Employer Health Insurance Costs to Climb 8% to 11% in 2027

The bill arrives at open enrollment

Americans with health insurance through work are heading into open enrollment as employer costs rise at the fastest pace in about two decades. Forecasts from the major benefits consultancies differ by a few points, but they all point the same way. Aon expects employer healthcare costs to rise 9.5% in 2027 before companies change their plans, and calls it the fourth straight year of elevated increases.13 Marsh puts the increase at 8.2% per employee after employers make cost-cutting changes. That would be the largest jump since 2003, and the firm says costs would climb about 11% if employers did nothing.4 WTW is even higher at 11.1%, and the Business Group on Health expects a median increase of 9.2%.32

The spread among these numbers mostly comes from timing. Some firms measure costs before employers adjust their plans and some measure after. Taken together, the forecasts put the underlying increase at roughly 9% to 11%, and Georgetown University health policy researchers describe the same range as the biggest annual jump in about 20 years.9 The main question for 2027 is how much of that increase employers pass to workers, and in what form.

Workers are already paying more

KFF's annual employer survey, released Oct. 22, shows how this year went. The average family premium rose 5% to $28,303. The share paid by workers rose 9% to $7,471 a year, faster than the 7.6% increase the year before.2 Wages grew 3.7% and overall inflation was 2.7%, so health costs took a larger share of paychecks.5 Among large employers, 44% raised what workers pay toward coverage.2

By one measure, though, workers' share of the premium barely changed. Employees still pay about 27% of family premiums and 18% of individual premiums, with employers covering the rest.2 Some coverage of the survey describes workers getting squeezed, while the share data suggests the split is holding steady. Both are accurate. The total cost is growing so quickly that a nearly unchanged percentage still means much larger dollar amounts.

The split may not stay stable in 2027. Marsh found that 59% of employers plan cost-cutting changes such as higher deductibles, and about two-thirds of employers with 500 or more workers expect to raise employees' share of premiums.4 Aon estimates that workers' total healthcare costs, including premiums and out-of-pocket spending, rose 7.9% in 2026, the fastest pace in ten years, and expects a similar increase in 2027.3 Aon's Todor Penev said employers have run out of most of their usual ways to control costs.1 Jim Winkler of the Business Group on Health said employers used to absorb most increases, but that is starting to change.2

The effects show up at small employers too. At a Michigan State University social club, the HR director must choose between a premium increase of nearly 13% with the current $1,000 deductible, or a $1,500 deductible that holds the increase to about 7%.1 Small firms already pay more. Their average individual deductible is $2,624, compared with $1,772 at large companies.5 KFF's Matthew Rae warned that steep rate increases for small groups could push some small firms to stop offering coverage.6

Hospitals, AI billing and the drug bill

The forecasters broadly agree on what is driving costs. People are using more care, and prescription drug and hospital prices are rising quickly.2 Marsh's actuaries say three newer factors each add about one percentage point to 2027 cost growth: GLP-1 weight-loss drugs, AI software used to submit claims, and arbitration disputes under the No Surprises Act.4 Georgetown researchers found that the arbitration process, which was expected to save money, instead added $22.4 billion in awards, fees and administrative costs from 2022 through 2025.5 The Business Group on Health also reported that hospital systems and other providers are using AI to get the most out of their billing to insurers and patients.2

The disagreement is over who bears responsibility. Elizabeth Mitchell of the Purchaser Business Group on Health argues that employers are being asked to fix a problem caused by hospitals, drugmakers and insurers, and that the industry is doing nothing to control costs.2 The data supports her. When employers' main tools are higher deductibles, narrower networks and dropping drug coverage, the cost stays in the system and lands on patients.

GLP-1 drugs are the clearest case of employers cutting back. The share of mostly large employers covering the drugs for weight loss fell from 72% in 2025 to 60% this year, according to the Business Group on Health, and the group knows of no employer that has started covering them.1 In KFF's survey, 29% of firms said GLP-1 coverage significantly raised their drug costs. About 9% of companies with 50 or more workers now buy prescription drugs from outside the U.S. to save money.2

Medicare's lower drug prices start Jan. 1

While private employers drop coverage of the drugs, Medicare is lowering their price. Negotiated prices for 15 more drugs take effect Jan. 1, 2027, including Ozempic, Wegovy and Rybelsus.13 The negotiated price for semaglutide is $274 for a 30-day supply, down from a 2024 list price of $959. Other cuts are steeper: Janumet falls 85% to $80, and Pomalyst, a multiple myeloma drug, drops from $21,744 to $8,650 a month.14 AARP reported savings estimates of $8.5 billion to $12 billion a year.11 Separately, Novo Nordisk has said it will cut the U.S. list price of its semaglutide drugs to $675 a month starting Jan. 1.14

The percentage cuts are measured against list prices, which overstates them. A peer-reviewed analysis found the negotiated prices were a median of 38% below estimated net prices, meaning prices after rebates. Most of them are still above the average list price in comparable wealthy countries.1817 For Vraylar, the negotiated price is still several times the average list price abroad.17

The gap between Medicare and employer plans is notable. Medicare will pay much less for the same drugs that employers are dropping because they cost too much. Georgetown researchers have proposed applying Medicare's negotiated prices to private insurance, along with caps on deductibles and hospital prices.2 Unless Congress acts, Medicare's lower prices will not reach employer plans.

Medicaid cuts and their effect on private premiums

The least-noticed factor in employer costs may be Medicaid. On Jan. 1, the work requirements in last year's Republican tax-and-spending law take effect nationwide. Adults in the expansion population will have to show 80 hours a month of work, school or volunteering, or $580 in monthly earnings, and renew their eligibility every six months.21 Reports differ on how many states are covered. The Guardian says 44, while summaries of the federal rule say 43 states plus Washington, D.C.2122 The Congressional Budget Office projects about 7.5 million people will lose coverage by 2034. At least 2.6 million of them would lose it because of paperwork, not because they are ineligible.26

Early results support that estimate. In the first renewal groups under one early state's rules, 533 people lost coverage. Only 43 were found ineligible; the other 490 did not return forms in time.30 Retroactive coverage is also being cut, to one or two months depending on the applicant.28

This matters for employer premiums because of cost-shifting. Washington state alone expects about 250,000 residents to lose Medicaid.29 Analysts there warn that when hospitals provide more charity care, they charge insured patients more, which can raise premiums for employer and marketplace plans.25 Washington hospitals expect to lose nearly $6 billion in revenue through 2033.24 Nationally, the Urban Institute estimates $278 billion in uncompensated care by 2034.21 Supporters of the law, including a Washington state senator, say it will save taxpayers money.25 Even so, the CBO says the federal savings will come mostly from people losing coverage.22

Our reading

Jan. 1, 2027 is when several major changes take effect at once. Medicare's lower drug prices, the Medicaid work requirements and the steepest employer cost increase in two decades all start on the same date, and the marketplace is also expecting a median 15% premium increase for insurers.6 The common thread is that costs keep shifting onto whoever has the least leverage: workers through higher deductibles, Medicaid enrollees through paperwork, and insured patients through hospital prices that rise to cover unpaid care. Medicare's negotiated prices show that the government can push prices down when it has the authority to. Employer plans do not have that authority, and the 2027 forecasts suggest workers will pay for it.