Health care in US faces ‘a triple shock’

The health care landscape in the U.S. faces what one analyst called “a triple shock.”

The scheduled expiration of enhanced Affordable Care Act tax credits, increasing costs for Medicare and Medicaid, and the impact of tariffs on pharmaceuticals and medical supplies have created what Brian O’Connell called “a three-headed monster.”

O’Connell is senior insurance plans analyst with InsuranceQuotes.com.

“You have this perfect storm right now,” he told InsuranceNewsNet. “Rising Medicare costs, expiration of ACA tax credits, and tariffs and inflation – they’re all bleeding through the medical supply chain and causing a lot of problems.”

The Medicare Part B premium is projected to increase by 11.6% to $206.50 per month in 2026, up from $185.00 in 2025. This increase is driven by factors like higher healthcare utilization, increased costs and legislative changes. The Part B deductible is also expected to rise to approximately $288.

But O’Connell said those rising premiums are just part of the story.

“Physician networks for Medicare Advantage plans are getting tighter. Physicians are complaining about stagnant payments from Medicare. Physician practices are seeing 40% higher operating costs than we’ve seen in the past 20 years but reimbursements haven’t kept pace. That’s driving some good doctors away from Medicare and limiting Medicare beneficiaries’ access to care.”

Meanwhile, inflation and tariffs are driving the cost of pharmaceuticals and medical supplies upward from 3% to 8% in the past year, O’Connell said.

Rising out-of-pocket costs are fueling greater interest in short-term health plans and supplemental plans, he said.

“If I were an agent, I'd be preparing my clients for narrowing networks and rising premiums,” he said. “I would emphasize they schedule planning review with their clients to avoid any surprises.”

Rising out-of-pocket costs 'tip of the iceberg'

Out-of-pocket costs for Medicare Advantage beneficiaries continue to creep upward, and O’Connell said those costs “are the tip of the iceberg.”

“I think it will get worse if things continue at their current pace,” he said. “I don’t think things are sustainable.”

Enhanced tax credits that enabled more people to buy coverage on the ACA exchanges will expire on Dec. 31 unless Congress extends them. Without the enhanced credits, families who obtain their coverage through the ACA could see their monthly premiums more than double, according to a KFF analysis, with households facing monthly bills rising anywhere from $378 to $1,479, depending on their income.

“That's a lot of money,” O’Connell said. “People are going to have a tough time affording it and insurers are going to have a tough time with it as well. For consumers, it’s not a cost issue, it’s really a financial planning issue at this point. How can people plan to pay for their health care? How can agents help people adjust to higher premiums – whether they’re higher costs from ACA or in Medicare? It’s not a good picture right now.”

The Congressional Budget Office estimated that 4.2 million Americans will go uninsured by 2035 if the ACA enhanced tax credits are not renewed.

“If households feel they can't afford it because it's just too much, and they walk away, what happens to the whole program?” O’Connell said. “I don’t know what will happen if the subsidy issue isn’t fixed soon.”

Employer-based health care facing challenges

The majority of Americans receive their health insurance through the employer. O’Connell said rising costs are impacting employer-based coverage as well.

“Employers are facing pressure because their health care costs are going up,” he said. “Some employers have been limiting coverage, limiting options. It's tough because they want to take care of their talent and their employees, but there's only so much money to go around. Employers have decisions to make about how high they can go in terms of cost before they start limiting what they can give their employees.

“We're in an era of tough choices. What do you do? You pinch pennies and you try to make it as manageable and serviceable as you can without hurting people. But it's not easy.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].