New statistics and articles about the climbing costs of health care are released almost every day, indicating that this is a pressing issue for plan sponsors. In 2025, the International Foundation released the Health Care Costs Pulse Survey: 2026 Cost Trend, which projects a roughly 10% increase in medical plan costs for 2026. In a March 2026 article published by the Peterson KFF Health System Tracker, “the cost of healthcare in the U.S. continues to grow and remains significantly higher than in peer countries.” The same article continues, “The U.S. spends roughly twice as much per capita on prescription drugs compared to peer nations.”
And now, nearly halfway into 2026, cost projections will soon be published for 2027—and the trend shows no sign of slowing. These high costs are top of mind for plan sponsors, but they may not fully understand what’s driving these yearly increases.
In a recent International Foundation webcast, “How Science and New Tech is Driving Health Care Costs,” speaker Margaret Lemkin, president of health benefit strategies, LLC, addresses the big picture of the rising costs, saying that “it’s not just one problem.” She discussed:
- Million-dollar claims doubling in frequency over four years
- New and expensive treatments
- Drug prices outpacing inflation by 50%
- The growing cost for cancer care with the increased prevalence of cancer diagnoses.
During the webcast, Lemkin provided a comprehensive explanation of the various factors contributing to the rise in health care costs and the science behind them, including:
- New medical technologies
- New prescription drugs
- GLP-1s
- Specialty medications including biosimilar drugs
- Immunotherapy
- Genetic testing
- Pharmacogenomics
- Gene and cell therapy.
Medical Technology Keeps Advancing
Medical technology refers to the procedures, equipment, services and processes that enable diagnoses and deliver research that refines medical care. Technological advances have led to many incredible findings that have changed medicine—but they usually come with a big price.
The increased use of technology, has led to a variety of changes in quality of care and quality of life as well. Lemkin specifically described:
- New treatments for previously untreatable terminal or other conditions
- New procedures for treating secondary diseases
- Expansions of use for different treatments
- New advancements for existing conditions.
While many medical technology advancements can lead to higher costs, some innovations also offer opportunities for cost savings. According to Lemkin, certain technologies, such as interventional radiology (IR), have become more widely used in health care settings. IR can contribute to lower expenses by enabling shorter hospital stays, decreasing the likelihood of complications, and minimizing the use of hospital resources.
Pharmaceutical Drug Spend
In addition to medical costs, plan sponsors are continuing to see large cost increases for prescription drugs, partially due to the increasing use of glucagon-like peptide-1 (GLP-1) receptor agonist drugs. According to Lemkin, pharmacy cost trend for 2025 was 12.5%. In the International Foundation’s GLP-1 2025 Pulse Survey, GLP-1 drugs account for more than 10% of annual claims. Cost increases also result from:
- Changes in utilization
- New drugs coming onto the market and new approvals for existing drugs for additional diagnoses they were not originally intended or approved for
- Direct-to-consumer (DTC) ads
- Aging population needs (i.e., increased usage)
- Increased level of chronic conditions
- New generic, brand and specialty drugs that have a higher starting price
- Price inflation for existing drugs.
Takeaways for Plan Sponsors
For plans (especially self-funded plans) and advisors that use data analytics and plan usage data to make decisions, there are several questions to answer:
- What do you want to cover in your plan?
- How will you change your plan design, and what will the cost-sharing impact be to participants?
- Do you want to cover new technology if there are more established, less costly options available?
- Can you afford to pay for expensive treatments like gene therapy?
With so many factors contributing to the rise in health plan costs, plan sponsors face difficult decisions to weigh regarding coverage for new therapies or treatments, medical technology and prescription drug innovations.
Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.
