Public employers face rapidly rising health care costs, straining already-tight local budgets. While there are a few immediate fixes, long-term solutions are possible through coordinated action.
In a Governing article, health care premiums for 2026 are set to rise far faster than inflation or tax revenues, leaving public employers and employees alike bracing for another expensive year. With costs driven by new treatments, high-priced drugs, and aging workforces, local governments are likely to face increased budget pressures in 2026.
From the article:
Most of these insurance cost increases will fall upon employer budgets. For public employers that pay or subsidize retiree insurance premiums in addition to those of their active workers, it will be a double whammy.
One potential cost-saving solution for county governments could be to take a more proactive, collective approach to managing rising health care costs. While many counties may hire benefits consultants to navigate year-to-year insurance increases, there might be an opportunity to use those experts to help county governments, municipal leagues, and boards of education develop a unified strategy for long-term cost containment. By forming a collaborative, local governments could be better positioned to negotiate more flexible coverage options, such as medical savings accounts, self-insurance pools, and caps on high-cost drugs, rather than being locked into one-size-fits-all plans. With this strategy, counties and their partners could move from passive observers in the national health care debate to active participants shaping sustainable solutions.
Prescription drug costs are a major driver of rising premiums. Some states, including Maryland, have passed legislation allowing price caps or upper payment limits on selected drugs. As mentioned in the Governing article, at the federal level, proposals around “most favored nation” (MFN) and direct-to-consumer (DTC) pricing could eventually reduce pharmacy costs and insurance premiums. Counties can explore cost-saving strategies with insurers, labor unions, and benefits consultants, including contract clauses that preserve flexibility to capture long-term savings as these policies develop.
Thoughtful collaboration through coordinated policy action, innovative benefit designs, and strategic investments will be critical for controlling health care costs over the long term.
