Why do health insurance premiums increase?


Editorial team Published on

Health insurance premiums are rising sharply due to higher overall medical care costs, expensive new drugs, and policy changes.

Key Drivers of Higher Costs

  • Expiration of Subsidies: The enhanced federal premium tax credits for Affordable Care Act (ACA) plans expired at the end of 2025, spiking net costs for many marketplace enrollees.
  • Expensive Medications: High demand and steep costs for specialty drugs—particularly GLP-1 weight-loss medications—are straining insurer and employer health plans.
  • Provider Consolidation: Hospital mergers and monopolistic pricing in metro areas allow health systems to charge significantly higher fees for basic procedures.
  • General Inflation and Labor: Economy-wide inflation, medical supply cost increases, and healthcare staff wage growth continue to push baseline spending upward.
  • Risk Pool Changes: As rates increase, healthier individuals sometimes drop coverage, leaving a sicker overall risk pool that drives costs even higher.