The Cost Curve Ahead: Key Health Care Trends for 2026

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Key Drivers of 2026 Health Care Cost Increases

As employers prepare for 2026, health care costs are expected to rise significantly—driven by pharmaceutical innovation, chronic disease prevalence, demographic shifts, and inflationary pressures. Recent data from leading health policy organizations and industry surveys provide a clear picture of what’s fueling these increases and how employers might respond.

Employer Cost Projections

Employers are bracing for another year of steep health care cost increases. According to the International Foundation of Employee Benefit Plans (IFEBP), organizations anticipate a 10% increase in health care costs in 2026, continuing a multi-year trend of rising expenses. This projection reflects growing concern over high-cost claims, pharmacy spend, and chronic condition management.

The Business Group on Health reports that employers are increasingly focused on plan design changes to manage spend, with many implementing cost-sharing strategies, prior authorization requirements, and condition-specific programs. Cancer care, specialty drugs, and chronic conditions remain top cost drivers, and employers are exploring innovative benefit strategies to mitigate financial risk while maintaining access to quality care.

GLP-1 Medications and Their Fiscal Impact

GLP-1 receptor agonists—such as semaglutide (Ozempic, Wegovy) and tirzepatide (Mounjaro)—are increasingly prescribed for obesity and diabetes management. These medications have shown strong clinical outcomes, but their cost and long-term use raise concerns for payers and employers.

A JAMA Health Forum study projects that if Medicare Part D plans were to cover GLP-1 drugs for obesity treatment, the 10-year fiscal impact could exceed $250 billion, with over 30 million beneficiaries eligible. This estimate highlights the potential scale of cost exposure if coverage expands.

Another JAMA study found that out-of-pocket costs for GLP-1 drugs remain high, even after the Inflation Reduction Act. Despite a $2,000 annual cap on out-of-pocket costs under Medicare Part D, many patients still face affordability challenges, especially those using these medications for weight loss rather than diabetes. Employers are responding by requiring prior authorization, integrating weight management programs, and evaluating formulary placement to manage utilization and cost.

Specialty Medications

Specialty drugs continue to dominate the pharmaceutical landscape and are a major contributor to rising health care costs. According to Mercer’s 2025 Drug Trend & Pipeline, nearly 80% of new FDA approvals fall into the specialty category, including biologics, biosimilars, and cell and gene therapies.

These treatments are high-cost, high-impact, and increasingly used to manage chronic and rare conditions. Biologics offer targeted therapies for autoimmune diseases and cancers, while biosimilars provide lower-cost alternatives as exclusivity periods expire. Cell and gene therapies are revolutionizing treatment for genetic disorders and blood cancers, but they come with significant logistical and financial challenges. Employers are working with pharmacy benefit managers to evaluate coverage policies, manage specialty drug pipelines, and ensure appropriate utilization.

Chronic Conditions

Chronic diseases remain a consistent and growing driver of health care costs. A JAMA study analyzing health care spending across 3,110 U.S. counties found that conditions such as diabetes, heart disease, and mental health disorders account for the majority of health care expenditures. These conditions are often comorbid, meaning individuals suffer from multiple chronic illnesses simultaneously, which compounds treatment complexity and cost.

Among these, obesity stands out as a major contributor to chronic disease burden. A JAMA Network Open study found that adults with overweight or obesity—especially those with employer-sponsored insurance or Medicare—incur significantly higher health care spending. Obesity is closely linked to other costly conditions such as Type 2 diabetes, cardiovascular disease, and sleep apnea, making it a multiplier of health care utilization.

Employers are increasingly investing in chronic condition management programs, including digital therapeutics, care coordination, and disease-specific coaching. These efforts aim to improve outcomes, reduce hospitalizations, and lower long-term costs. However, the prevalence of chronic disease continues to rise, especially among working-age adults, making it a persistent challenge for benefits planning.

Aging Populations

The aging U.S. population is another key factor driving health care cost increases. Older adults use more services, require more frequent care, and are more likely to have multiple chronic conditions. While specific new data was not retrieved in this search, previous projections from Health Affairs confirm that per-capita spending for adults 65+ is significantly higher than for younger populations.

As life expectancy increases and birth rates decline, the demographic shift toward an older population is accelerating. This trend places additional pressure on Medicare, long-term care systems, and employer-sponsored retiree health plans. Employers may need to consider the long-term impact of aging populations on workforce health, productivity, and benefit design.

Cancer Care

Cancer care remains one of the most expensive and complex areas of health care. A JAMA Network Open study projects that cancer incidence and mortality will rise steadily through 2040, driven by population growth and aging. This means more employees and dependents will require long-term, intensive treatment.

New therapies—including immunotherapies, targeted drugs, and personalized medicine—offer improved outcomes but come with high price tags. Employers are seeing more high-cost claims related to cancer, prompting increased interest in oncology navigation programs, second-opinion services, and value-based care models. Managing cancer-related costs will remain a top priority for benefits teams in 2026 and beyond.

Medical Inflation and Coverage Costs

Medical inflation continues to outpace general inflation, driven by increased utilization, pharmaceutical pricing, and labor costs. KFF’s analysis of Medicaid enrollment and spending shows that federal subsidies and coverage expansion have helped reduce uncompensated care, but they’ve also created a growing taxpayer burden.

As enhanced subsidies under the Affordable Care Act face potential expiration, many consumers could face steep premium increases in 2026. Employers may also see higher costs as insurers adjust rates to reflect inflationary pressures and increased demand for services. Understanding the interplay between public policy, inflation, and coverage costs is essential for strategic benefits planning.

Health Care Labor Shortages

Labor shortages in health care are contributing to rising costs across the system. While no new source was retrieved in this search, Mercer and Business Group on Health have previously cited staffing challenges and wage pressures as key contributors. Hospitals and health systems are facing difficulty recruiting and retaining clinical staff, especially nurses and support personnel.

These shortages lead to increased labor costs, reduced service capacity, and longer wait times—all of which affect the cost and quality of care. Employers may see these pressures reflected in higher premiums, narrower networks, and increased reliance on virtual care. Addressing labor shortages will require coordinated efforts across the health care ecosystem, including workforce development, technology adoption, and policy reform.

Employer Takeaway

Health care costs in 2026 are expected to rise sharply, driven by pharmaceutical innovation, chronic disease prevalence, demographic shifts, and inflation. Employers who stay informed and proactive—through plan design, pharmacy management, and strategic benefits planning—will be better positioned to manage costs and support their workforce.

References

• KFF – Medicaid Enrollment & Spending Growth: FY 2025 & 2026
• International Foundation of Employee Benefit Plans – Health Care Costs Pulse Survey: 2025 Cost Trend
• Health Affairs – National Health Expenditure Projections, 2024–33
• Mercer – 2025 Drug Trend & Pipeline
• Business Group on Health – 2025 Employer Health Care Strategy Survey
• JAMA Health Forum – Estimated Medicare Cost of GLP-1 Drugs for Obesity
• JAMA – Out-of-Pocket Costs for GLP-1 Drugs Post-IRA
• JAMA – County-Level Health Care Spending and Chronic Conditions
• JAMA Network Open – Projected Cancer Incidence and Mortality Through 2040
• JAMA Network Open – Obesity and Health Care Spending