Healthcare premiums are rising faster than they have in over a decade. Costs increased about 6 percent in 2025, and projections for 2026 put the increase at 11 percent or higher. In a February 2026 survey by the Federal Reserve Bank of New York, employers reported an average increase of more than 13 percent as their policies renewed. Several forces are driving these increases at once, and understanding them can help you make sense of what you’re seeing on your pay stub or marketplace renewal notice.
The GLP-1 Drug Effect
The single biggest new factor pushing premiums higher is a class of medications originally developed for diabetes that are now widely prescribed for weight loss. These drugs, sold under brand names like Ozempic and Wegovy, have exploded in popularity. They work, but they’re expensive, often running over $1,000 per month per patient. When millions of people start taking a high-cost medication in a short window of time, insurers have to absorb that spending and pass it along.
The scale of the impact is striking. Harvard health economist Richard Frank estimated that roughly 30 percent of this year’s premium increase is attributable to GLP-1 drugs alone. That means if your premium went up by $100 a month, about $30 of that increase traces back to these medications. Even if you don’t take one yourself, you’re sharing the cost through the insurance pool. This is a fundamentally new category of spending that didn’t exist at this scale just a few years ago, and insurers are still adjusting to it.
Medical Costs Keep Outpacing Inflation
Prescription drugs get the headlines, but the underlying cost of medical care has been climbing steadily for years. Hospital consolidation has reduced competition in many markets, giving health systems more leverage to negotiate higher rates with insurers. When a hospital is the only option within a reasonable distance, it can charge more for the same procedure. Those higher negotiated rates flow directly into premiums.
Staffing costs have also surged since the pandemic. Hospitals and clinics faced severe workforce shortages, and wages for nurses, technicians, and support staff rose sharply. Those labor costs haven’t come back down. At the same time, advances in medicine mean more conditions are treatable than ever before, but many of those treatments, including gene therapies, cancer immunotherapies, and specialized biologics, carry price tags in the tens or hundreds of thousands of dollars per patient. A single high-cost claim in a small employer’s insurance pool can shift premiums for the entire group the following year.
How Employer Plans Pass Costs to Workers
Most Americans get insurance through their jobs, and employers are responding to rising costs in ways that directly affect your paycheck. The Federal Reserve Bank of New York found that rising health insurance costs are dampening wage growth. When an employer’s health plan costs jump 13 percent in a year, that money comes from somewhere. Often it comes from smaller raises, higher employee premium contributions, or both.
You may also notice changes in your plan’s design. Higher deductibles, larger copays for specialists, and narrower pharmacy benefits are all tools employers use to keep the sticker price of premiums from climbing even faster. The premium number you see might not tell the whole story. If your deductible went from $1,500 to $2,500, you’re paying more out of pocket even if your monthly premium held steady.
What Happens if Federal Subsidies Expire
If you buy insurance through the ACA marketplace, enhanced subsidies passed under the Inflation Reduction Act have been keeping your costs significantly lower than they would otherwise be. These subsidies are set to expire, and the consequences for marketplace enrollees would be dramatic.
Right now, subsidized enrollees on Healthcare.gov pay an average of about $56 per month. Without the enhanced subsidies, that average would jump 93 percent to roughly $108 per month. In at least 12 states, average premium payments would double or more. Wyoming would see the sharpest increase at 195 percent, followed by West Virginia at 133 percent and Alaska at 125 percent. Texas, with 3.4 million people receiving premium tax credits, would see an average increase of 115 percent.
The impact hits lower-income enrollees hardest. A 45-year-old earning $25,000 would see their annual premium payment jump from $160 to $1,077, a 573 percent increase for a standard silver plan. Even a 45-year-old earning $65,000 would face an additional $941 per year. Whether Congress extends these subsidies remains an open question, but if you’re on a marketplace plan, this is worth tracking closely.
The 80/20 Rule and Its Limits
The Affordable Care Act requires insurance companies to spend at least 80 percent of premium dollars on actual medical care (85 percent for large group plans). The remaining percentage covers administrative costs and profit. This rule, known as the medical loss ratio requirement, was designed to prevent insurers from pocketing excessive profits while raising premiums.
The rule does provide a guardrail, but it also creates a less obvious dynamic. When medical costs rise, insurers are allowed to keep a proportional share for administration and profit. If total medical spending goes up by 10 percent, the insurer’s permitted administrative take goes up by 10 percent in absolute dollars too. The percentage stays the same, but the dollar amount grows. This means insurers don’t have a strong financial incentive to push back aggressively on rising medical costs, since higher spending across the system means a larger allowable slice for them.
Why Multiple Forces Hit at Once
What makes the current moment feel especially painful is that these factors are compounding. GLP-1 drugs created a sudden new cost category. Hospital and labor costs were already climbing post-pandemic. Specialty medications for cancer, autoimmune diseases, and rare conditions continue to grow more expensive. And the potential loss of federal subsidies threatens to shift billions in costs directly onto consumers.
Premiums are also set based on projections. Insurers estimate what they’ll spend on medical claims in the coming year and price accordingly. When costs are volatile or hard to predict, as they are now with rapidly expanding GLP-1 use, insurers tend to price conservatively, building in a cushion. That means some of the increase you’re seeing reflects uncertainty as much as actual costs already incurred.
For most people, the practical takeaway is that premiums are unlikely to flatten in the near term. The underlying drivers, from drug costs to hospital pricing to workforce expenses, aren’t showing signs of reversing. Reviewing your plan options during open enrollment, comparing marketplace alternatives if you’re eligible, and understanding what your employer is changing in plan design are the most concrete steps available to manage what you pay.