Survey: Health benefit costs expected to jump 8.2% in 2027, the biggest increase since 2003
We field the National Survey of Employer-Sponsored Health Plans over the summer, and each year in mid-August we take an early look at the responses so we can release the projected health benefit cost increase for the upcoming year as soon as possible. While it’s usually exciting to see this important data point for the first time, this year it was almost hard to look — and yes, it was as bad as we feared, if not worse.
Total health benefit cost per employee is expected to rise 8.2% on average in 2027 — the highest increase since 2003 — even after accounting for planned cost-reduction measures. Employers said that the cost of their current plans would increase by 11%, on average, if they took no action to lower it.
Based on these projections, 2027 will be the fifth consecutive year of elevated health benefit cost growth after a decade of more moderate annual increases. It will also be the highest increase in this five-year period. The average projected increase for 2026 was 6.7%.
Ongoing cost pressures persist, along with a few new factors
Some of the most significant cost pressures are ongoing. Advances in diagnostics and therapeutics, such as cancer treatments, produce better outcomes but typically cost more than the treatments they replace. The consolidation of providers into fewer, larger health systems and provider groups gives them considerable bargaining power when negotiating prices with insurers, contributing to higher charges. And when government funding for healthcare doesn’t keep pace with inflation, it puts more pressure on private health plan payors as providers seek to make up for lower public health plan reimbursements and more uncompensated care.
While these cost pressures consistently keep medical cost trends above general inflation, this year, some newer cost drivers have combined to drive cost growth to a level not seen in decades. At the top of the list is GLP-1 medications for weight management. While the market for these medications is evolving in ways that could ultimately result in lower costs, some employers needing immediate cost relief chose to drop this coverage for next year. Still, our actuaries estimate that rising GLP-1 utilization accounts for a full percentage point of the overall cost growth for 2027.
Two other recent developments are also driving the current spike in health benefit cost, each also adding as much as a percentage point to trend, according to our actuaries. One is the rapid adoption of AI-enabled software that assists physicians with claims submission and has resulted in more claims, and higher-level claims, being submitted for payment than before the system was in place. Another is an unintended consequence of The No Surprises Act, which was designed to protect patients from big bills when they go to the hospital and see a provider they didn’t choose or who is out-of-network. The Act established an Independent Dispute Resolution (IDR) process to handle disagreements between providers and insurers on payment about. The number of cases being submitted for IDR has far exceeded predictions, as have the amounts being awarded to providers.
While we can hope that lawmakers will address the problems with IDR in the very near future, right now it is injecting additional cost into employer-sponsored health plans that sponsors and plan members can ill-afford.
Employers’ response to faster cost growth
The pressure on health care budgets is likely to result in higher healthcare costs for employees in 2027. The survey found that 59% of employers plan to make cost-cutting changes to health benefits in 2027, including plan design changes like higher deductibles that can increase members’ out-of-pocket costs.
In addition, a Marsh survey conducted earlier this year found that about two-thirds of large employers (those with 500 or more employees) expect to increase employees’ share of premium costs next year. That means that in 2027 many employees will see their paycheck deductions for health coverage rise by more than the overall average cost increase of 8.2%.
But the earlier survey also found that many employers are also looking for ways to control costs without shifting them to employees, such as offering lower-cost, quality-focused plan options. One example is variable copay plans, which 12% of large employers plan to offer in 2027 (18% of employers with 20,000 or more employees). These plans generally have no or a low deductible and charge members less when they select top-performing providers for specific health services.
When employers were asked to identify their top priorities for managing health programs over the next few years, guiding members to higher-quality care was in the top three, with 58% of large employers indicating that this strategy would be important or very important. In last year’s survey, this strategy ranked fifth, suggesting it is gaining momentum.
Not surprisingly, the highest priority continues to be a greater focus on managing high-cost claims. As very expensive new therapies for cancer and rare diseases reach the market, extremely high-cost claims have become more common. So on top of high costs, health plan sponsors are also dealing with more volatile costs, which can materially disrupt budgets and impact quarterly earnings, particularly for smaller employers.
A call to action
Few organizations can absorb health cost increases that far outpace inflation without making tough financial decisions such as cutting benefits, slowing hiring and wage growth or charging customers more. This level of increase is a call to action for employers to use data and analytics, quality strategies, and targeted interventions to better manage costs while still supporting their workforce’s health. There is much that employers can do to bend the trend, as we discussed in this recent post on alternative medical plans. In the coming weeks on the blog, we’ll continue to share ideas and examples of employers that have taken bold steps to disrupt cost growth.
About Marsh’s National Survey of Employer-Sponsored Health Plans
The 2026 National Survey of Employer-Sponsored Health Plans launched on June 10, 2026. The preliminary results discussed here are based on responses from over 1,800 employers through August 10. The final survey results, reflecting responses from more than 2,000 employers, will be released later this year. Explore the findings from last year’s survey here.
