Health care inflation hit a three-year high last month, in the latest sign that workers could soon be juggling big premium increases with higher prices for groceries, clothing and other items subject to President Trump’s tariffs.
WHY IT MATTERS:
Medical prices have been steadily rising, but corporations projecting increases of 9% or more next year are no longer willing to insulate their employees from the pain.
DRIVING THE NEWS:
Medical care costs rose 4.2%, compared with an overall inflation rate of 2.9%, the Bureau of Labor Statistics said Thursday.
Consulting firms are forecasting that the trend will carry over into next year, even without sector-specific tariffs on drugs.
Mercer recently forecast that employers are facing their highest health benefit cost increase in 15 years. Beyond higher demand for health services, other factors include rising wages in the medical sector.
On Wednesday, professional services firm Aon reported that U.S. employer health care costs are projected to rise 9.5% in 2026, or more than $17,000 per employee. It blamed rising prescription drug costs and higher health care utilization.
“The overlooked reality is that employers continue to act as a stabilizing force,” Farheen Dam, head of Health Solutions for North America at Aon, said in a statement. “They absorb the bulk of the increase while making smart, targeted adjustments that protect employees and preserve plan value.”
BETWEEN THE LINES:
The rising costs are being felt beyond workplace insurance; Affordable Care Act marketplace plans are seeking median 18% premium hikes for next year, according to KFF. That’s the largest rate change insurers have requested since 2018, they said.
The insurers cite high-priced drugs, increasing labor costs and general inflation, as well as concern about the expiration of enhanced subsidies that could hike out-of-pocket premiums an average of 75% for over 20 million enrollees.
THE BOTTOM LINE:
Inflation is hitting health care harder than the broader economy, setting up a painful year ahead for both patients and employers.
It’s unclear whether the biggest health insurance price hikes in years could lead to deferred care, or more people opting to go uncovered.
The Trump administration has confirmed it will once again expand access to so-called short-term health insurance — which all too often fall into the category of “junk” insurance. They’re usually skimpy policies that do not meet the coverage requirements of the Affordable Care Act and that were largely reined in (again) by the Biden administration because of how devastating they can be for families with pre-existing conditions – or anyone who gets badly injured or sick.
Calling many of these plans junk insurance isn’t hyperbole. They’re called that because they are not designed to protect policyholders from financially crippling medical expenses. They’re built to look affordable upfront but in many cases leave people dangerously exposed when they need care most. Leslie Dach of Protect Our Care summed it up plainly:
“Short-term junk plans are allowed to deny coverage, drop people when they get sick, and exclude life-saving coverage such as prescription drugs and hospital care, leaving families with sky-high bills and nowhere else to turn”
Short-term, limited-duration insurance (STLDI) plans were originally designed as a stop-gap for people who needed catastrophic-protection between jobs. But starting in 2018, the ACA rules were loosened to allow these plans to last for a year and be renewed for up to three years, which inspired health insurers to jump in and begin heavily marketing them online as if they were real alternatives to traditional, comprehensive insurance.
Before the ACA, junk plans were not just short term, they were everywhere. The ACA outlawed much of what these STLDI plans do including refusing to cover basic medical services, excluding people with preexisting conditions, and spending only a fraction of policyholders’ premium dollars on care. There is a reason that the provisions preventing those abuses were some of the most popular in the ACA: They led to better care and lower costs for millions. These STLDI plans don’t cover needed care and only spend an average of 65% of the money patients pay in premiums on medical care, with some plans spending as little as 34% on care and keeping the other 66%. Expanding plans that do not adhere to patient protections in the ACA is not the way to fix our health care system.
As American Lung Association explains, most of these plans keep premiums low by cutting out what most of us think of as essential care: prescription drugs, hospital stays, mental health treatment, maternity care and more. They often cap how much they’ll pay in benefits, leaving families on the hook for huge bills if someone gets sick or injured. Unlike plans that comply with patient protections under the Affordable Care Act, they can deny coverage to people with asthma, diabetes, cancer or any other pre-existing condition.
Anti-junk plan history
Simply put, junk plans are the snake oil of the health insurance business, and advocates, including myself, have been sounding the alarm for years. On June 24, 2009, I testified before the Senate Committee on Commerce, Science, and Transportation and, for the first time, blew the whistle on how my old industry confuses their customers and dumps the sick. But I wasn’t alone on the dias. Nancy Metcalf, then senior program editor at Consumer Reports, sat to my left. Metcalf had much to say about junk insurance plans. In her written testimony, she wrote:
“As consumers, we are trained to look for a bargain. Buying a car or a flat-screen TV, we’re proud if we can get it for less than our friend paid. People think insurance works the same way. They never consider that if they are 55 years old, and have diabetes and heart disease, that no insurer could possibly stay in business selling them a comprehensive policy for $150 a month. That’s why so many of the junk policies we’ve looked at are marketed as “affordable.”
“Yet another scheme to shift costs to consumers and away from insurers and employers is to enroll them in limited-benefit plans. The big insurers have spent millions of dollars acquiring companies that specialize in these plans, often providing such skimpy coverage that some insurance brokers refuse to sell them.”
“There are so many restrictions built into limited-benefit contracts that there is always reduced risk to insurers, who appear only too happy to sell these policies to people who don’t realize they could be ill served.”
“Limited-benefit plans, coupled with high deductibles, represent the ultimate in cost shifting and are among the fastest growing health insurance products. They’re the future that insurers had in mind as they fought bitterly against reform that could jeopardize their profits.”
This isn’t the right move
The Biden administration tried to put an end to this dangerous bait-and-switch. In March 2024, the Centers for Medicare & Medicaid Services (CMS) issued rules to once again limit short-term plans to a maximum of four months and require clearer disclosures so people would know what they were buying. As CMS Administrator Chiquita Brooks-LaSure put it:
“By making short-term plans truly short term, people will be more informed about the risks associated with these types of coverage and their options for comprehensive coverage.”
The Trump administration’s move to undo that rule means these plans can proliferate again and, as Protect Our Care noted in a statement, more than 100 million Americans with pre-existing conditions could be put at risk as insurers are once more allowed to deny coverage or drop people when they get sick.
This isn’t about politics. No matter who is in office, promoting junk plans is a bad idea. Families can get ruined when they think they’re covered — only to find out in the middle of a crisis that what they thought was a real insurance plan won’t pay for what they need. Short-term, limited benefit plans are the riskiest bet you can place in the U.S. health insurance casino. The house will always win.
Evernorth’s new latest investment in Shields Health Solutions ties its parent company, Cigna, even closer to hospitals and the fast-growing specialty drug market.
Regular readers will know that we’ve harped on UnitedHealth Group’s vertical integration into care delivery, pharmacy benefits and nearly every other corner of the health care landscape. But UnitedHealth isn’t the only company guilty of vertical integration: Cigna is playing the same game.
Shields partners with more than 80 health systems and over 1,000 hospitals and clinics across nearly all 50 states. That reach gives Cigna another way to weave itself into the daily operations of hospitals – and the lives of millions of patients.
From insurer to health services conglomerate
When I was an executive at Cigna, the company was primarily what’s known as a third-party administrator. We sold some health and group life policies as an insurer, but our bread-and-butter was administering health benefits for large employers. Our “value proposition” back then was keeping costs under control — at least as we defined them. Evernorth didn’t exist. At the time, to me, the idea that Cigna would one day be pouring billions into specialty pharmacies and drug distributors would have seemed far-fetched.
In 2018, though, Cigna bought the huge pharmacy benefit manager Express Scripts. And soon after that, it created Evernorth to oversee its non-insurance health services operations, not only its PBM but also specialty pharmacies, and now investments like Shields. Cigna is no longer just deciding what care to cover, but it’s increasingly involved in how drugs are dispensed and priced. In fact, the company now gets the great majority of its revenues from the pharmacy business. Of the $195 billion in revenues Cigna took in last year, $154 billion came from Evernorth.
The same old consolidation story
According to Reuters, Evernorth’s investment in Shields was structured as preferred stock and, according to the company, won’t affect its 2025 profit forecast. But make no mistake: This is part of the same playbook we’ve seen before from companies Americans have been led to believe are primarily insurers.
UnitedHealth buys physician practices, rehab centers, and home health companies. CVS Health owns Aetna, the PBM Caremark, and a sprawling pharmacy business. Cigna, for its part, is also planting stakes across the drug supply chain. In addition to Express Scripts, it also owns Accredo, one of the nation’s largest specialty pharmacies, and now Shields.
Cigna CEO David Cordani, who I once worked with during my time at Cigna, framed the deal as a way to “deliver exceptional care across healthcare settings – from home to physician’s office or clinic, to hospital”. In a statement on Evernoth’s website, Cordani said:
“Demand for specialty medications continues to grow at an accelerated pace, and Evernorth is uniquely positioned to serve the rapidly expanding number of individuals living with complex and chronic conditions and the doctors who care for them.”
Specialty medications, as Cordani mentioned, are among the fastest-growing and most expensive parts of the pharmaceutical market and include medications for cancer, multiple sclerosis, rheumatoid arthritis and other complex and chronic conditions. Research indicates that spending on specialty drugs will make up more than half of all U.S. drug spending in the coming years.
That’s why Evernorth already owns Accredo. Now, by getting into bed with Shields, Evernorth is tying itself even closer to the hospitals and health systems that rely on specialty pharmacies to serve patients.
What can be done about it?
When insurers buy into the businesses that are supposed to compete for contracts (like pharmacies and physician practices) it gives the insurer almost all the cards because they are able to both set the rules of the game and profit from it. Competition suffers, and costs for patients and employers can rise.
Fortunately, Washington is starting to wise up to these tactics. The Patients Over Profits Act, soon to be introduced by Sen. Jeff Merkley (D-Oregon) and Rep. Val Hoyle (D-Oregon), would prevent insurers from owning most doctors offices and medical providers. In addition, The Patients Before Monopolies Act, introduced by Sens. Elizabeth Warren (D-Massachusetts) and Josh Hawley (R-Missouri), prevents pharmacy benefit managers and/or health insurers from owning pharmacies. Given a divided Congress, these bills wont be easy to pass, but seeing strange bedfellows like Warren and Hawley taking the lead brings me great hope.
I saw firsthand during my years inside Cigna how Wall Street’s pressure for constant growth drives these decisions.Insurers and their shareholders aren’t satisfied with premiums alone. They want to control the entire pipeline — from the doctor’s prescription pad to patients’ wallets.
So the next time you hear about vertical integration in health care, don’t just think about UnitedHealth Group. Remember that Cigna is moving just as aggressively. With this latest $3.5 billion bet, it’s clear that the insurer I once worked for has transformed into something much larger — and far concerning — than the insurance company most folks believe it to be.
HENRY KOTULA 