Healthcare costs have been growing at an alarming rate in recent years, and they’re not slowing down. Surveys indicate that healthcare costs in the United States are likely to increase by 8-10% or more in 2027. Here’s a breakdown of cost predictions:
- Mercer predicts that the total health benefit cost per employee will rise 8.2% on average in 2027, which is the highest increase since 2003, even after planned cost-reduction measures.
- The Business Group on Health (BGH) expects a 9.2% healthcare median increase in healthcare costs for 2027, which employers hope to reduce to about 8% through plan design changes.
- PwC projects a group medical cost trend of 9% in 2027, the highest in 17 years.
- The International Foundation of Employee Benefit Plans anticipates a median 10% increase in healthcare costs in 2027.
- A KFF analysis revealed the median proposed premium increase among 295 small group insurers is 14% for 2027.
Individual Marketplace plans are also facing a median proposed premium increase of about 15% for 2027. Regardless of the exact figure, employers can expect their healthcare costs to continue to skyrocket throughout 2027.
The following are key factors impacting rising healthcare costs in 2027:
Cancer Care
Cancer care has been the top driver of employer cost increases for five consecutive years. Cancer is complex, so diagnosis and treatment is unique for different individuals. Diagnoses are increasing, and the new and innovative treatments offer better outcomes but come with a higher price tag.
Employer Approach: May try to focus on healthy lifestyle promotion, cancer prevention and screenings, or centers of excellence partnerships.
GLP-1s
Both awareness and adoption of GLP-1 drug use for weight loss continue to rise. These medications are intended to be taken in perpetuity to achieve their benefits, so users are required to use these costly treatments on an ongoing basis. Additional GLP-1 options could also drive up employer health plan costs.
Employer Approach: May require employees who use these medications for weight loss to get prior approval, participate in weight management programs, or meet other requirements. Further, as alternative payment options become available, many plans cover GLP-1s only for diabetes or not at all.
Specialty Medications
Specialty drugs now account for the vast majority of new FDA drug approvals, reflecting a shift toward more targeted, complex therapies for chronic and rare conditions.
The rapid growth of this market is fueled by more plan participants using key specialty drugs like biologics and biosimilars, as well as CGTs.
Employer Approach: Increasingly using formulary design, coverage policies, and clinical edits to encourage the use of lower-cost biosimilars when clinically appropriate. To manage CGT costs, many are using centers of excellence and specialized contracting arrangements.
Chronic Health Conditions
Chronic health conditions require ongoing treatment, monitoring, and medication, which adds up quickly for individuals and employer-sponsored health plans. An increasing percentage of the population has two or more of these diseases, which includes heart disease, stroke, cancer, diabetes, arthritis, and obesity.
Aging Populations
While life expectancy in the U.S. has increased over the past 50 years, birth rates have consistently trended downwards. More Americans are entering retirement age, and this group accounts for a sizable portion of healthcare spending driven by the likelihood of having one or more chronic conditions.
AI-driven Billing and Documentation
Documentation and coding tools powered by artificial intelligence (AI) are capturing more billable detail without necessarily increasing intensity of care delivered. Employers may see claims reflect higher billed severity even when patient treatment itself hasn’t changed as these tools become more widespread across provider networks.
Catastrophic Claims
These claims typically involve severe illnesses, complex treatments, or long-term care needs and occur across all employee age groups. They’re often associated with cancer treatments, NICU stays, organ transplants, mental health crises, severe trauma or accidents, genetic disorders, and advanced therapies. General inflation and consolidation of health systems are also driving up prices for services.
Healthcare Talent Shortages
Demand for healthcare workers is significantly outpacing supply, and this gap is projected to widen in the coming years. As patient demand continues to grow, several factors strain the healthcare workforce, including:
- The aging population
- Workforce approaching retirement
- Demand for behavioral health services
- A shrinking talent pipeline
- Residency bottlenecks
When patients face longer wait times or reduced access to primary care, they may delay treatment until conditions become more advanced or turn to costlier emergency care instead, thus compounding this dynamic.
Healthcare and Provider Consolidation
Consolidation among hospitals, health systems, and physician practices continues to give larger provider organizations greater leverage in price negotiations with insurers, which can lead to higher prices for employers and employees while generally producing no change in the quality of care.
The U.S. Government Accountability Office (GAO) also found that private equity ownership of or investment in physician practices represented about 6.5% of physicians nationally in 2024, a small but growing share.
