The Dilemma Over US Healthcare Affordability:

A 2026 Policy Viewpoint

• With healthcare affordability likely to be the theme of 2026, we expect policymakers will shift their focus from reducing beneficiaries’ premiums to lowering out-of-pocket costs.
• Healthcare stocks had a turbulent year due to increased utilization and poor risk adjustment forecasts.
• We believe that federal policymakers will look to increase the number of alternative insurance options for small businesses, reduce regulatory burdens for Medicare Advantage, and engage in piecemeal drug pricing reform. and attempt to mitigate Medicaid reforms during the 2026 mid-term elections.

With healthcare affordability likely to be the theme of 2026, we expect policymakers will shift their focus from reducing beneficiaries’ premiums to lowering out-of-pocket costs. Congress and the administration don’t seem to be prepared to begin the harder conversation over potential solutions to insurance coverage in the U.S. beyond increasing uptake and access in the commercial market and reducing eligibility for government coverage. We think that instead, policymakers should be looking for solutions to stabilize the markets and create new incentives for plans to reduce premiums and out-of-pocket costs yearly as current laws (such as the Medical Loss Ratio) simply encourage price increases each year.

Given increased utilization and poor risk adjustment forecasts, healthcare stocks had a turbulent year. We anticipate 2026 to be key for health insurance companies and the clients they serve.

Specifically, we believe that federal policymakers will look to increase the number of alternative insurance options for small businesses, reduce regulatory burdens for Medicare Advantage, engage in piecemeal drug pricing reform, and attempt to mitigate Medicaid reforms during the 2026 midterm elections.

Since early 2025, congressional Republicans have sought to increase healthcare coverage options for small business by expanding Individual Coverage Health Reimbursement Arrangements (ICHRAs), Association Health Plans (AHPs) and modifying Health Savings Accounts (HSAs), most notably for Bronze Plans (wherein beneficiaries select the lowest monthly premium but have higher out-of-pocket costs). However, the lack of consensus amongst Republicans over extending the Affordable Care Act (ACA) enhanced premium tax credit (EPTCs) has highlighted concerns over healthcare affordability. We believe it is unlikely that Congress will look to fund ACA Cost-Sharing Reductions (CSRs) as the offset would need to be significant—and potentially only viable in a second reconciliation bill.

We maintain a 40% likelihood that Congress will advance a bipartisan deal on ACA EPTCs next year, likely at the end of January to avoid another government shutdown. In that scenario, we generally expect a bipartisan grand bargain that also includes alternative insurance expansion.

The majority of Americans are covered under employer-sponsored plans; 154 million people under 65 were covered in 2025. Yet, Congress’ attention has been on the much smaller ACA market this past year overlooking the continuing pressure of premium increases year over year for single and family coverage. Additionally, with the One Big Beautiful Bill Act (OBBBA) reducing Medicaid coverage and reimbursement to hospitals and other providers, it is expected that commercial plans and their beneficiaries will bear the brunt of aggressive billing practices to mitigate any Medicaid losses. If the hospital industry is too forceful in their revenue management processes, we could see Congress return to the No Surprises Act to expand patient protections and curb certain billing practice.

The second Trump administration remains focused on expanding direct-to-consumer (DTC) offerings for prescription medicines and services. However, patients purchasing these items are spending dollars outside their insurance benefit, which means they aren’t contributing to their cost-sharing obligation. With the press speculating that TrumpCare is imminent and likely to be for catastrophic coverage only, the administration appears to be working towards expanding access outside traditional employer coverage.

In the long term, proliferation of DTC solutions will likely erode beneficiaries’ confidence in employer-sponsored insurance without slowing the increase in premiums and out-of-pocket costs. Because of this, we believe DTC will increasingly become an effective market access approach as pricing dynamics move outside of negotiations with traditional insurance structures.

With a provision in the OBBBA requiring verification of the employment status of Medicare and Medicaid beneficiaries, we expect policymakers to mitigate the impact of this new law on hospitals and providers as compared to individual beneficiaries. The Rural Transformation Fund may provide additional funds for this effort beyond the originally allocated $50 billion.

We continue to have a bullish base case on Medicare Advantage (MA), but expect further headwinds for stand-alone Medicare Part D Prescription Plans as the administration is unlikely to extend the Part D Stabilization Demonstration. Furthermore, CMS, in the Medicare Part D rule, has requested industry feedback on how future risk adjustment could move away from diagnosis codes, which we view as a positive for MA plans. Overall, with more seniors opting into MA, the Medicare program is likely to shift its methodology to be more aligned with MA as compared to Traditional Medicare.

In our view, the reason that Pharmacy Benefit Manager (PBM) reform has failed to pass in several legislative vehicles is that the well-socialized provisions (delinking in Medicare Part D, 100% rebate pass through and banning spread pricing in Managed Medicaid) come too little too late. These provisions—in our opinion—do not directly reduce patients’ out-of-pocket costs, and policymakers cannot claim victory in an election year if drug prices at the pharmacy remain a key barrier to access. Although the administration is supportive of DTC access to prescription drugs, this support does not align with any solutions from Congress.

Individual states have taken several approaches to reform PBMs, but none require reforming insurance coverage and defining how benefits should be priced. For large insurance companies, the longer PBM reform stalls, the more time Congress will have to investigate the insurance industry and how it engages PBMs to lower plan and employer costs as compared to a single beneficiary.

Investors should expect Republicans to continue to drive health policy reform without clear consensus or aligned objectives. We anticipate policymakers to continue to scrutinize healthcare affordability with insurance coverage as the next likely target for reform in 2026.

To explore these developments in greater depth, contact the Washington Analysis Health Care team for comprehensive research and insights.

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