2026 MARKET TRENDS

Actuarial & Underwriting

Key Takeaways

Rising underlying claim costs are the core driver of employer risk and budget pressure
Traditional plan design changes shift cost but do not solve root causes
Employers need earlier, better data to manage volatility and projections
Large claimants and specialty drug utilization disproportionately influence results

Plan sponsors face difficult tradeoffs between affordability, workforce expectations and long-term sustainability.

Overview

Employers continue to operate in a sustained high-trend environment across both fully insured and self-funded health plans. Renewal increases remain elevated, with projected cost growth for 2026 among the highest in recent years. These pressures are driven by underlying claim cost dynamics rather than short-term market fluctuations, including higher utilization, increasing severity, specialty pharmacy spend, increased hospital costs and the growing number of large claimants. As a result, employers are increasingly moving away from passive approaches and engaging earlier in renewal planning and risk management.

At the same time, plan sponsors face difficult tradeoffs between affordability, workforce expectations and long-term sustainability. While plan design and contribution changes can influence near-term budgets, they do not address the root drivers of claim costs and often introduce additional volatility. This environment places greater emphasis on understanding cost drivers, improving forecasting discipline and making more deliberate decisions around benefit strategy, data use and risk management as employers navigate the 2026 renewal cycle and beyond.

Sustained High-Cost Environment

Medical and pharmacy cost trends remain elevated across fully insured and self-funded plans. According to the Brown & Brown Employer Health and Benefits Strategy Survey, affordability is now the most significant challenge for plan sponsors, with cost control for employees and organizations ranking as the top strategic priorities. Renewal increases for 2026 reflect persistent pressure from utilization, severity, specialty drugs and large claimants rather than short-term anomalies.

This environment has reduced tolerance for passive benefit management. Employers increasingly recognize that inaction compounds future budget strain and limits flexibility in subsequent renewal cycles, prompting earlier and more deliberate engagement in benefit strategy.

Affordability pressure is forcing employers away from passive strategies and toward proactive cost management.

Evaluate which actions address immediate renewal pressure versus longer-term claim trends
Use underwriting analysis as a foundation for renewal negotiations
Align benefit decisions with sustained engagement rather than one-time adjustments

Purpose of Benefits Under Pressure

Even as cost pressure intensifies, employers continue to view health and welfare benefits as a core component of their employee value proposition. The Brown & Brown Employer Health and Benefits Strategy Survey shows enhancing employee well-being and productivity as the top reason organizations offer benefits, while reducing long-term organizational costs ranks last. Nearly 90% of employers describe their health package as very or extremely important.

This creates an ongoing tension between financial constraints and strategic intent. Employers face rising costs but remain committed to supporting workforce well-being, engagement and competitiveness, shaping benefit decisions beyond pure cost containment.

Employers continue to view benefits as a strategic investment, not just a cost-control tool.

Align leadership on the primary purpose of the benefits program
Separate short-term renewal actions from long-term workforce strategies
Balance financial discipline with cultural and competitive objectives

Plan Design Shifts Increase Volatility

Approximately three-quarters of employers expect to make moderate or significant changes to medical contributions, plan design or wellness programs over the next 12 to 24 months, according to the Brown & Brown Employer Health & Benefits Strategy Survey. These changes directly affect budgets and employee contributions, while continuing to reshape the benefits experience.

While plan design changes influence affordability, they do not reduce underlying claim costs. Cost sharing and contribution increases shift expense rather than changing utilization or severity and often introduce enrollment and risk volatility that complicates forecasting.

Plan design changes shift costs without addressing claim drivers, and when repeated, increases volatility.

Identify underlying cost drivers before implementing plan changes
Anticipate enrollment migration and risk redistribution
Prioritize targeted programs that address utilization and severity

Data Without Decision Discipline

Employers report that access to data is not a primary challenge. The Brown & Brown Employer Health and Benefits Strategy Survey indicates lack of actionable data ranks lowest among reported obstacles. Claims reporting and analytics tools are widely available across medical, pharmacy and stop loss programs. However, data alone does not improve outcomes. Without clear objectives, governance and measurement, reporting often fails to translate into effective decisions and meaningful cost control.

Insight depends on interpretation and accountability, not data volume.

Define objectives before deploying analytics
Establish metrics tied to expected outcomes
Use data to guide decisions rather than validate assumptions

Large Claimant Volatility

Large claimant frequency and severity continue to rise. The 2025 Aegis Risk Medical Stop Loss Premium Survey shows 49% of respondents incurred at least one claimant exceeding $1 million, with 16% reporting claims above $2 million and 16% reporting known ongoing medical or drug costs.

These dynamics materially distort projections. For self-funded plans, large losses and lasers increase the risk of overbudget positions. For fully insured employers, they translate into higher renewal increases as pricing assumptions erode.

Large claimants materially undermine budgeting accuracy and renewal stability.

Review experience-rated plans monthly for emerging risk
Monitor claimants nearing pooling points for insured plans
Begin renewal planning earlier

GLP-1 Cost Distortion

GLP-1 medications for weight loss continue to place significant pressure on medical plan performance. Employers who cover GLP-1 medications report increased calculated trends and higher renewals tied to utilization growth. While long-term outcomes remain uncertain, near-term cost impact is clear.

According to the Brown & Brown Employer Health & Benefits Strategy Survey, 48% of mid-market employers cover GLP-1s for weight loss, yet 86% plan to continue. Utilization can drive total healthcare spend increases of 10 percent or more, even as direct-to-consumer pricing introduces lower unit costs.

GLP-1 utilization is distorting trend calculations and renewal projections.

Analyze cohort experience when coverage exists
Model projected impact carefully when considering coverage
Define eligibility, consider requiring participation in a sponsored program and create measurable thresholds

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