Employer Health Costs Set for 8.2% Jump in 2027, Most Since 2003

The number that frames 2027 open enrollment

Employers will pay more for health benefits in 2027 than at any point in more than 20 years. Marsh, the benefits consultancy formerly known as Mercer, released preliminary survey results showing that total health benefit cost per employee should rise an average of 8.2% next year. That is the largest increase since 2003, and the figure already accounts for the cuts employers plan to make.24 The same employers said their current plans would cost 11% more if they changed nothing.21 The firm's own write-up did not sound like a consultant trying to calm clients. It said the results were hard to look at and "as bad as we feared, if not worse."21

The survey reflects responses from more than 1,800 employers collected between June 10 and August 10. Final results from more than 2,000 employers are due later this year.24 This would be the fifth straight year of elevated cost growth, coming after roughly a decade of smaller increases. The 2026 projection was 6.7%.24 Earlier Marsh research put the scale in perspective: annual increases hovered around 3% for more than a decade before the current run began.30

The headline number matters well beyond human resources departments. More than 165 million Americans get coverage through an employer.1 According to Bureau of Labor Statistics data, private employers paid an average of $3.48 per employee hour toward health insurance in June, out of $14.07 in total benefit spending.1

Where the forecasts agree, and where they split

The big consultancies all point the same way. They differ on how steep the climb will be. Aon projects a 9.5% rise, which would push average employer costs above $19,000 per employee.2223 WTW is higher still at 11.1%, which it calls the biggest jump in more than two decades.2 The Business Group on Health projects a 9.2% median increase, falling to 8% after benefit changes.26 Segal puts medical trend at 9.9% and prescription-drug trend at 11.5%, and PwC projects a 9% group medical trend.29

Some coverage has blurred these numbers. One market-focused outlet led with an "11% surge."7 That is Marsh's figure for what happens if employers do nothing, not its forecast. One explainer made the point directly: the 11% and 8.2% describe the same employers under two different assumptions, so they are not competing estimates.27 These measures also use different methods and populations. Employer cost growth, medical trend and proposed small-group premiums should not be compared one-to-one.29 My read is that the true range runs from roughly 8% to just over 11%, depending on how much employers cut. Every major forecaster is describing the same kind of shock.

Workers will absorb much of it

For employees, the more important figure may be the share of the increase that lands on them. Fifty-nine percent of surveyed employers plan cost-cutting changes for 2027, including higher deductibles.24 An earlier Marsh survey found that about two-thirds of large employers, those with 500 or more workers, expect to raise employees' share of premiums.21 Marsh itself said this means many workers will see paycheck deductions for health coverage rise faster than the 8.2% average.28

Small employers are under the most strain. An eHealth survey found that 54% of smaller employers expect premium hikes of at least 10% in 2027, and 73% are considering dropping traditional health insurance.7 The head of the National Federation of Independent Business warned that policies built for big employers can backfire on small ones. Large firms can self-insure, which smaller firms cannot do.10

Reporting from the medical sector shows that health workers are caught in this too. An Idaho nurse practitioner told reporters her family's monthly premium rose from $700 to $1,500. A physician and his pharmacist wife dropped coverage and now pay for care from a health savings account.1 The executive director of the Association for Independent Medicine said his own practice faced a 22.5% premium increase.4 These are individual stories, not survey data.8 Still, they suggest that independent practices, which are themselves employers, may start trading benefits for higher wages, a shift some are already considering.1

Drug prices: GLP-1s and Medicare's negotiating power

Drug spending is at the center of this story. Marsh's actuaries estimate that rising use of GLP-1 weight-loss drugs alone accounts for a full percentage point of 2027 cost growth. Some employers have already dropped coverage for the drugs to get immediate relief.24 That is about an eighth of the projected increase coming from one drug class.27 Mercer's June research found that 27% of employers had tightened GLP-1 coverage criteria for 2026 or 2027, and another 5% were considering dropping the drugs.30

The contrast with Medicare is hard to ignore. Starting January 1, 2027, negotiated prices take effect under the Inflation Reduction Act for 15 more drugs, including Ozempic, Rybelsus and Wegovy.1114 Medicare's negotiated 30-day price for semaglutide is $274, compared with a 2024 list price of $959, a cut of about 71%. Across the 15 drugs, reductions range from roughly 38% to 85%.20 CMS estimates the new prices will save enrollees about $685 million out of pocket in 2027.1420 Medicare also runs a separate GLP-1 Bridge program, which offers certain weight-management drugs at a flat monthly cost and has been extended through December 31, 2027.11

My reading is that the federal government now has negotiated prices for the same drugs that employers are struggling to afford, and commercial plans get none of that pricing. Marsh has said the GLP-1 market is changing in ways that could eventually bring costs down.21 For 2027, though, private plans are paying the price.

Medicare enrollees face their own increases, just smaller ones. Open enrollment began October 15 and runs through December 7.17 The Part D annual out-of-pocket cap rises from $2,100 to $2,400, the standard deductible rises from $615 to $700, and a temporary Part D premium subsidy is ending early.17 Average stand-alone Part D premiums are projected to rise by less than $1 a month. As one analysis notes, though, that measures something different from Marsh's per-employee cost figure.27

Medicaid cuts and the cost-shift problem

The policy story with the most direct link to employer costs is the Medicaid overhaul in the 2025 federal budget law. Marsh lists lower government funding and reimbursements in public programs among its cost drivers.24 The firm explained the mechanism: when public funding falls behind inflation, providers try to recover lower reimbursements and uncompensated care from private payers.22 An executive at Lilly put it more bluntly. As Medicare and Medicaid get less money, he said, employers "get stuck with a larger bill."9

The largest changes take effect January 1, 2027. Expansion adults must document 80 hours a month of work, school or volunteering, or about $580 in monthly earnings. Renewals move to every six months, and retroactive coverage shrinks.33 The law cuts about $1 trillion from federal Medicaid spending over ten years.35 The CBO projects that the law's Medicaid changes will add 7.5 million uninsured people by 2034, or 10 million when marketplace provisions are included.39 Estimates vary widely depending on which version of the bill was scored.40 Manatt Health estimates that CMS's implementing rule could push average annual coverage losses up to 8.2 million.34

State figures make this concrete. Maryland raised its projected losses to as many as 152,000 people.38 Connecticut projects that 108,000 residents are at risk, and the state hospital association warns that the costs will fall on employers and insured residents.37 One analysis projects a $466 billion increase in hospital uncompensated care over a decade.32 Each of these is a projection, but together they point toward higher commercial prices.

The individual market adds more pressure. Enhanced ACA tax credits expired at the end of 2025, and average monthly marketplace payments rose 58%.1 Insurers have proposed a median 15% increase for 2027.6 People who lose Medicaid for failing the work requirement also cannot get subsidized marketplace coverage.34

The bottom line

Other forces are also driving costs up: provider consolidation, AI-assisted billing that produces more and higher-coded claims, and larger-than-expected awards to providers in No Surprises Act payment disputes.2425 The head of the Society for Human Resource Management called the steep increases "a new normal."9

My conclusion from the reporting is that 2027 is not a one-year spike. It is where several trends meet: expensive new drugs, health systems with more pricing power, and public programs being cut back. Medicare's negotiating power is shielding seniors from some of it. Employers and their workers have no comparable protection, and cuts on the public side add to what they pay.