US health insurers face mounting underwriting pressure as medical costs rise

Desk report: US health insurers are confronting mounting underwriting pressure in 2026 as persistently high claims utilisation and rising medical costs continue to erode profitability.

According to a March 5, 2026 market segment report from AM Best, the US health insurance segment’s net income declined nearly 20% during the first three quarters of 2025 compared with the previous year. The drop was driven by higher-than-expected utilisation, elevated claims costs, increased patient acuity and rising healthcare expenses in several lines of business.

Over the past two years, underwriting profitability has been pressured by accelerating medical cost inflation, sustained post-pandemic utilisation and surging drug spending, particularly for GLP-1 medications and high-cost therapies for cancer, autoimmune diseases and genetic conditions.

Provider price inflation and broader economic factors have further increased unit costs, pushing medical loss ratios above target levels and weighing on insurer results.

AM Best warned that underwriting performance in 2026 will likely remain under pressure, with claims trends continuing above historical norms. Behavioural health utilisation has also remained elevated, contributing to unfavourable claims experience.

Fitch Ratings issued a deteriorating outlook for the sector in December 2025, projecting commercial group medical costs to rise approximately 9% in 2026, the highest rate in more than a decade, driven by inpatient cost inflation, provider consolidation and specialty drug spending.

PwC’s medical cost trend analysis similarly projects an 8.5% cost trend for the group market and 7.5% for the individual market in 2026, unchanged from 2025 but still well above pre-pandemic levels.

Insurers are responding by intensifying utilisation management, strengthening payment integrity programmes and targeting high-cost claims. However, structural cost drivers, including an aging population and rising chronic disease prevalence, continue to challenge affordability.

Industry analysts warn that without effective mitigation strategies, existing cost pressures could further compress margins and lead to premium increases in commercial, Medicare Advantage and marketplace plans in 2026.