Louisiana businesses brace for 2026 employee insurance hikes: 'Going to be a very tough year'

As he does every summer, Baton Rouge-based insurance broker Kerry Drake has started meeting with the local companies on his client list to talk about renewing their employee health plans.

This year, the conversations are especially difficult.

"We're seeing renewals for 2026 at double-digit rate increases," said Drake, an employee benefits consultant with Gallagher. "It's going to be a very tough year."

Rising health care costs are nothing new. But a variety of factors — including inflation and pricey prescription drugs — have pushed them even higher over the past few years.

In 2025, the cost of health care is on target to rise about 8% over 2024, which was up 8% over 2023, according to industry estimates.

For employers, that means the year-over-year premium increases that are already stretching company budgets are about to get worse. Company-sponsored benefit plans provide health insurance to more than 60% of all non-elderly people in the U.S.

"Employers are telling us they're seeing some of the largest increases they've seen in decades," said Shawn Gremmiger, president and CEO of the Washington, D.C.-based Alliance of Health Purchaser Coalitions, which works with businesses to control health care costs.

Those increases are averaging about 15%, he said.

Adding to the concern is the potential impact of President Donald Trump's One Big Beautiful Bill Act, which contains more than $1 trillion in cuts to Medicaid beginning in 2028, while adding new eligibility requirements to the program.

An estimated 11.8 million people could lose their government-backed health insurance over the next decade as a result of the changes, according to some industry estimates, which could shift the cost to hospitals.

"It is going to put tremendous pressure on hospitals, and what do you think they are going to do?" Drake said. "They are going to pass it on to employers, who will have to pass it on to their employees."

Pricey drugs

Since 2000, health care costs in the U.S. have increased 250%, more than double the cost of wages and inflation. Since 2023, the increases have been particularly sharp, according to Gremmiger.

Among the factors he points to are inflation, labor shortages and hospital consolidations, which reduce competition and can lead to price increases. Vertical integration — where large insurers buy pharmacies, clinics and specialty hospitals — is also contributing to the problem.

Locally, employers say the biggest driver they're seeing is the cost of pricey and highly effective prescription drugs. GLP-1 drugs like Ozempic and Wegovy that control obesity and also Type II diabetes can cost upward of $1,200 a month.

Certain cancer drugs and gene therapy treatments can cost 10 times as much or more.

Given those kinds of prices, even a handful of sick employees can drive a company's utilization rates and costs through the roof, negatively impacting their premiums for the following year.

"What has really impacted employer-sponsored care over the past three to four years has been cancer treatments," said Dan Burke, vice president for benefits at Turner Industries and a founding member of the Employer Coalition of Louisiana, a group of large, self-insured companies focused on controlling health care costs. "The innovations have come so far, but it's extremely expensive."

Potential impacts

Adding to the pressure on next year's premiums is uncertainty around recent policy changes at the national level. According to an analysis by the nonprofit health policy firm KFF, insurers plan to raise premiums by an additional 4% next year than they otherwise would have because Congress opted not to renew enhanced tax credits for those insured through the Affordable Care Act.

Those credits made health insurance more affordable for millions, and insurers expect a large share of healthier enrollees to leave the market, leaving the risk pool sicker, the KFF study found.

Some insurers also are planning for the potential impact of tariffs on prescription drug prices and are baking the anticipated increases into next year's premiums.

And if Congress doesn't wind back any of the recent Medicaid changes, doctors, hospitals, insurers and privately insured patients — employers and employees — will all get stuck picking up a greater share of the tab.

"Right now, we don't know how it's going to play out," Drake said. "But if all these changes eventually go through, it's going to put pressure on the entire system."

Strategies?

To cope with the cost pressures, a growing number of companies are self-insuring, which enables them to contract directly with doctors and hospitals to provide health care benefits and, therefore, keep a tighter lid on costs.

In the past, only large companies like Turner Industries, with nearly 20,000 employees, could afford to self-insure. Recently, however, medium-sized companies with between 500 to 1,000 employees are exploring the option, Burke said.

Companies are also banding together through coalitions of self-insured employers to create "narrow networks" of select doctors and hospitals that agree to provide care at a certain discount.

The Employer Coalition of Louisiana, which has seen its membership grow from six companies to 33 since its founding three years ago, is working on a plan to create such a network, according to its CEO, Cindy Munn, though it's still in the early stages.

Small employers who don't have the wherewithal to self-insure can still take steps to curb costs, including working with insurers to create networks of less expensive providers.

"We encourage employers to be more thoughtful and aggressive with their network negotiations and to start having difficult conversations with their employees," Gremmiger said. "Maybe it's time to tell them they're not going to have all three hospitals in their network any longer but just one or two of them."

Employers can also work with employers to structure plans that carve out certain specialty drugs, either limiting their availability or working out deals to purchase them from specialty pharmacies in Canada.

"We're always out testing the waters on drug prices," said Burke. "It's incumbent on employers to negotiate."