Why Healthcare Costs Are Jumping 10% in 2026 and What It Means for Employees

Healthcare costs are climbing again, and this time the increase is hard to overlook. Industry forecasts show employer-sponsored healthcare costs in the U.S. rising close to 10 percent in 2026, putting this increase among the largest year-over-year jumps in more than a decade. For employees, these higher costs don’t stay behind the scenes. They show up in premiums, out-of-pocket expenses, and overall financial stress. Understanding what’s driving the increase can help employees better prepare for what is ahead and help employers continue supporting their workforce through these changes.

A Near Double Digit Increase: What Data Shows

Industry analysts are largely aligned in their outlook for 2026. Healthcare costs are expected to remain elevated across employer plans.

PwC’s Health Research Institute¹ estimates an 8.5 percent medical cost trend for employer group plans, far outpacing general inflation. Willis Towers Watson² projects employer healthcare costs to rise at close to 10 percent, reflecting continued pressure from utilization and pricing. Milliman³ reports that healthcare cost trends remain elevated, with increases generally tracking in the high single digits to near double-digit range depending on plan design and cost management strategies.

Together, these projections explain why many HR and finance leaders are budgeting for roughly a 10 percent increase, even if final renewals land slightly above or below that mark.

What Is Driving the Cost Surge?

Several factors are contributing to this increase. One of the most significant is higher use of healthcare services. As employees continue to seek care that was delayed during the pandemic, overall utilization is rising across inpatient care, outpatient visits, and behavioral health services. Virtual care has improved access and convenience, but it has also contributed to more frequent use rather than reducing total spending. Virtual care has expanded access and convenience, and PwC’s¹ research indicates it is contributing to greater overall utilization as more patients engage with healthcare services.

Hospitals and providers are also facing higher operating costs driven by labor shortages, wage growth, and rising supply expenses. These pressures, especially workforce-related, have been well documented by the American Hospital Association⁴. To offset them, many providers are negotiating higher reimbursement rates with insurers, which ultimately flow through employer-sponsored health plans.

Prescription drugs remain one of the fastest-growing areas of spending, particularly GLP-1 medications used for diabetes and weight management. Drugs like Wegovy, Zepbound, and Ozempic have seen a sharp rise in utilization. According to the Kaiser Family Foundation⁵, monthly costs for these medications often range from $600 to $1,000 per patient, while broader prescription drug spending continues to increase.

In addition, employers are seeing higher rates of chronic and complex conditions such as cardiovascular disease, cancer, and musculoskeletal disorders. These conditions often require ongoing treatment, specialty medications, and coordinated care, driving costs higher over time.

What This Means for Employees

For employees, the impact of rising healthcare costs is direct and ongoing. Because employees typically pay a percentage of total plan premiums, increases show up quickly in paycheck deductions. KFF’s Employer Health Benefits Survey⁶ consistently shows employees absorbing a growing share of costs through premiums and cost-sharing.

At the same time, many employers are adjusting benefit designs to manage costs. Reports from the Employee Benefit Research Institute (EBRI)⁷ show higher deductibles, copays, and out-of-pocket maximums becoming more common in 2026. While these changes can help control premium growth, they also mean employees may pay more when they access care.

Access to certain benefits is tightening as well. Coverage for high-cost treatments, particularly GLP-1 medications, increasingly includes requirements such as prior authorization, step therapy, or participation in wellness programs. KFF research highlights how employers are adding these guardrails to manage rising costs.

All of this contributes to growing affordability pressure. As premiums and out-of-pocket costs rise at the same time, more employees report delaying or skipping care because of cost, especially among lower- and middle-income workers.

What This Means Going Forward

Healthcare costs are rising in 2026 because utilization, pricing, and medical innovation are all increasing at the same time. While many employers are taking a longer-term approach such as offering more plan options, expanding chronic condition programs, using data analytics, and strengthening pharmacy benefits, short-term increases remain difficult to avoid. For employees, the impact will continue to be felt through higher premiums, greater cost sharing, and ongoing affordability concerns. As changes occur, employers continue to play a critical role in supporting their workforce, providing resources, guidance, and benefit strategies designed to help employees navigate rising healthcare costs with greater confidence. Understanding what is driving these changes can help individuals make more informed benefit decisions and better prepare for what lies ahead.

Sources:

¹ PwC Health Research Institute. (2025). Medical cost trend: Behind the numbers 2026. https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

² Willis Towers Watson. (2024, October 16). 2025 global medical trends survey. https://www.wtwco.com/en-hr/insights/2024/10/2025-global-medical-trends-survey

³ Milliman. (2025, May 27). 2025 Milliman Medical Index. https://www.milliman.com/en/insight/2025-milliman-medical-index

⁴American Hospital Association. (2025). The cost of caring: Challenges facing America’s hospitals. https://www.aha.org

⁵Kaiser Family Foundation. (2025). Perspectives from employers on the costs and issues associated with covering GLP‑1 agonists for weight loss. https://www.kff.org/health-costs/issue-brief/perspectives-from-employers-on-the-costs-and-issues-associated-with-covering-glp-1-agonists-for-weight-loss/

⁶Kaiser Family Foundation. (2025). Employer health benefits survey. https://www.kff.org/health-costs/report/2025-employer-health-benefits-survey/

⁷Employee Benefit Research Institute. (2025). GLP‑1 drugs and implications for employment-based health coverage. https://www.ebri.org