Healthcare costs to grow 8.5% next year: PwC

Modern Healthcare – Thursday, July 17, 2025
By Hayley DeSilva

Group healthcare costs are expected to increase by 8.5% in 2026.

PricewaterhouseCoopers’ Health Research Institute based its forecast published Thursday on policy changes, expensive medications including glucagon-like peptide agonists, higher rates of behavioral health claims and increased use of artificial intelligence, among other factors.

For PwC’s annual report, researchers spoke with actuaries at 24 different health insurers covering 125 million employer-sponsored members and 12 million Affordable Care Act members to forecast healthcare inflation. In addition to the predicted 8.5% jump in costs for the group market, the consultancy projected a 7.5% increase for the individual market.

Here’s PwC’s forecast for the industry in 2026.

Policy changes pushing up healthcare costs

Trump’s tax law, which includes several funding cuts to federal healthcare programs, is expected to drive up healthcare costs significantly, according to the PwC report.

New requirements and benchmarks for Medicaid coverage are expected to leave millions without insurance, making care more expensive, per PwC. The new law may additionally trigger Medicare spending cuts.

Although many of the impacts won’t be felt for several years, PwC notes that enhanced Affordable Care Act subsidies are due to expire at the end of 2025, leading to a projected jump in individual market costs.

Additionally, Trump’s proposed tariffs could also hike costs, though the specifics are uncertain.

GLP-1s staying popular

Demand will persist for GLP-1s like Ozempic and Wegovy. Although the prices of GLP-1 drugs themselves have leveled off as shortages end, utilization has grown. To manage costs, most insurers only offer coverage for diabetes treatment, as opposed to weight loss.

Cellular, gene and RNA therapies are additionally expected to drive up spending, with several drugs set to hit the market over the next year.

A boost in behavioral health claims

A third of respondents said behavioral healthcare was one of their top three cost drivers and that they expect costs to increase over the next year.

More people are being diagnosed with a wide variety of mental illnesses, which has put a strain on the industry, along with increased access to telehealth.

Meanwhile, low reimbursement rates are making it difficult to offer competitive salaries, contributing to ongoing staff shortages.

Possible relief from biosimilars

Biosimilars, or less expensive copies of biologic drugs, could offset spending to some degree.

Multiple biosimilars of AbbVie’s rheumatoid arthritis drug Humira have launched since January 2023, for example. Starting this year, the three largest pharmacy benefit management companies opted to only include biosimilars of Humira on their formularies.

The progress could be slow. By 2034, 118 biologic drugs will lose patent protection. However, only 12 have biosimilars in development as of September 2024.

Higher short-term costs from AI

The healthcare industry has increasingly turned to artificial intelligence as an attempt to save on costs in the long term, whether through decreasing administrative tasks or finding new ways of delivering care.

But implementing AI is actually expected to drive up healthcare costs in the near future, according to PwC.

Reimbursement for care delivered using AI has yet to be standardized across the industry, which means providers may seek to make up for any cost with revenue from other areas of business.

Additionally, increased AI use could lead to more diagnoses, which would also drive up costs.

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