Why are healthcare costs rising so fast in 2026?

How fast costs are rising, by measure

Premiums, claims trend and national health spending are not interchangeable. A premium includes the insurer’s expected claims and other costs. Medical trend estimates the change in the cost of treating members. National spending includes multiple payers and services. A projection is not a guarantee or an approved rate increase.

PwC’s live report now covers 2027. Do not cite that page as though it still supplies a 2026-only forecast. When saving a benchmark, record the report year and whether the number is before or after assumed benefit changes. Otherwise two legitimate forecasts can look inconsistent simply because they measure different things.

Prices vs. utilization: which one is driving it?

A simplified spending model is unit price multiplied by the number of services, with an additional adjustment for service mix. More intensive treatment can raise spending even if the number of visits is flat. That distinction matters when a vendor attributes a renewal entirely to “inflation.” Ask which prices, services and population assumptions changed.

RAND’s hospital-price study found that employers and private insurers in its data paid about 254% of Medicare prices for comparable hospital services in 2022. That is an aggregate comparison in the study, not a promise that a specific employer could buy care at Medicare prices. Negotiated prices and available alternatives differ by hospital and location.

For planned care, ask whether the member can compare clinically appropriate sites that participate in the exact network. Verify the facility and professional components, relevant authorization and the scope of an estimate. For urgent symptoms or emergencies, cost comparison should not delay appropriate evaluation.

Where a premium dollar goes

A premium pays for more than the next doctor visit. It supports pooled covered claims and includes administrative expenses and other components. A national allocation chart cannot tell you how one employer’s premium is spent. I would ask what the quote includes and avoid treating one insurer’s margins or an industry average as the margin on this contract.

The direct drivers

• Provider prices and market structure. Consolidation can affect negotiating leverage. For your renewal, ask what network and contracted-rate assumptions changed. Do not infer a particular hospital’s price from a national ownership statistic.
• Prescription spending. New treatments, utilization, negotiated prices and rebates can change net spending. Ask for gross and net costs, covered indications and any formulary changes before attributing the increase to one drug category.
• Behavioral health. More treatment can increase spending while improving access. Ask whether the change reflects more members receiving care, more visits per member or higher prices. A cost increase alone is not evidence of inappropriate treatment.
• Chronic conditions. Ongoing visits, supplies and medicines belong in a realistic benefits budget. Better access is valuable, but do not promise that every preventive or management program will lower total spending.
• Enrollment and service intensity. Changes in covered dependents, age mix and the types of services delivered can affect the bill. Separate those changes from a like-for-like rate increase.

The incentive problem

The ACA medical loss ratio rules generally require insurers to devote at least 80% of adjusted premium revenue to clinical services and quality improvement in the individual and small-group markets, and 85% in the large-group market. Insurers that fall short may owe rebates. This is not a direct cap on profit: administration and other expenses also matter, and the calculation includes adjustments and aggregation rules. The rules do not apply to a self-funded employer’s claims budget in the same way.

My concern about incentives is a reason to ask questions, not proof of misconduct. Ask how brokers and administrators are paid, whether compensation changes with premium or enrollment, and what happens if a promised saving does not occur. Review the agreement rather than assuming every vendor benefits from higher medical spending. A transparent fee can still buy useful work.

What a 14% renewal means for a 10-person team

What employers can actually do

• Choose a model where your vendors make money when costs go down, not up.
• Help employees get to fairly priced, high-quality care before the bill arrives.
• Assess primary care and prevention on appropriate clinical outcomes, access and evidence, without assuming every program produces a financial return.

What usually doesn't lower costs

• Calling cost shifting a saving. A higher deductible changes who pays and may change use of care. Show member costs explicitly and avoid assuming that every reduction in use is appropriate or will reduce future claims.
• Accepting a vendor’s return-on-investment claim without a method. Ask for the comparison population, time horizon, fees, exclusions, attrition and independent review. A favorable case study does not establish a predictable return for your company.
• Comparing unmatched quotes. Different networks, drug coverage, deductibles, enrollment assumptions or administrative obligations can explain a lower price. Reconcile those terms before attributing the difference to efficiency.

Keep a written renewal comparison

Before approving a renewal, save the current and proposed benefit documents with the same enrollment assumptions. Record premium rates by tier, employer contributions, employee payroll deductions and any separate fees. Mark changes to networks, prescriptions, deductibles and out-of-pocket maxima. This creates a useful record for explaining why the budget changed and avoids relying on a remembered headline about national inflation.

After implementation, review enrollment errors and access complaints through the administrator. A lower quoted price is only part of the decision. If members cannot obtain the care the proposal promised, document the issue and ask for a corrective response before the next renewal cycle.

How Prescience approaches cost

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

• An effective $0 deductible, so the plan helps from the first visit.
• Simple copays shown before a visit, capped by a low out-of-pocket maximum.
• A broad national PPO network, plus providers we contract with directly.
• 24/7 physician-led care navigation: a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.