Employer Health Costs Set for Biggest Jump Since 2003 in 2027

A rare consensus, and it's bad news

The major benefits consultancies usually disagree about how fast employer health costs will grow. This fall they mostly agree, and they all point to one of the steepest increases in a generation. Marsh, the brand that now includes Mercer, projects that total health benefit cost per employee will rise an average of 8.2% in 2027. That would be the largest increase since 2003. The figure comes from preliminary responses from more than 1,800 U.S. employers.16 Employers in that survey also said that if they left their current plans unchanged, costs would rise about 11%.12

The other major trackers report similar or higher numbers. Aon expects costs to climb 9.5%, which would push average employer spending above $19,000 per employee.19 The Business Group on Health found a median projected increase of 9.2% among large employers. PwC's Health Research Institute puts group medical cost trend at 9%, its highest reading in 17 years. WTW reports an underlying trend of 11.1%, the highest it has recorded in nearly two decades.22 Small businesses face even more. Insurers in the small-group market have asked for a median 14% premium increase for 2027, and six carriers have filed for more than 30%.22

The consultancies use different samples, methods and definitions. Even so, they land in roughly the same 8%-to-11% band. That convergence is the most important fact in the story. This is not one firm sounding an alarm. It is a reading of the market that the whole industry shares.

Why the forecasts differ

The spread between 8.2% and 11.1% can look like disagreement. Most of it comes down to one methodological choice: whether a figure is measured before or after employers change their plans. Marsh's 8.2% already includes planned cost-cutting, and its 11% is the do-nothing case.26 WTW's 11.1% is a pre-mitigation number, and employers expect to bring it down to 9.7%. The Business Group on Health's 9.2% median falls to about 8% after plan design changes.22 Aon says its 9.5% assumes a status quo in which employers add no new plan changes or care-management programs.19

Read together, the pre-mitigation numbers cluster around 9% to 11%. The post-mitigation numbers sit closer to 8% to 10%. The gap between the two is the important part, because it shows how much employers plan to cut. One analysis estimates that Marsh's 2027 pair implies about 2.8 percentage points of cost-shifting, compared with 1.4 points for WTW and 1.2 for the Business Group on Health.15

There is one reason for caution. The same analysis notes that Aon projected 9.0% growth for 2025, but the realized figure came in at 6.7%. It argues that status-quo forecasts tend to overshoot once employers redesign their plans.15 It also points out that federal actuaries project private health insurance spending to grow about 5% a year over the next decade. That is roughly half the per-employee trend the consultancies describe.15 Different populations and definitions likely explain much of that gap. Still, the headline numbers are self-reported employer expectations collected before the plan year begins, not settled claims.15

Those caveats shouldn't be overstated. Costs are already accelerating. Aon says employer costs rose 8.8% in 2026, up from 3.7% in 2022.19 Marsh's 2027 projection is 1.5 percentage points above its 2026 projection of 6.7%.26 Even if 2027 comes in below forecast, the direction is clear.

What's pushing costs up

The trackers broadly agree on what is driving costs, though they stress different factors. Marsh's chief actuary, Sunit Patel, says advances in diagnostics and treatment improve outcomes but often cost more than what they replace. He also cites health system consolidation and lower public reimbursements as structural pressures that keep medical inflation above general inflation.16

GLP-1 weight-management drugs are the newest and most visible factor. Marsh estimates that rising use of these drugs accounts for a full percentage point of 2027 cost growth.16 An earlier Aon analysis reached a similar estimate of roughly 1%, which makes it one of the better-corroborated numbers in the field.15 Aon adds that GLP-1 therapies are spreading into cardiovascular disease, sleep apnea and chronic kidney disease, and that newer oral versions could widen access.19 Some employers spend heavily on these drugs. Bank of America has said GLP-1s make up about 13% of its more than $2 billion in annual employee health spending.19

Two of the newer drivers are partly technological. Marsh points to the rapid adoption of AI-enabled billing software that helps physicians submit claims. It says this has led to more claims and higher-level claims.16 PwC's survey supports that view: nearly 70% of responding health plans named AI-enabled coding among their top three trend inflators.22 The No Surprises Act's arbitration process is also adding cost. About 2.6 million disputes were filed in 2025, and providers won around 85% of them.22

Cancer care remains the leading driver named by large employers for the fifth year in a row. Seventy percent of Business Group on Health respondents cited it, up from 58% the year before.22

Workers will absorb more of the increase

The 8.2% describes total benefit cost per employee. It is not a forecast of what workers will pay out of their paychecks.18 For many workers, the actual hit may be larger. Marsh found that 59% of employers plan cost-cutting changes for 2027, including higher deductibles. A separate Marsh survey found that about two-thirds of large employers expect to raise employees' share of premiums. Marsh's own conclusion is that many workers' payroll deductions will rise faster than the 8.2% average.11

The starting point is already high. KFF's benchmark survey put average family premiums at $26,993 in 2025, with workers contributing $6,850.4 That was the first time in two decades that family coverage costs rose 6% or more for three straight years.7 Measured against average full-time earnings of about $62,000, a family premium now equals more than 40% of a typical salary.2 Aon's breakdown shows the employee side clearly. In 2026, workers paid an average of $3,130 in premium contributions plus $2,167 out of pocket, while employers covered about 82% of plan costs.1530

The effects are already visible. A nurse practitioner told reporters her family's monthly employer premium rose from $700 to $1,500, and it now takes about a fifth of her income.25 Small businesses may be under the most strain. An eHealth survey found that 73% of smaller employers are considering dropping traditional health benefits in 2027.29

Wages and hiring are exposed

Marsh's language is notably blunt. It warns that few organizations can absorb increases this far above inflation without cutting benefits, slowing hiring and wage growth, or raising prices for customers.11 Aon's Mike Pasterick makes a similar point. He says increases near double digits stop being a budgeting issue and start shaping workforce and financial planning decisions.14

The most likely outcome is not a sudden collapse of employer coverage. It is gradual erosion. Employers will keep their plans but shift more cost to workers through premium contributions, deductibles and narrower networks. Some will drop expensive coverage such as GLP-1s for obesity. Marsh notes that some employers did exactly that to get immediate relief.23 Others are trying alternative designs. Twelve percent of large employers expect to offer variable-copay plans in 2027, which reward members for choosing designated high-performing providers.13

The broader context makes this harder for households. ACA marketplace insurers are proposing about 15% average increases for 2027, after a 20% average increase for 2026.28 Workers with employer coverage, those buying on the exchanges and small-business owners are all facing higher costs at once.

What to watch

Marsh's final survey results, covering more than 2,000 employers, are due later this year.11 More immediately, open enrollment materials issued this fall will show how much of the increase employers are actually passing to workers. If Aon's past forecasts are a guide, the realized 2027 number may come in below the status-quo projections. The likely reason is that employers will cut benefits, not that the cost pressures will ease. Either way, workers are likely to pay more, whether through higher premium contributions or higher costs when they use care.