Employer Health Costs Set for Steepest Rise Since 2003 in 2027

How large the increase will be

American workers are about to enter open enrollment as health care costs rise on several fronts at once. Every major benefits consultancy now expects 2027 to bring the largest single-year increase in employer health costs in close to two decades. The lowest of the headline forecasts comes from Marsh, the firm formerly branded as Mercer. It projects that total health benefit cost per employee will rise 8.2% on average, the highest rate since 2003, and that figure already accounts for the cost-cutting steps employers plan to take.8 Other forecasts are higher. Aon, drawing on 1,100 employers, expects a 9.5% increase. Business Group on Health puts the median at 9.2% before plan changes. PwC's survey of health plan actuaries projects a 9% group medical cost trend, the highest in 17 years.14

So the "nearly 10%" in the headlines describes a range, and a fairly narrow one. Analysts who compared the leading projections say most of them fall between 8% and 12%.14 The more important point is that these increases come on top of earlier ones. Marsh describes 2027 as the fifth straight year of elevated growth.11 Aon reports that employer cost growth climbed from 3.7% in 2022 to 8.8% in 2026, more than doubling.1 Business Group on Health estimates that health costs have risen 76% over the past decade, more than twice the rate of general inflation.14

Gross and net figures measure different things

The forecasts differ mainly because some measure costs before employers act and some measure costs after. Marsh's employers said their current plans would cost 11% more if they changed nothing. The 8.2% figure reflects planned measures such as higher deductibles. Business Group on Health reports the same pattern, with a 9.2% median that falls to about 8% once plan design changes are counted.14 WTW finds an underlying trend of 11.1% and expects employers to bring it down to 9.7%.14

Workers should pay close attention to this distinction. The difference of roughly three points between the gross and net figures is not money that disappears. Much of it moves to employees through higher deductibles, larger out-of-pocket maximums, narrower networks and tighter eligibility rules.14 Marsh found that 59% of employers plan cost-cutting changes for 2027. In an earlier Marsh survey, about two-thirds of employers with 500 or more workers said they expect to raise the employee share of premiums.8 One business publication concluded that, for many workers at large companies, paycheck deductions could therefore rise faster than the 8.2% average.12

The forecasts do not fully agree on how costs will be shared. KFF's Matthew Rae said employers have covered about 80% of plan costs for more than 20 years, and that workers and employers have historically shared premium increases.8 Aon found that employee premium contributions rose 6.4% in 2026, to $3,130. That is slower than the growth in total plan costs, which means employers absorbed more of the increase in dollar terms.14 Aon also reported that workers' total health spending, counting premiums and out-of-pocket costs, rose 7.9% in 2026, the fastest pace in ten years, and an Aon executive expects a similar rate in 2027.17 Taken together, the evidence suggests that employers have shielded workers from premium increases but are now running out of room to keep doing so. The shift to workers will likely show up more in deductibles and point-of-care costs than in premiums.

The dollar figures in Aon's own coverage also differ. One report said its 2026 per-employee cost was $14,43214, while another said the 2027 forecast would push average per-employee spending above $19,000.1 The two numbers probably measure different things, so readers should rely on the percentage changes rather than either dollar figure.

Hospitals and providers drive the increase

GLP-1 weight-loss drugs have received much of the attention, but the forecasts point to hospital and provider prices as the main source of pressure. PwC reports that hospital and related services inflation reached a post-pandemic high of 7.59% year over year in February 2026.2 The 2026 Milliman Medical Index found that outpatient hospital costs and pharmacy spending together accounted for 69% of the year-over-year increase in employer health costs.4 Small-group insurers filing 2027 rates estimated median underlying medical cost growth at 10.8%, citing higher prices for hospital stays, physician care and prescription drugs.4

Consolidation is a major reason. Marsh named hospital consolidation, along with reduced government health spending, as a structural force keeping costs above inflation.12 One analyst told CNBC that when large hospital systems buy smaller practices, they gain more power to negotiate higher payment rates with insurers.3 The same analyst pointed to health care labor shortages, which raise wages and add to inflation.3

Two newer factors are less familiar. Nearly 70% of health plans in PwC's survey named AI-enabled medical coding among their top three cost inflators.14 Marsh also cited AI-assisted billing software, saying it has led to more claims and to claims coded at higher levels.16 Software that helps providers document care more thoroughly also produces larger bills, which suggests that billing practices, and not only the amount of care delivered, are now driving costs.

The second factor is the arbitration process created by the No Surprises Act. Providers filed 2.6 million disputes in 2025 and won about 85% of them.14 The law was designed to protect patients from unexpected out-of-network bills. Its dispute process now appears to be raising costs that return to patients through premiums.

The uninsured also affect what insured patients pay. As more people lose coverage, the cost of their unpaid care shifts onto people with insurance.13 This links the employer market to the turmoil in the ACA marketplace.

Drugs: cancer treatment and GLP-1s

The forecasts agree on GLP-1s. Marsh's chief actuary, Sunit Patel, estimates that growing use of the drugs adds about one percentage point to employer cost growth in 2027.17 Pharmacy spending is already about a quarter of total health spending, and Business Group on Health expects it to rise 12% in both 2026 and 2027.10 Some employers are already pulling back. Mercer data show that 6% of large employers dropped GLP-1 weight-loss coverage in 2026, and another 5% plan to drop it or are considering doing so for 2027.4

Employers, however, cite cancer more than GLP-1s. Cancer has been the top cost driver named by employers for five straight years, cited by 70% of respondents to Business Group on Health in 2026, up from 58% the year before.14 The group's chief strategy officer pointed to the prices of newer oral and infused therapies, more diagnoses at younger ages, and the cost of managing complex illness over longer periods.6 Patel added that very expensive new therapies for cancer and rare diseases have made extremely high-cost claims more frequent and budgets less predictable. He said this volatility hits smaller employers hardest. An International Foundation of Employee Benefit Plans survey points the same way: catastrophic claims were the cost driver employers cited most often, ahead of specialty drugs.4

This suggests that blaming GLP-1s, a story centered on a single drug class, oversimplifies the problem. Even if employers dropped weight-loss coverage entirely, they would remove about one point from a trend near 9%. The rest comes from hospital prices, cancer care and how claims are billed.

Costs are rising across all types of coverage

Employer plans are only one part of the picture. ACA marketplace insurers have proposed a median 15% premium increase for 2027, according to KFF's review of 276 insurers. That would be the second straight double-digit increase, after an average of about 20% for 2026.15 The expiration of enhanced federal subsidies is driving much of the increase. Insurers expect younger, healthier people to drop coverage, which leaves a more expensive group of enrollees behind.17 Small employers face similar pressure, with insurers requesting a median 14% increase for small-group plans. Six of those insurers asked for more than 30%.14

The consequences are already reaching people who work in health care. A nurse practitioner in Boise said her employer-plan premium for her family rose from $700 to $1,500 a month, which takes about a fifth of her income.16 A Boise family physician dropped his family's coverage after marketplace premiums approached $1,600 a month.16

Outlook

The forecasts may still change. Marsh's figures are preliminary, and final results from more than 2,000 employers are expected later this year.16 Business Group on Health also notes that actual costs have come in above employer predictions for three straight years.6 Based on that record, the risk is that the final numbers will be higher, not lower.

The forecasts point to a clear conclusion. Employers can reduce the rate on paper by changing plan designs, but those changes mostly shift costs to workers rather than lowering them. Cost growth will slow only if hospital pricing, billing practices and the price of new therapies are brought under control. For 2027, workers should expect to pay more in premiums, at the pharmacy counter and when they receive care.