Medical and pharmacy costs drive premium increases

A new survey of Blue Cross and Blue Shield (BCBS) health insurance providers found the following:

• Medical and pharmacy costs grew 8.1% on average
• More than 83% of surveyed Plans cited pharmacy trend as a major driver of premium increases
• Plans noted the healthcare tax credit expiration and No Surprises Act independent dispute resolution (IDR) as the most important regulatory and policy factors driving rate increases

For millions of American families, the math no longer works. They are doing everything right and still watching the cost of care climb faster than their paychecks. That strain is real; it's getting worse, and it deserves to be met with solutions.

To better understand the root causes of rising prices and the best ways to take them on, the Blue Cross Blue Shield Association (BCBSA) surveyed BCBS companies.

The key findings:

1. Rising cost of care

BCBS companies reported average medical and prescription drug cost increases of 8.1%. When the underlying cost of care and medications goes up, the cost of coverage goes up too. This is similar to a 2026 report from PwC, which projected the cost to treat patients would rise by 9% in the group market in 2027, the highest medical cost trend in nearly two decades.

2. Prescription drug costs

More than 83% of surveyed BCBS companies identified prescription drug spending as a major contributor to higher premiums, particularly spending on specialty medications and GLP-1 drugs. Specialty drugs are often used to treat complex conditions, including cancer and autoimmune disease, and are extraordinarily expensive. The specialty drug market is projected to grow by nearly 40% a year through 2030. U.S. prescription drug spending grew 12.7% in 2025 compared to 2024, according to the American Journal of Health-System Pharmacy, reinforcing concerns about escalating drug costs.

3. Medical costs and healthcare use

Higher healthcare prices, greater use of healthcare services, and changes in provider contracting were among the key drivers of premium growth, according to the survey. This reflects broader trends in hospital pricing. According to the Milliman Medical Index (MMI), outpatient costs grew 7.5% from 2025 to 2026, and these costs have increased by more than 300% for a family of four since the MMI first published in 2005.

4. Policy factors

BCBS companies also identified factors tied to federal mandates that are putting upward pressure on premiums.

• The expiration of the healthcare tax credit, which lowered monthly coverage costs for many consumers, caused healthier people to exit the ACA marketplace, while people with greater healthcare needs maintained coverage despite the cost. New data from Wakely already points to a smaller and less healthy risk pool, with enrollment down 12% and average health risk rising 6.3% in the first four months of 2026.
• The No Surprises Act independent dispute resolution (IDR) process for resolving certain payment disputes. Federal data show the process awarded nearly $15 billion to providers in 2025 alone. Those costs trickle through the healthcare system and drive up costs for everyone. Barring changes, IDR costs are expected to continue to escalate in coming years.

The impact on premiums

This environment is forcing health plans to propose 13.2% average premium increases in the individual market in 2027.

"These increases would put even more pressure on families already struggling with healthcare costs,” says David Merritt, BCBSA EVP. “When premiums rise, families feel it in their monthly budgets and face tougher choices about their healthcare spending. We have to drive real solutions that bring down the cost of care."

What BCBS companies are seeing in the individual market

BCBSA surveyed actuaries at 24 BCBS companies representing approximately 6.1 million members, or roughly one-quarter of the individual market. The individual market is an important source of coverage for millions of Americans, especially those without access to employer-provided coverage. Most surveyed BCBS companies anticipate enrollment declines for next year.

Looking ahead

The survey results reinforce the need to address the factors driving healthcare costs higher. BCBS companies are advancing a roadmap that could reduce healthcare costs by nearly $1 trillion over the next decade through commonsense solutions that tackle these root causes and make healthcare more affordable for everyone. As consumers prepare for open enrollment, marketplace stability can help ensure they have clear information about their coverage options and costs. Families deserve a marketplace they can navigate with confidence.

Editor’s Note: This article was originally based on responses from 21 BCBS companies. The survey has since expanded to 24 Plans, and the data have been updated accordingly.