Leo Martin is a staff writer and second-year MPA student.

In 2026, health insurance premiums will rise by the fastest rate since 2018; at the same time, the Affordable Care Act (ACA) tax credits are currently scheduled to expire. This is coming as the Trump Administration’s pharmaceutical tariffs have been part of a series of protectionist moves which have constituted the largest tariff increase since the 1930s. With retail prescription pharmaceuticals comprising 9.2% of healthcare costs in the United States, is there a connection between the two? Are the tariffs the reason Americans are paying more for prescription drugs, and are they paying these costs through higher insurance premiums? 

On  April 15, 2025, The Trump Administration issued an executive order calling for an investigation into the pharmaceutical supply chain under Section 232 of the Trade Expansion Act of 1962. As a result, on September 25th, President Trump announced the imposition of 100% tariffs on name-brand drugs imported into the U.S, unless the companies were building manufacturing plants within the United States, initially effective October 1.  Tariffs can be a useful economic measure, whether it is for protecting American industries and workers from unfair competition, combating unfair trade practices, or shoring up supply chains for national security reasons. The Trump Administration has justified these tariffs for two apparent reasons. The first is part of the Trump Administration’s plan to combat unfair pricing, bringing them inline with drug prices in other developed countries.The second is the onshoring of pharmaceutical manufacturing by promising not to impose tariffs if firms have begun, or are in the process of, building manufacturing capacity in the United States. If the tariffs are meant to reduce the costs of prescription drugs, why are Americans going to be paying more for their healthcare next year? 

What is most striking about the Administration’s tariff policies has been how unpredictable it has been. On September 30th, the Administration made a deal with Pfizer to lift the threatened tariffs if the firm agreed to sell its drugs directly to consumers through a government website, TrumpRX. On October 1, the Trump Administration delayed the 100% tariff on brand-name prescription drugs, as it negotiated more deals with pharmaceutical companies for cheaper drugs. The Administration claims that tariffs are being used as a negotiation to bring pharmaceutical companies to the table. Companies could face higher tariffs until the Administration is satisfied with the manufacturers’ response, including having broken ground on new manufacturing capacity in the US or reaching favorable pricing agreements with the US. Yet the tariffs still remain a threat, even if they have yet to go into effect.

  While the tariff rate on pharmaceutical drugs is unclear, what is clear are the higher premiums people and employers will pay for health insurance. On November 1st, consumers could enroll for personal health insurance plans on the State-Based Marketplaces, and it is evident that premiums will be higher in 2026 and are rising faster than they have since 2017. An analysis by Health Systems Tracker (HST) of ACA Marketplace insurance plans found a median proposed premium increase of 18%, 11 percentage points higher than the 2025 increase of 7%. Premiums are also increasing for employer paid insurance plans, with one survey showing that employer premiums will increase by 9% on average. The acceleration is driven in part by the potential expiration of the COVID-19 ACA tax credits which would double premiums for between 11 to 24 million Americans. They are also increasing because healthcare costs are increasing. In 2025, healthcare inflation reached 4.2% in August, the highest since 2022. In 2026, healthcare inflation may worsen, partially due to health insurance companies passing on healthcare costs to consumers. An independent analysis of insurance companies’ 2026 filings found that insurers typically project a 7-8% rise in healthcare costs. 

In their fillings, health insurance companies have offered a range of causes, but some companies have already cited tariffs as a cause for higher premiums. KFF, an independent health policy think-tank, cited the example of United Healthcare of Oregon: which built a price impact of 2.2% into their initial premium filing in order to account for the uncertainty due to the tariffs, and the costs of onshoring in the US, a principle aim of the tariffs.  HST found that, “on average, insurers that cite tariffs as a factor are raising premiums an additional 3 percentage points higher than they would be without these new tariffs.” When health insurance companies have acknowledged the tariffs, it is to justify higher premiums. Insurance companies are building the price increases of the tariffs into their cost projections for next year, and passing them on through higher premiums. 

From the initial evidence we have, some health insurance premiums are increasing due to the Trump administration’s pharmaceutical tariffs, and are declaring so in their filings. Whatever the long term benefits of cheaper imports or reshoring of domestic pharmaceutical manufacturing may bring, health insurance companies are not projecting cheaper prescription drugs next year. Health insurance companies that cite tariffs as a cause for premium increases show that tariffs are making prescription drugs more expensive. They are also making prices unpredictable, meaning that insurers cannot forecast how much more drugs will cost next year. Customers will be paying more next year through higher premiums, because drugs will be more expensive and due to the uncertainty of how expensive they will be, an uncertainty premium. Healthcare will continue to become more expensive as long as the threat of tariffs remains. Any plan agreed to by Congress to reduce the cost of healthcare should provide more clarity on what the tariff rates will be, when they will go into effect, and what plans they have to reduce the costs of prescription drugs. If the uncertainty around the tariffs continue, insurers and patients will continue to face uncertainty on healthcare costs which are already making healthcare more expensive.

Photo by Myriam Zilles on Unsplash

The views expressed in Policy Perspectives and Brief Policy Perspectives are those of the authors and do not represent the approval or endorsement of the Trachtenberg School of Public Policy and Public Administration, the George Washington University, any employee of either institution, or the authors’ employers.