Why 2026 may hit employers with a one-two punch on healthcare costs

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Employers should brace for a cycle of increasing healthcare costs, Alan Cohen, chief operating officer of Centivo, told Becker’s. 

With billions in Medicaid cuts looming, employers should expect more pressure on the commercial market, Mr. Cohen said. America’s Essential Hospitals estimates cuts to Medicaid spending in the One Big Beautiful Bill Act will add $443.4 billion to hospitals’ uncompensated care costs from 2025 to 2034. 

When uncompensated care increases, providers tend to request higher rates from commercial insurers, Mr. Cohen said. 

“We need to be cognizant of the fact that we are going to be entering a cycle of increasing medical costs, which means employers need to pull out all the stops and look for alternative solutions,” he said. 

Buffalo, N.Y.-based Centivo administers self-pay employer-sponsored plans. The company builds networks around what it considers to be the highest-value providers. 

Employers often shift rising costs to their employees, Mr. Cohen said, but “we are getting to the end of how high deductibles can go.” 

Finding the highest-performing, most cost-effective providers is one lever for reducing costs without sacrificing quality, Mr. Cohen said. 

“If cost increases are going to be 15, 20%, you’ve got to look for ways to continue to build high-quality, cost-effective, high-value healthcare without it eroding your business,” he said. 

The threat of tariffs could put additional pressure on healthcare costs. Multiple insurers cited tariffs as one factor driving increasing premiums for 2026. 

Tariffs could increase the direct costs of drugs and medical equipment for payers, Mr. Cohen said. As hospitals face increased costs for supplies, payers are likely to absorb more of these indirect costs as well. 

“When a hospital CFO decides what rates they’re going to demand from a health plan, they look at all their input costs. They look at their labor costs. They look at the cost for materials. If their material costs are going up, they’re going to demand a higher price in the next negotiation with a health plan,” he said. 

The Trump administration has set an effective date of Aug. 1 for steep tariffs on countries that do not strike deals with the U.S., though the date has been pushed back twice before. The president has also threatened to impose a 200% tariff on pharmaceuticals. 

“It’s entirely possible that there’s a whole slew of deals that get done and these things aren’t tariffed, or they’re excluded from tariffs,” Mr. Cohen said. “Unless that happens, we can expect the cost of healthcare to increase.” 

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