelara (ustekinumab) entering the market.

Three out of four plans expressed their focus on managing the total cost of care. That includes using value-based provider contracts, pre-payment audits, and dropping care management programs that aren’t delivering results.

As health plans look ahead, they’re also adjusting to policy changes and new market trends. For example, AI, individual coverage health reimbursement arrangements (ICHRAs) and simpler health plan designs are among the key developments shaping 2026.

AI has the potential to improve care and lower costs, but not right away, experts claim.

In today’s payment model, providers are paid based on volume—so if AI helps them see more patients, spending may rise before payment systems adapt. There’s also concern about overdiagnosis from AI tools detecting issues that don’t require treatment.

ICHRAs, which allow employers to give tax-free money for workers to buy their own insurance, are gaining traction—especially with employers new to offering coverage. They’re projected to make up 84% of 2025 ICHRA enrollment.

In addition, more simple plan designs are growing. These models use upfront co-pays instead of deductibles, giving members more predictable costs and often pairing with high-quality networks.

Meanwhile, price transparency rules have improved access to pricing data, but gaps remain. As expenses climb, it’s important for plans to balance short-term savings with long-term solutions.