The Virginia Health Insurance Market in 2026

By Brian Marks, MBA, CEBS

It’s another challenging year for health care. The Virginia health insurance market is under continued pressure in 2026 and small employers are affected particularly hard. While rising costs have been a persistent challenge for most of my career in employee benefits, the current cycle appears to be more than a temporary spike.

Prices are rising for several reasons: long-term structural increases driven by medical inflation, pharmacy costs, increased utilization, and policy changes. For employers, this environment is forcing a shift away from traditional, renewal-focused decision-making toward a more strategic approach to benefits design and funding.  Many want alternatives to traditional, fully insured Affordable Care Act (ACA) plans.

The level of health insurance premium increases is indicative of all the factors driving up costs. The Virginia Bureau of Insurance saw insurers request average premium increases of approximately 11.2% for the 2026 plan year in the small-group market. This aligns closely with national trends; small group plans across the country are experiencing similar increases with a median change of about 11%.

While these figures may seem consistent with prior years, the persistence of these increases over time sets the current market apart. Costs do not appear to be stabilizing but are instead accelerating. For example, I recently requested the 3^rd quarter pricing trend from a major insurer and learned its pool pricing trend was 24%.

Small employers are not the only affected group. In 2026, Virginia’s individual health insurers requested an average increase of over 20%. Although the individual and small group markets operate differently, they are influenced by many of the same underlying cost drivers. In addition, changes in one segment often affect the broader health care ecosystem, including employer-sponsored coverage. For example, when subsidies shift or enrollment patterns change, it can influence risk pools and pricing assumptions across markets. When the ACA subsidies were not extended, it had a ripple effect across the market that impacted other segments.

What’s Affecting Health Care Costs?

The primary drivers of these increases are well understood but their impact is accelerating. Medical cost inflation remains a foundational issue, with hospital systems and provider pricing continuing to rise. These increases are driven by a combination of factors, including labor costs, technological advancements and provider consolidation, all of which reduce pricing flexibility within the system. At the same time, utilization of health care services continues to increase. Health care is seeing more frequent use of services, higher-cost procedures, and a growing prevalence of chronic conditions that require ongoing treatment. It is the perfect recipe for pricing inflation.

Pharmacy spending is a significant cost driver, particularly the rapid growth of specialty medications. GLP‑1 drugs and specialty biologics are major contributors to increasing costs. These medications, often used to treat diabetes, obesity and other chronic conditions, can carry substantial price tags. Though their impact can be great, so is their cost, and expanding usage places increasing pressure on both fully insured and self-funded health plans. I routinely see pharmacy costs exceed 30% of my clients’ claim spending.

Beyond direct cost drivers, policy developments are also affecting the market. The 2026 expiration of enhanced federal premium tax credits that had previously helped offset insurance costs for individuals over 400% of the federal poverty limit was a key driver. Many carriers cited the removal of these subsidies as a source of market uncertainty and a potential contributor to adverse selection because healthier individuals exited the insured population and left a higher-risk pool behind. This dynamic put upward pressure on premiums across the system; even employer-sponsored coverage was affected. Though we can debate the correlation, any time there is uncertainty, insurers increase prices.

Costs Burden Employers and Employees

The data reveals the heavy costs of health insurance across the board. The Kaiser Family Foundation’s 2025 Employer Health Benefits Survey put total premiums nationally at $9,325 for single coverage and $26,933 for a family. The share of these benefits paid by employees varies among employer sizes, but it is safe to say it has generally increased in recent years.

The market dynamics are translating into real-world challenges for employers. Many are experiencing substantial plan renewal increases. At Employee Benefits of Virginia, several clients received increases of over 30% in the past year. To help, we try to find a different carrier, funding solution or benefit design. But it’s becoming increasingly difficult to reduce the overall premium increases without making changes the employees and employer deem too disruptive.   

Affordability is a central concern for employees. As premiums rise, employers often pass a portion of the increase on to employees through higher contributions, deductibles or out-of-pocket costs. This increase in cost exposure impacts the perceived value of the benefit for employees, regardless of root cause.

What Can Employers Do?

In response to these pressures, employers are beginning to rethink their approaches to health insurance in their overall benefits packages. The traditional model, selecting a fully insured plan and revisiting it once a year at renewal, is becoming less effective as a long-term strategy. Rising costs are largely driven by underlying health care inflation, which affects all carriers and plan designs. As a result, simply moving from one fully insured carrier to another may only delay the increase — not stop it. 

Instead, there is a growing emphasis on alternative funding and delivery strategies that allow for greater control over costs and more alignment with the specific needs of the workforce. One approach is the use of individual coverage strategies, where the risk and plan options are moved to the individual coverage market. To keep tax-favored status, these are implemented through Individual Coverage Health Reimbursement Arrangements (ICHRA) or Qualified Small Employer Health Reimbursement Arrangements (QSEHRA). The choice between these vehicles is determined by employer size and objectives.

Under this model, employers provide a defined contribution or percentage of a benchmark plan to employees, who then purchase their own health insurance in the individual market. This shifts the employer’s role from plan sponsor to financial intermediary, creating more predictable costs for them while giving employees greater control and flexibility.

My experience with these arrangements is that employers should be prepared to educate and support employees with this transition. It’s stressful for some employees to move from two or three plan choices to dozens. However, these arrangements can produce savings for employers. Generally, my clients with more than 50 employees who are risk-adjusted by the carriers have seen larger savings than those with less than 50 who have access to the ACA fully insured plans.

Another approach gaining popularity for smaller employers is level-funded health plans, which allow employers to have a self-funded plan with a fully insured feel.  Employers have a fixed monthly payment and total liability. Also, if claims are less than expected, the employer may receive a refund — creating the potential for additional savings. If claims are higher, their stop-loss coverage limits exposure. This approach can provide significant savings to employers with a certain demographic (generally younger and healthier than the average). Level-funded plans can be a solid alternative to ACA fully insured plans, which pool all risk with no consideration of health status. 

These alternatives are not all-inclusive of the strategies that exist for smaller employers, but they are the most dominant approaches I see now. They are not without their complexities, and a full explanation of all the facets goes well beyond the scope of this article. Individual coverage strategies require careful communication and employee education, as employees take a more active role in selecting coverage. They can also require an understanding of how subsidies and affordability rules interact with employer contributions. Level-funded plans, on the other hand, involve underwriting and greater exposure to group-specific risk variability, which may not be suitable for all employers. 

However, both approaches reflect a broader shift in the market. Employers are moving away from a one-size-fits-all model and toward more customized solutions that better align cost with value.

Any Hope for the Future?

Looking ahead, it’s unlikely the core drivers of health insurance cost increases will meaningfully change in the near term. Medical inflation, pharmacy trends, and utilization patterns are all expected to continue rising. While policy changes and market innovations may provide partial relief, they are unlikely to reverse the overall trajectory. Health care is expensive and health insurance is merely a function of those underlying costs.

These factors show that health insurance must be managed as a strategic component of the business, rather than a recurring administrative task. Employers that take the time to understand the market, evaluate their options, and align their benefits strategy with their workforce will be better positioned to navigate ongoing challenges. Those that continue to rely solely on annual renewal adjustments may find it increasingly difficult to manage costs and maintain competitive benefits.

In summary, the Virginia health insurance market in 2026 is defined by sustained cost pressure, evolving risk dynamics, and a growing need for strategic decision-making. While the challenges are significant, they are not without solutions. Employers that are willing to explore alternative approaches and adapt to changing conditions have an opportunity to affect one of their largest and most complex expenses.