For many individuals and families, the cost of health care is a persistent and deeply personal challenge. While discussion about rising costs often focus on assigning responsibility, the reality is that multiple factors across the health care system are driving increases. The prices people pay, the way care is delivered and coordinated, and the effects of demographic changes and rapid medical innovation all combine to shape the affordability landscape – making it harder for people to access the care they need without financial stress.

The five primary drivers of rising health care costs

A new research paper by Cigna Healthcare identifies five forces that consistently account for rising costs across employer-sponsored health coverage.

1. Chronic diseases are rising among working-age adults and people are living longer, raising the baseline demand for health care.
2. Hospital cost pressures, pricing dynamics, and consolidation are reshaping market dynamics.
3. Drug pricing, limited competition, and advertising fuel high‑cost demand.
4. Health care workforce shortages and changes in physician ownership are increasing costs.
5. Fragmentation and complexity create waste and absorb value across the system.

Each of these adds pressure on premiums and out-of-pocket costs. Together, they compound affordability challenges for employers and the people they cover.

1. Chronic diseases are rising among working-age adults and people are living longer, raising the baseline demand for health care

Today, chronic disease affects three quarters of U.S. adults and accounts for 90% of our country’s health care spending. As people live longer and manage multiple conditions over decades, utilization of medical services, prescription drugs, and specialty care increases.

Chronic conditions are also appearing earlier in life, including among working-age adults. The prevalence of at least one chronic condition among adults ages 18-34 has increased significantly. That means employers face sustained cost growth driven not by one-time events, but by long-term patterns of care that extend across an employee’s career.

Source: CDC (1,2)

2. Hospital cost pressures, pricing dynamics, and consolidation are reshaping market dynamics

Hospitals account for the largest share of health care spending, and recent growth has been driven primarily by rising prices rather than increased use. At the same time, hospitals are operating in a challenging environment, facing higher labor and administrative costs, workforce shortages, and ongoing pressure to invest in technology and expand access.

In many regions, consolidation has reduced competition, giving health systems greater pricing power. As a result, costs can vary widely depending on where care is delivered – in some cases ranging from 5 to 23 times higher for the same procedure – creating significant differences in what employers and individuals pay.

While these market dynamics reflect real operational pressures, research shows consolidation has not consistently led to better quality or improved patient outcomes such as lower readmission or mortality rates. For employers and the people they cover, this often results in higher costs without a corresponding increase in value.

Source: KFF

3. Drug pricing, limited competition, and advertising fuel high-cost demand

Prescription drug costs have risen rapidly, particularly for specialty, biologic, and advanced therapies. New medications are entering the market at prices far higher than in the past – with median launch prices increasing from about $2,000 in 2008 to roughly $370,000 by 2024 – setting a costly baseline for coverage and negotiation.

Many of these treatments are introduced in categories with limited competition, allowing prices to remain elevated even as utilization grows. While lower-cost alternatives such as biosimilars can help in the long run, adoption takes time, and innovation continues to outpace the market’s ability to offset these increases.

These factors lead to higher premiums and out-of-pocket costs for people who rely on ongoing or complex medications. Direct-to-consumer advertising also contributes to higher costs by steering utilization toward brand-name therapies even when lower-cost alternatives exist.

Source: JAMA, U.S. News, Statista

4. Health care workforce shortages and changes in physician ownership are increasing costs

Shortages of physicians and other clinicians make it harder for people to access timely primary and specialty care. When routine care is delayed, conditions often worsen and treatment shifts to emergency rooms or hospital settings that cost more.

At the same time, more than 75% of U.S. physicians are now employed by hospitals, health systems, or other corporate groups. These ownership models can expand the use of facility fees and higher-cost sites of care. For example, research shows that physician practices acquired by private equity firms charge about 20% higher costs per claim, which is driven by pricing changes without clear evidence of better outcomes.

Source: Physicians Advocacy Institute, JAMA

5. Fragmentation and complexity create waste and absorb value across the system

Care delivery, benefits administration, and data systems are often disconnected. This fragmentation drives duplicative services, avoidable complications, and administrative overhead, all of which add to total costs. Poor coordination accounts for up to $78 billion in wasted health care spending a year, and administrative complexity nearly $266 billion.

For people with chronic conditions, poor coordination is especially costly, as fragmented care is associated with higher rates of preventable hospitalizations compared with more coordinated care (9.1% vs. 7.1%), as well as more than $4,500 in additional annual spending per patient.

Source: JAMA, Annals of Internal Medicine

Why affordability requires industrywide collaboration

No single organization can fix health care affordability on its own. Progress depends on aligning incentives across the system so prevention, early intervention, and coordinated care are prioritized over fragmented, reactive treatment.

Affordability is not about shifting costs from one part of the system to another. It’s about designing a health care ecosystem where pricing, care delivery, and benefits work together so people can access care with more clarity, confidence, and predictability.

When health plans, providers, employers, and policymakers work toward shared goals, affordability becomes more achievable – not just in the short term, but over time.

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