Projected Medical Cost Trend Increase in 2026

Posted: August 4, 2025 in Employee Benefits , Finance & Economy

PwC’s annual medical trend report predicts that, for the third year in a row, medical cost trend will be 8.5% in 2026 for group health insurance. While medical trend dipped in 2022 coming out of the COVID-19 pandemic, costs are hovering again at rates similar to those 15 years ago. Continue reading a brief summary of the PWC Behind the Numbers report¹.

Medical Cost Trend Outlook Summary

Medical costs are projected to rise ➡️ 8.5% for Group plans and ➡️ 7.5% for Individual plans in 2026. This marks the third consecutive year of elevated trends, matching pre-ACA era highs.
Key cost drivers: Hospital inflation, new high-cost drugs (GLP-1s), and rising behavioral health utilization.
Prescription drug spend rose $50B in 2024 — GLP-1s expected to impact trend by up to 1%.
Behavioral health claims: +80% inpatient, +40% outpatient since 2023.
Bright spots: Biosimilars, cost containment tools, AI for fraud and claim oversight.
Federal policy shifts (ACA subsidy expiration, Medicaid changes) may increase commercial cost pressure.

PwC health researchers surveyed and interviewed actuaries of 24 U.S. health plans, covering more than 125 million employer-sponsored members and 12 million Affordable Care Act (ACA) marketplace members for this annual report. The medical cost trendis the expected increase of health care costs by health plans. PwC’s report identified the following inflators that are driving the upward trend.

By leveraging predictive analytics, health plans can identify trends in claims data to address potential cost drivers early.

Top 3 Cost Drivers (Inflators)

1. Hospital & Provider Costs

Wage inflation, staffing shortages, and rising supply costs.
Hospitals using advanced Revenue Cycle Management (RCM) to increase collections.
Commercial payers absorbing more costs as Medicare and Medicaid rates lag.

2. Prescription Drug Spend

Drug spending in the US grew by $50 billion from $437 billion to $487 billion (11.4%) in 2024 at net manufacturer prices, up from $20 billion of growth (4.9%) in 2023 (Figure 9).
From the therapeutic area perspective, Oncology, immunology, cardiovascular, obesity and diabetes have led the growth of drug spending, totaling $37 billion.

New therapeutics, including glucagon-like peptide-1 (GLP-1) agonists, continue to hit the market for both prevalent chronic illnesses and rare genetic disorders.
Looking ahead, the therapeutic pipeline is robust with potential new therapies and expanded indications.

3. Behavioral Health Utilization

Inpatient BH claims ➡️up ~80% from 2023–2024.
Outpatient BH claims ➡️up nearly 40%.
Employers face cost pressure as demand rises and provider shortages persist.

Top 2 Medical Cost Deflators

1. Biosimilars

Biosimilars were noted as health plans’ top cost deflator for the third year in a row. Biosimilar adoption increased significantly in 2024, and it’s expected to continue with newly approved biosimilars for drugs such as, Humira and Stelara.
- To date, seven Stelara biosimilars have received FDA approval, launching with Wholesale Acquisition Cost (WAC) list prices more than 80% lower than the reference product.
- A similar private-label dynamic seen with Humira biosimilars is emerging as well, with two of the three largest pharmacy benefit managers (PBMs) having either launched or announced plans to launch private-labeled versions.

These developments are expected to exert meaningful downward pressure on specialty drug spending and help moderate medical cost trend in the near term.

2. Smarter Cost of Care Management

AI-powered tools improving claims integrity, fraud detection, and care management.
Targeted utilization management and pharmacy benefit audits delivering savings.

Federal & Market Forces to Watch

Signed in 2025, The One Big Beautiful Bill (OBBBA) policy is set to:

Reduce federal Medicaid spending by $325B;
End enhanced ACA subsidies by late 2025;
Impose potential pharmaceutical import tariffs.

Employer Insights & Action Steps

Evaluate Pharmacy Strategies: Consider PBM carve-outs, GLP-1 utilization oversight, and value-based contracts.
Modernize Plan Design: Explore innovative models (e.g., ICHRAs, transparent copay-only plans) to control costs and improve employee satisfaction.
Partner for Performance: Hold vendors accountable for trend management—especially in behavioral health and specialty Rx.
Use Data Strategically: Leverage claims analysis and benchmarking to inform negotiations and optimize plan performance.

Continue reading the full overview for additional insight. For help understanding and strategically managing your benefit's plan, contact an SSG Advisor .

^{SOURCE: 1PwC’s Behind the Numbers 2026 report.}