A survey of employers projects the largest increase in healthcare costs in more than two decades, driven by factors including the growing use of expensive weight-loss drugs and artificial intelligence tools that help medical providers submit more billable claims.
Costs for employer-sponsored health benefits are expected to rise by an average of 8.2 percent in 2027, the largest increase since 2003, according to an Aug. 31 report from consulting firm Marsh.
Workers are expected to bear some of the increase. About two-thirds of large employers plan to increase employees’ share of premium costs next year, while many are considering higher deductibles and other changes that would raise out-of-pocket expenses.
Marsh says this means many employees could see their paycheck deductions for health coverage rise by more than the overall 8.2 percent increase.
The skyrocketing costs come despite planned cost-reduction measures. Employers told Marsh that the cost of maintaining their current plans would rise by an average of 11 percent if they took no action to rein in spending.
The 2027 projection would mark the fifth consecutive year of elevated health benefit cost growth following a decade of more moderate annual increases. It would also be the sharpest increase during the five-year period, up from a projected 6.7 percent in 2026.
The findings are based on responses from more than 1,800 employers.
What’s Driving Costs Higher?
Some of the most significant pressures come from long-standing trends, including advances in diagnostic tools and medical treatments. New therapies, particularly for cancer and rare diseases, can produce better outcomes but often cost more than the treatments they replace.
The consolidation of medical providers into fewer, larger health systems has also increased their bargaining power when negotiating prices with insurers, contributing to higher charges.
Government healthcare funding has meanwhile failed to keep pace with inflation. That has put more pressure on private health plans as providers seek to offset lower public reimbursements and the rising cost of uncompensated care.
“Some newer cost drivers have combined to drive cost growth to a level not seen in decades,” the report’s authors wrote.
Marsh attributed a full percentage point of the projected increase to the growing use of GLP-1 weight-loss drugs, which can impose substantial costs on employers that cover them. Some employers have chosen to drop this coverage for next year, with some others pushing for the introduction of lower-cost GLP-1 biosimilars.
Another percentage point stems from medical providers’ growing use of AI-enabled software to document care and submit claims. The tools have resulted in more claims—and more claims billed at higher levels—being submitted for payment.
The dispute-resolution process created by the No Surprises Act is adding as much as another percentage point. The law, which took effect in 2022, was designed to shield patients from unexpected out-of-network bills but has generated a surge of payment disputes between providers and insurers.
The number of cases has far exceeded expectations, as have the amounts awarded to providers, according to Marsh.
Other Estimates Point Higher
Marsh found that 59 percent of employers plan to make cost-cutting changes to their health benefits in 2027, including higher deductibles that shift more expenses to workers.
Other projections point to even steeper increases. Aon expects U.S. employer healthcare costs to rise by 9.5 percent in 2027, pushing the average above $19,000 per employee and marking the fourth consecutive year of near-double-digit increases.
PwC separately projected a 9 percent increase in commercial health plan costs, the highest medical cost trend in 17 years. About 70 percent of health plans ranked provider AI tools among their top three cost drivers.
Sylvia Xu contributed to this report.