Rising Healthcare Costs Strain Insurance Companies

Expensive prescriptions and ongoing medical expenses are increasingly burdening insurance companies and employers, leading to a potential shift where patients might begin covering these costs next year.

By 2026, many might see health insurance prices rise, possibly limiting coverage options. This could translate into higher out-of-pocket expenses for doctor visits as changes in prescription coverage take effect.

Insurers predict significant price hikes, especially in individual coverage markets. Some companies may also eliminate federal assistance that helps subsidize coverage.

{“We’re dedicated to enhancing healthcare services,”} said Larry Levitt, executive vice president of the nonprofit KFF.

Rising Costs

During a recent call discussing revenue, insurance firms reviewed the trend of escalating costs. More patients are seeking care, with an uptick in visits to costly emergency rooms and rising claims for mental health treatments.

Moreover, healthier individuals are leaving individual markets, leading to a higher concentration of patients with serious health issues who generate more claims.

The Affordable Care Act enrollment has grown in recent years, but tighter eligibility checks, which were relaxed during the pandemic, now make it harder for some to maintain their coverage, according to analyst David Windley.

He mentioned that many people are, perhaps, not paying close attention.

Obesity treatments, especially popular yet costly GLP-1 drugs like Ozempic and Wegovy, introduce another layer of complexity to healthcare costs.

{“Dealing with pharmacies is a headache, no joke,”} said Vinny D’Aboul, managing director of RT Consulting in Boston.

Expensive New Treatments

New gene therapies, which can exceed $2 million for a single treatment, are also impacting costs. These therapies treat rare diseases, along with certain new cancer medications, have contributed to significant claims for insurance companies like Sun Life Financial.

Some of these pharmaceuticals are rarely used, yet overall costs are increasing and, consequently, raising insurance premiums.

{“We’re experiencing healthcare cost growth in unprecedented ways,”} Collier noted.

Looking Ahead

The steepest price increases are evident in the individual coverage market. According to KFF, premiums may rise by approximately 20% in 2026.

However, the true impact on consumers could be even greater if Congress doesn’t renew enhanced tax credits that facilitate coverage purchases, which may expire soon.

KFF projects that without these credits, consumer costs could soar by over 75%.

Shirley Modlin, a business owner from Powhatan, Virginia, expresses concern over the escalating prices. Unable to fully cover her 20 employees in 3D design and manufacturing, she admits to providing only a monthly refund for their purchased coverage.

Modlin realizes her refund only partially alleviates her workers’ expenses and fears that rising costs may compel some to seek employment with larger companies that offer more comprehensive benefits.

{“While my employees might not prefer large companies, they might have to consider it when it comes down to paying bills,”} she said.

Shifting Burdens

The broader employer-sponsored coverage market is also feeling the impact of rising costs, as noted by benefits consultant Mercer. Although employees may not see immediate effects because companies largely cover premiums, they might experience changes in coverage quality.

Around half of large employers surveyed by Mercer indicated they are likely to pass more costs onto employees, resulting in higher deductibles before coverage kicks in.

Changes in Drug Coverage

In the realm of prescriptions, patients may soon find limits on costly obesity treatments.

Additionally, some insurance plans could implement individual deductibles for drug benefits or require patients to shoulder more costs for prescriptions, according to D’Aboul.

Emily Bremer, president of Bremer Group, an independent insurance agency based in St. Louis, suggests that coverage changes could differ widely across the country.

She noted that while employers are not eager to reduce benefits, dramatic shifts in prescription coverage may not occur immediately, but they could be on the horizon.

{“If pharmacy costs remain unchanged, we might see changes sooner than we’d like to think,”} Bremer cautioned.