Why is Health Insurance Getting More Expensive

By: TAHP | Tuesday, February 24, 2026

The big picture: Health insurance is getting more expensive for the same reason everything else is: the prices are going up. But there is a critical difference. Health care prices are rising even faster and outpacing inflation. While the cost of many household goods has leveled off, hospital, physician, and drug prices continue to surge.

Keep it simple: At the root of the problem are rising health prices. When hospitals charge more and drug manufacturers set higher prices, insurance premiums have to rise to cover the bill. Nearly 90% of the health insurance premium increase for 2026 is tied directly to these rising prices.

Why it matters: Texas businesses cover more than half of Texans, and they pay most of the premiums. When health care prices rise this fast, employers have less room to invest in wages and growth. For workers, it shows up as lower wages and higher out-of-pocket costs when they need care.

By the numbers: Health insurance premiums far outpaced inflation this year, with job-based health insurance reaching a new peak of $27,000.

• 75%: The portion of the bill employers still pay. When the total cost goes up, both the company and the family feel the squeeze.
• 7% - 9%: How much job-based premiums jumped this year for single and family plans.
• 35%: The average premium hike for Texans buying their own insurance on HealthCare.gov.

The "Big Two" Drivers: Hospital costs and prescription drug spending make up 65 cents of every dollar spent in health care.

• Prescription Drugs: More than 24 cents of every premium dollar goes toward prescription drug costs - the greatest individual category. Weight loss drugs are the biggest driver. Spending on GLP-1s alone made up half of the increase in drug spending.
• Hospital care: Total hospital costs, including inpatient, outpatient, and emergency department care, account for about 40% of health spending and are a major driver of recent growth. A new study shows that hospital spending alone accounted for 40% of the spending growth from 2022 to 2024.

What can be done: Patients need more affordable health insurance options that meet their needs, and insurers should be allowed to offer benefits that work for Texas employers.

• Restore Competition in the Marketplace: We must push back against anti-competitive practices from consolidated hospital systems. By promoting a fair and open market, we can ensure that competition drives down the cost of care.
• Empower Innovation: Texas should reduce regulations that limit lower-cost insurance options for employers and families. Texans should be able to choose the coverage that fits their needs.
• Create Meaningful Price Transparency: Consumers still lack a complete picture to shop. Require providers to post and accept cash price payments from all patients, even those with insurance.

The Bottom Line: Health care costs are shaped by many forces - hospital prices, pharmaceutical costs, and changing regulations. Affordability cannot be fixed by insurers alone. It is a shared responsibility that requires transparency and accountability from all stakeholders.

• We welcome any opportunity to work together on common-sense solutions that lower health care prices for every Texas family.

Learn More: TAHP recently broke down what's driving up the costs in our new 101 presentation.