Medical Cost Trend 2027 Hits 9% as Employers Brace for Hikes

A forecast that keeps getting worse

Health plan actuaries expect the cost of treating commercially insured patients to rise 9% in 2027. PwC's annual Behind the Numbers report calls that the steepest medical cost trend in 17 years.1118 The firm projects 9% for the employer group market and 8.5% for the individual ACA market. It also raised its 2026 estimates after the fact, lifting group trend from 8.5% to 9% and individual trend from 7.5% to 8.5%.1114 That revision may matter as much as the headline. It suggests actual 2026 claims came in above what plans expected a year ago, which is why one analysis of the report described the increase as structural rather than a one-time spike.17

The figures come from surveys and interviews conducted in April and May 2026 with actuaries at 27 health plans. Together those plans cover more than 103 million employer-sponsored members and 8 million marketplace enrollees.1615 PwC defines medical cost trend as the year-over-year increase in per-person costs with benefits held constant. Insurers use it to set the next year's premiums.11 The report deliberately leaves out Medicare and Medicaid.11 That is a real gap, because the most consequential policy changes taking effect on January 1, 2027, are in those programs.

Five inflators, one surprising culprit

PwC lists five forces pushing costs up:

• provider use of AI-enabled revenue tools
• reimbursement pressure driven by inflation and consolidation
• rising pharmacy spending
• sustained growth in behavioral health use
• more out-of-network payment disputes under the No Surprises Act11

The AI finding has drawn the most attention. About 70% of surveyed plans ranked provider AI documentation and coding tools among their top three cost drivers, and roughly a fifth named it the single largest.18 The mechanism is simple. These tools let clinicians record more detail and higher severity, which raises the amount paid per claim.11 One trade summary noted that this extra billable severity can appear without a matching increase in the intensity of care.13

PwC's own podcast described AI more favorably, as a way to make sure physicians are properly paid for care they already provide.12 Insurers and providers will keep arguing over whether this is "accurate coding" or "upcoding." For employers paying the bills, the label matters less than the rising cost per claim.

The other inflators are more familiar. Consolidation has weakened insurers' bargaining power, and PwC put hospital-related inflation at 7.59%.1117 More than 85% of surveyed plans expect pharmacy costs to grow faster than overall medical trend, driven by specialty drugs and GLP-1 therapies.16 Behavioral health use rose 10% from 2023 to 2024 and about 62% since 2018. Unlike most categories, that growth comes from more people using care rather than higher prices.1114

The report's sharpest warning concerns the usual sources of relief. Biosimilars, generics and shifting care to cheaper settings are already built into plans' baseline assumptions, so they can no longer pull the trend down much.1118

Employers: estimates differ, direction doesn't

The employer-side forecasts published since June agree on direction and disagree mainly on size:

• Aon: costs up 9.5% before mitigation, pushing average spending per employee above $19,000.1
• Business Group on Health: median increase of 9.2% before plan changes, about 8% after.5
• Marsh (formerly Mercer): total benefit cost per employee up 8.2% after planned cost cuts, the largest rise since 2003, and 11% if employers changed nothing.29
• WTW: 11.1% increase.5

The spread is less of a disagreement than it looks. The figures measure different things. The lower numbers assume employers will cut benefits, and the higher ones assume they won't. One employer guide put the practical meaning bluntly: the gap between the before and after figures is coverage that workers lose.7

The strongest reason to take the higher estimates seriously comes from the Business Group on Health. Its data show employers have underestimated their actual spending for three straight years, with each miss larger than the last.5 The group's CEO said this pattern implies the 2026 and 2027 forecasts may be too optimistic.5 On that evidence, the 9% to 9.5% range looks like a floor, not a ceiling.

Workers will feel much of this. Marsh found that 59% of employers plan cost-cutting changes for 2027, such as higher deductibles. About two-thirds of large employers expect to raise employees' share of premiums, which means many paycheck deductions will rise faster than the 8.2% average.2 Aon's data show employers still pay about 82% of plan costs, and their own annual cost increases rose from 3.7% in 2022 to 8.8% in 2026.1 The Business Group on Health estimates cumulative costs will have risen 76% over a decade, roughly double general inflation.5

Medicare: lower premiums, higher ceilings

Medicare Advantage looks like the opposite story at first glance. CMS projects the weighted average monthly MA premium will fall 16.5%, from $14.37 to $12.00. For MA plans with drug coverage, the average Part D premium is expected to drop 38% to $7 after rebates.22 CMS also says about eight in ten MA enrollees can keep their current plan at the same or a lower premium.22

The lower premium hides other increases. Consumer guides report that the median in-network out-of-pocket limit rose from $6,500 to $7,100.21 Comparison sites describe out-of-pocket maximums up about 10% and drug deductibles up about 30%, with carriers holding premiums steady by raising cost-sharing limits.26 Florida coverage says almost all seniors there will be affected, as MA plans cut benefits and raise deductibles.30 In one Kansas area, every MA plan will charge a prescription deductible of $400 to $700.29

Standard Part D is also getting more expensive for enrollees:

• The deductible rises to $700 from $615.2430
• The annual out-of-pocket cap rises to $2,400 from $2,100.2430
• A demonstration that limited stand-alone plan premiums is ending.2427
• The Part B premium is projected at $209.50, up from $202.90.25

CMS frames the premium declines as the result of "slashing handouts" to insurers.22 Taken together, though, the numbers point to costs moving from premiums onto patients when they actually use care.

Drug price negotiation is the clearest relief. Negotiated prices for 15 more drugs take effect January 1, bringing the total to 25.2429 Semaglutide (Ozempic, Rybelsus and Wegovy) gets a maximum fair price of $274 for a 30-day supply, about 71% below its 2024 list price of $959.24 CMS estimates the new prices would have saved about $12 billion, roughly 44%, had they applied in 2024.28 AARP puts annual savings at $8.5 billion to $12 billion, with 5.3 million beneficiaries using the drugs.23 Those discounts don't apply to employer plans, which is part of why commercial drug spending keeps rising while Medicare's slows.

Medicaid: the cost shift arrives January 1

The biggest wildcard is Medicaid. Under the 2025 law known as H.R. 1, expansion adults must document 80 hours a month of work, school, volunteering or job training, or earn $580 a month, starting January 1, 2027. They will also have to re-verify eligibility every six months instead of every year.3540 Retroactive coverage windows also shrink to 60 days for traditional enrollees and 30 days for expansion adults.38

Estimates of how many people will lose coverage vary widely:

• CMS's implementing rule: 2.3 million in 2027, rising to 3.1 to 3.3 million in later years.40
• The Congressional Budget Office: about 5.7 million by 2034.36
• RAND: about 5.3 million by 2034.36

The Urban Institute argues the federal rule understates likely losses and overstates employment gains. Even under the rule's own assumptions, it calculates that more than four in ten people losing coverage would actually be compliant or exempt.36 Given how earlier state work requirements played out, the outside estimates look more realistic.

Hospitals bear the direct impact. A Commonwealth Fund model projected that hospital operating margins in expansion states would fall 11.7% to 13.3%, and safety-net hospital margins about 26% to 30%.31 The same analysis said hospitals may respond by cutting services or raising rates for privately insured patients.31 The Urban Institute estimates the law will produce $278 billion in uncompensated care by 2034.35 Connecticut officials expect hundreds of millions of dollars in losses as tens of thousands of residents drop off coverage.32

Why this all lands on one bill

PwC studies the commercial market in isolation, but every program feeds into the same health care economy. The Business Group on Health cited vendor estimates that Medicaid cuts and the end of enhanced ACA subsidies are adding about 2% to employer cost trend.5 PwC also notes that its 2027 projection does not include the effect of the expired subsidies.11 Insurers have proposed a median 15% premium increase for 2027 marketplace plans.8

The most likely outcome is a cost shift. As public programs tighten and providers keep consolidating, hospitals will try to recover lost revenue from commercial payers, and employers will pass much of it to workers through higher deductibles and premium shares. PwC itself expects employers to scale back benefits in ways that resemble government plans.11 In 2027, patients in employer plans, marketplace plans, Medicare Advantage and Medicaid are all likely to pay more, whether through premiums, deductibles or losing coverage.