Healthcare costs for commercial payers are projected to rise by as much as 8.5% in 2026, driven by ongoing inflationary pressures, utilization of inpatient and outpatient behavioral health services, and prescription drug spending, according to a new report from PwC’s Health Research Institute.
The July 16 report is based on surveys and interviews with actuaries at 24 U.S. health plans covering 125 million group plan members and 12 million individual plan members.
Based on the input from actuaries, PwC projects healthcare costs for commercial payers will increase 8.5% year over year in the group market and 7.5% in the individual market.
“Commercial payers in 2026 will be asked to continue paying the ballooning bill for medical services and prescription drugs,” said the report’s authors. “Meanwhile, federal health policy and legislation likely will reduce federal spending on healthcare over the next 10 years, with an expected but unknown impact on medical cost trend in the future.”
Analysts outlined ways to improve cost trend pressure in the short term and recommended that health plans “put additional emphasis on cost-of-care programs to bring medical cost trend to a sustainable level.”
Six things to know:
1. The projected medical cost trend, or growth rate, in 2026 is in line with 2024 and 2025 levels.
2. Many hospitals and health systems continue to face inflationary pressures, PwC analysts said, noting that average hospital year-end margins fell to 2.1% in 2024, compared with 7% in 2019 — and declined further in the first quarter of this year.
3. Amid rising costs, some hospitals and health systems have increased utilization and optimized their revenue cycle processes, PwC analysts said. They expect the incentive for organizations to rev up revenue cycle management will only grow as hospitals face impending declines in federal funding.
4. Behavioral health utilization is rising, PwC analysts said, noting that claims for inpatient and outpatient behavioral health services climbed nearly 80% and nearly 40%, respectively, between January 2023 and December 2024.
5. PwC analysis reported that U.S. drug spending grew from $437 billion to $487 billion in 2024 at net manufacturer prices. The study authors said drug spending is expected to continue to rise in the coming years due to growth in oncology, immunology, cardiovascular, obesity and diabetes drugs.
6. Health plans reported biosimilar adoption as the lead cost deflator amid rising drug costs. Additionally, three out of four health plan actuaries interviewed cited managing the total cost of care as a top deflator.
Read the full report here.
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