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HARTFORDBUSINESS.COM | AUGUST 10, 2026 17 Rising health care costs explained – and a clearer path to affordability I ncreasing health care costs remain one of the most significant challenges facing employers. While discussions often focus on assigning responsibility, the reality is that multiple forces across the health care system contribute to higher spending. How care is delivered, how services and medications are priced, and broader demographic trends all play a role. A new Cigna Healthcare® research paper identifies five factors that consistent- ly drive costs in employer-sponsored health coverage. Together, they increase premiums and out-of-pocket expenses, affecting both employers and employees. 1. Chronic disease is increasing demand for care Chronic disease affects three-quarters of U.S. adults 1 and accounts for 90% of U.S. health care spending. 2 As people live longer and manage multiple conditions over time, demand for medical services, prescription drugs, and specialty care continues to increase. Chronic conditions are also appearing earlier in life. e prevalence of at least one chronic condition among adults ages 18-34 has increased significantly, 3 contributing to higher health care spending across employees' working years. 2. Hospital pricing and consolidation are driving costs higher Hospitals account for the largest share of health care spending, 4 and recent growth has been driven primarily by price increases rather than greater utilization. At the same time, hospitals face ongoing labor shortages, higher administrative expenses, and growing technology investments. Consolidation has reduced competition in many markets, giving health systems greater pricing power. As a result, the cost of the same procedure can vary dramat- ically, ranging from 5 to 23 times higher depending on where care is delivered. 5 3. Drug pricing continues to escalate Prescription drug spending, particularly for specialty medications and advanced therapies, has risen sharply in recent years. Median launch prices for new drugs increased from approximately $2,000 in 2008 6 to about $370,000 in 2024. 7 Limited competition in many therapeutic categories allows prices to remain elevated as utilization grows. While biosimilars can help reduce costs over time, 8 adoption has been gradual. Direct-to-consumer advertising can also increase demand for brand-name medications even when lower-cost alternatives are available. 9 SPONSORED CONTENT 1. Centers for Disease Control and Prevention, April 14, 2026. About Chronic Diseases. https://w w w.cdc. gov/chronic-disease/about/index.html 2. Centers for Disease Control and Prevention, August 8, 2025. Fast Facts: Health and Economic Costs of Chronic Conditions. https://w w w.cdc.gov/ chronic-disease/data-research/facts-stats/index.html 3. Watson KB, Wiltz JL, Nhim K, et al. Trends in Multiple Chronic Conditions Among US Adults, by Life Stage, Behavioral Risk Factor Surveillance System, 2013–2023. Preventing Chronic Disease, 2025;22:E15. https://pmc.ncbi.nlm.nih.gov/articles/ PMC12007472 4. Kaiser Family Foundation, February 11, 2026. Hospital Spending Accounted for 40% of the Growth in National Health Spending Between 2022 and 2024. https://w w w.kff.org/health-costs/hospital- spending-accounted-for-40-of-the-growth-in- national-health-spending-between-2022-and-2024 5. PatientRightsAdvocate.org, December 20, 2023. New Report Highlights Extreme Price Variation for the Same Medical Procedures Within and Across Hospitals. https://w w w.patientrightsadvocate.org/ blog/new-report-highlights-extreme-price- variation-for-the-same-medical-procedures-with- in-and-across-hospitalsnbspnbsp 6. Rome BN, Egilman AC, Kesselheim AS. Trends in Prescription Drug Launch Prices, 2008–2021. JAMA, 2022;327(21):2145–47. https://jamanetwork.com/ journals/jama-health-forum/fullarticle/2792986 7. U.S. News and World Report, May 22, 2025. Prices for New US Drugs Doubled in Four Years as Focus on Rare Disease Grows. https://w w w.usnews.com/ news/top-news/articles/2025-05-22/prices-for- new-us-drugs-doubled-in-4-years-as-focus-on- rare-disease-grows 8. Gunnam S, Fathema K, Nijhawan M, et al. A Review on Economic Benefits and Impact of Biosimilars on Healthcare System: Review Article. Journal of Pharam Insights and Research, 2025;3(4):181-190. http://jopir.in/index.php/journals/article/view/485 9. Sullivan HW, Aikin KJ, Berktold J, et al. Direct-to- Consumer Prescription Drug Advertising and Patient-Provider Interactions. Journal of the American Board of Family Medicine, 2020;33(2): 279–83. https://www.jabfm.org/content/33/2/279 10. Physicians Advocacy Institute, April 2024. PAI- Avalere Report on Physician Employment Trends and Acquisitions of Medical Practices: 2019–2023. https://w w w.physiciansadvocacyinstitute.org/ PAI-Research/PAI-Avalere-Study-on-Physician- Employment-Practice-Ownership-Trends-2019-2023 11. Georgetown University Center for Health Insurance Reforms, December 15, 2025. From Check-Ups to Cha-Ching: Consumers' Exposure to Facility Fees. https://chir.georgetown.edu/from-check-ups-to- cha-ching-consumers-exposure-to-facility-fees 12. Singh Y, Song Z, Polsky D, et al. Association of Private Equity Acquisition of Physician Practices With Changes in Health Care Spending and Utilization. JAMA Health Forum, 2022;3(9):e222886. https:// jamanetwork.com/journals/jama-health-forum/ fullarticle/2795946 13. Shrank WH, Rogstad TL, Parekh N. Waste in the US Health Care System: Estimated Costs and Potential for Savings. JAMA, 2019;322(15):1501–09. https:// jamanetwork.com/journals/jama/fullarticle/2752664 4. Workforce shortages and physician ownership trends affect affordability Health care workforce shortages can make it more difficult for people to access timely primary and specialty care. Delays in care often result in more serious conditions and higher-cost treatment later. At the same time, more than 75% of U.S. physicians are now employed by hospitals, health systems, or other corporate entities. 10 ese arrangements can increase the use of facility fees and shift care to higher-cost settings. 11 Research also shows that physician practices acquired by private-equity firms charge approximately 20% higher costs per claim, 12 largely because of pricing changes rather than improved outcomes. 5. Fragmentation creates waste throughout the system Disconnected care delivery, benefits administration, and data systems generate unnecessary costs across the health care ecosystem. Poor care coordination accounts for up to $78 billion in wasted spending annually, while administrative complexity adds nearly $266 billion. 13 Affordability requires industrywide collaboration No single organization can solve health care affordability alone. Progress depends on greater alignment among health plans, providers, employers, and policymakers. Affordability is not about shifting costs from one part of the system to another. It is about designing a health care ecosystem where pricing, care delivery, and benefits work together so people can access care with greater clarity, confidence, and predictability. For employers facing continued pressure from rising benefit costs, understanding these drivers is an important step toward building a more affordable and sustainable health care experience for their workforce. Read Cigna Healthcare's white paper, Understanding the health care affordability challenge, at insights.cignahealthcare.com/employers/ hub/articles/mental-health-care-access Cigna Healthcare products and services are provided exclusively by or through operating subsidiaries of e Cigna Group, including Cigna Health and Life Insurance Company (Bloomfield, CT), or its affiliates. In Utah, all products and services are provided by Cigna Health and Life Insurance Company (Bloomfield, CT).