Rhode Island employers should prepare for another year of steep increases in commercial health insurance premiums. Based on the pattern of the past three years—during which the Office of the Health Insurance Commissioner (OHIC), after considering actuarial analysis of requested rate increases and consistent with OHIC’s stated mission, approved about 80% of insurers’ requested increases—the Rhode Island Business Group on Health (RIBGH) projects that 2026 premiums for large and small groups will rise by 18% or more, absent unusual government intervention.
Rhode Island in Context
On one level, Rhode Island performs reasonably well: our family premiums are the lowest in New England even though they are consistently increasing above the consumer price index and wage growth. Yet when compared nationally, family premiums, deductibles, and out-of-pocket maximums have hovered around the national average for more than a decade. But “average” is not good enough when the national system itself is failing at affordability. Being in the middle of the pack is no comfort if the pack is headed in the wrong direction. The real goal should be to bring Rhode Island below the national average, improving the state’s ability to recruit and retain businesses from across the country.
Rhode Island employers also carry a larger share of family premium costs than the national average. This matters for competitiveness. If Rhode Island wants to retain and recruit businesses, employer health costs must be driven below the national average, creating a genuine advantage rather than liability.
What’s Driving Premium Growth?
The largest single driver of commercial premiums is hospital spending, which accounts for nearly 50% of total medical expenses covered by commercial health insurance. Within this, outpatient hospital costs have grown faster and to higher totals than prescription drugs over the last decade. RIBGH’s briefs make clear: until hospital cost trends are addressed, employers and families will continue to face relentless premium increases.
Hospital lobbying has also become a powerful force behind rising costs. Every year, hospital systems and the Hospital Association of Rhode Island push legislation designed to increase their payments substantially. In 2023, one major hospital system proposed legislation that would have added $500 million to medical expenses borne by fully and self-insured employers in the state. Last year, the Hospital Association advanced a series of proposals that together would have added several hundred million dollars to employer-sponsored health insurance costs—without offering a single proposal to improve efficiency or outcomes. They also sought to weaken OHIC’s Affordability Standards, which currently limit hospital revenue growth to the Consumer Price Index plus 1%. That cap is widely regarded as one of the most effective guardrails preventing family premiums from rising even more steeply.
Another important factor is the use of provider taxes, a mechanism through which the state taxes hospitals to increase its share of federal Medicaid funding. These taxes—estimated at approximately $240 million annually—raise hospital costs, which are then passed on to employers through higher insurance premiums. These costs ultimately flow back through health insurance premiums, which fully and self-insured employers pay. The issue here is not intent—OHIC is committed to keeping commercial premiums affordable—but rather how the system enables incentives that drive added cost-sharing. The irony is that one arm of state policy is charged with promoting affordability, while another relies on mechanisms that inflate hospital expenses to maximize federal Medicaid dollars. That dynamic illustrates a broader point: aligning financial incentives—such as rewarding efficiency over volume—is essential to meaningful reform.
At the federal level, the combination of Medicare and Medicaid cuts enacted under the Trump administration threatens to deepen the burden on employer-sponsored coverage, fully insured and self-insured alike. Unless reforms intervene, commercial insurance will continue to be treated as the payer of last resort—the backstop that makes up the difference when public payments fall short.
The Urgent Need for Change
With family premiums in Rhode Island equaling almost 28% of median household income, the current path is unsustainable. What must change is the underlying assumption—held by providers, hospitals in particular, and by Medicaid—that commercial health insurance can indefinitely subsidize shortfalls. That is no longer a viable strategy.
Instead, Rhode Island needs an alignment of effort among providers, insurers, and state government to tackle the drivers of cost directly. Promising steps include payment reforms such as the AHEAD global budget model, now in early implementation in Rhode Island. By stabilizing hospital finances and rewarding efficiency rather than volume, AHEAD can begin to bend the cost curve. But reform will only succeed if employers remain vocal about affordability as a business issue, and if policymakers prioritize hospital cost containment as central to economic competitiveness.
Conclusion
The message is clear: without change, we can expect more of the same—premiums that rise faster than inflation, burden households, and weaken Rhode Island’s ability to attract and keep businesses. Employers should prepare for 18% or more increases in 2026, while also joining RIBGH in pressing for reforms that put hospitals, insurers, and state leaders on a shared path toward affordability.