Market Forces Impacting Employers in 2026

Renewal season has a way of repeating itself for many fully insured employers. Regardless of claims experience, premiums continue to go up.

 

Insurers do not base rates solely on any one employer’s recent claims history. Instead, premium rates are developed months in advance using projected healthcare costs and anticipated trends across the broader population. That means even employers with favorable claims experience can face significant increases when healthcare costs rise across the market.

 

This article examines the economic and healthcare market trends shaping fully insured premiums in 2026, helping employers better understand the factors behind rising renewal costs, what may lie ahead and where opportunities may exist to influence future spending.

 

 

Healthcare spending continues to climb, and most forecasts suggest the trend will persist for the foreseeable future. PwC projects a 9% commercial medical cost trend for 2027, the highest level in nearly two decades, after revising its 2026 forecast upward to the same 9% level. The pressure shaping this year’s renewals is expected to carry into next year’s. Likewise, the Business Group on Health reports that employers expect healthcare costs to increase significantly in 2027 before plan design changes help moderate the impact.

 

The specific percentage affecting any employer will vary based on geography, workforce demographics and plan design. However, the broader takeaway is clear: insurers continue to anticipate elevated healthcare spending, and those expectations are reflected in premium rates long before a plan year begins.

 

Several factors are contributing to these ongoing pressures, including rising provider expenses, prescription drug spending and increased utilization of healthcare services.

 

 

Healthcare providers continue to face major financial pressure of their own, particularly related to workforce costs.

 

According to the American Hospital Association, labor accounts for approximately 60% of hospital expenses. Persistent staffing shortages, competition for healthcare workers and wage growth have increased the cost of delivering care across the country. When providers negotiate higher reimbursement rates to offset those expenses, those costs ultimately flow through the healthcare system and contribute to higher premiums.

 

Provider consolidation adds another layer of pressure. As hospitals and health systems combine, they often gain greater negotiating leverage with insurers. In many markets, this can lead to higher reimbursement rates, increasing costs for health plans and employers alike.

 

For fully insured employers, these dynamics may feel distant, but they play a crucial role in shaping the assumptions insurers use when developing future rates.

 

 

Prescription drugs remain one of the fastest-growing components of healthcare spending.

 

While glucagon-like peptide-1 (or GLP-1) medications have attracted considerable attention, they represent only a part of a broader trend. Employers are also facing growing costs associated with specialty medications used to treat complex conditions such as cancer, autoimmune disorders and rare diseases. These therapies can improve health outcomes, but they often come with substantial price tags.

 

Insurers increasingly cite specialty drug spending as a factor influencing premium growth. In response, some carriers have reevaluated coverage approaches for certain medications, particularly weight-loss drugs, as they work to manage long-term pharmacy costs.

 

At the same time, emerging biosimilar medications may offer some relief in certain therapeutic categories. Although these alternatives will not eliminate pharmacy cost pressures, they could help moderate spending growth over time as adoption increases.

 

 

Higher healthcare costs are not driven solely by prices. Utilization is also increasing.

 

Chronic conditions, behavioral health needs and other complex health challenges continue to account for a growing share of healthcare spending. According to the U.S. Centers for Disease Control and Prevention, 90% of the nation’s $5.3 trillion in annual healthcare expenditures are for people with chronic and mental health conditions.

 

Behavioral healthcare utilization has also increased in recent years as employees seek greater access to mental health and substance use treatment services. At the same time, an aging workforce and growing prevalence of chronic disease continue to increase demand for healthcare services across the system.

 

From an insurer’s perspective, higher utilization translates directly into higher projected claims costs. Thus, the increasing demand for care remains an important factor in projections of medical trends and premium development.

 

 

Although renewal increases can feel disconnected from the employer’s own experience, they are often tied to broader changes occurring across the healthcare system. Rising provider costs, growing prescription drug spending and increased utilization continue to place upward pressure on premiums throughout the fully insured market. As healthcare costs continue to evolve, staying informed remains one of the most effective ways to prepare for future renewals.

 

Contact us to discuss how these market trends may affect your organization and the steps that can help support your benefits goals.

For many self-funded employers, 2026 is shaping up to be a year defined by rising complexity. Healthcare utilization remains elevated, specialty drug costs continue to climb, high-cost claims are occurring more frequently and stop-loss carriers are responding with tighter underwriting practices. Because self-funded employers fund claims directly rather than transferring that risk to a carrier, these pressures tend to show up in their plans faster and more visibly than in the fully insured market.

 

This article examines the market dynamics influencing self-funded employers in 2026 and how they may continue to shape costs, risk management and plan strategy in 2027.

 

 

Higher claim severity and a growing number of large claims continue to influence the stop-loss market in 2026. Cancer treatment, specialty drugs, complex surgeries and chronic illness remain the leading drivers of that growth. Carriers are responding with tighter underwriting, particularly on plans carrying ongoing high-cost claims or heavy specialty pharmacy exposure. At renewal, employers may notice:

 

 

Hospitals and health systems are under financial pressure of their own, and that pressure works its way into the claims that self-funded employers pay. Labor is the biggest driver, accounting for roughly 60% of hospital expenses, according to the American Hospital Association. Ongoing staffing shortages and wage growth continue to put upward pressure on those costs.

 

Rising costs are also being driven by provider consolidation. When hospitals and health systems merge, they often gain greater leverage in negotiations with insurers, which can lead to higher reimbursement rates for the same services. Unlike a fully insured plan, a self-funded plan feels the impact of reimbursement increases immediately. There is no premium renewal cycle to delay or absorb those higher costs, which is why network design and reimbursement strategy have become increasingly important tools for managing plan spending.

 

 

Specialty drugs accounted for 53% of total U.S. prescription drug spending in 2025, with specialty spending up 15.2% from 2024, according to a peer-reviewed analysis published in the American Journal of Health-System Pharmacy in July 2026. Glucagon-like peptide-1 (GLP-1) medications remain among the fastest-growing categories in that spend. A 2026 survey from the International Foundation of Employee Benefit Plans found that GLP-1 drugs accounted for 11.4% of annual claims this year, up from 6.9% in 2023, and cost remains a primary factor in employer decisions about whether to continue covering these medications for weight loss.

 

Cancer and rare-disease treatments continue to dominate the new drug development pipeline, with half of the novel drugs approved in 2025 carrying an orphan drug designation. A growing share of that pipeline consists of cell and gene therapies, which often carry one-time price tags ranging from hundreds of thousands to millions of dollars. As these therapies become more prevalent, costs are likely to become increasingly concentrated in specialty drug categories. In response, many employers are taking a closer look at pharmacy benefit manager contract terms, specialty drug management programs and biosimilar alternatives as part of their cost-containment strategy.

 

When a high-cost specialty claim occurs, a self-funded plan absorbs the expense right away. Without a premium cycle to spread costs over time, decisions about formulary management and pharmacy benefit manager contracts have a more direct and immediate effect on plan spending.

 

 

Healthcare spending is affected by more than price. Utilization continues to rise across most areas of care. A data brief released in June 2026 by the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics found that 14% of U.S. adults received counseling or therapy in the past 12 months, and behavioral health claims have grown accordingly. Chronic conditions such as diabetes, cardiovascular disease and obesity remain closely tied to a plan’s largest claims. The CDC estimates that people with chronic and mental health conditions account for 90% of the nation’s $5.3 trillion in yearly healthcare spending, and an aging workforce is adding to demand across a wide range of treatment categories. For self-funded plans, rising utilization shows up directly in claims experience rather than being smoothed out over time, making ongoing monitoring, condition management and early intervention standard components of a long-term benefits strategy rather than optional add-ons.

 

 

Self-funded plans continue to offer employers flexibility and long-term opportunities to manage healthcare spending. At the same time, organizations are operating in an environment shaped by tighter stop-loss underwriting, concentrated specialty pharmacy spending and growing healthcare utilization. GLP-1 medications, cell and gene therapies, chronic disease prevalence and sustained demand for healthcare services are likely to remain key areas of focus for employers and stop-loss carriers heading into 2027.

 

Contact us to discuss how these market developments may affect your self-funded plan and explore strategies that align with your benefit goals.