Employer Health Costs Set to Rise 8.2% in 2027, the Sharpest Jump Since 2003

Employers are bracing for the largest jump in health benefit costs since 2003. Marsh, the brokerage formerly known as Mercer, now projects an 8.2% increase in 2027 healthcare spending. That figure comes from preliminary results of the firm's 2026 National Survey of Employer-Sponsored Health Plans, based on responses from more than 1,800 employers as of August 10.

This is not a one-year blip. It marks the fifth straight year of rising costs, following a decade of what analysts called "more moderate annual increases." It is also the steepest increase of that five-year run. The pattern suggests something structural is at work, not just a temporary shock.

The number gets worse before mitigation. Employers estimate that if they took no action to control spending, the cost of maintaining their current plans would climb 11% in 2027. The gap between 8.2% and 11% represents the value employers expect to extract through active cost management, plan redesign, vendor negotiations, and benefit trims.

What's Driving the Increase

Several forces are converging at once. Marsh's report points to provider consolidation, government funding failing to keep pace with inflation, advanced treatments, AI software used in claims processing, and GLP-1 medications as the primary cost drivers.

GLP-1 drugs deserve particular attention. These medications, used for weight loss and diabetes management, have become a lightning rod in benefits planning. Marsh's actuaries estimate that rising GLP-1 utilization alone accounts for a full percentage point of total cost growth in 2027. Some employers, facing immediate budget pressure, have simply dropped the coverage for next year rather than absorb the expense. Analysts note the market for these drugs is evolving in ways that could eventually lower costs, but that relief has not arrived in time to help 2027 budgets.

Regulatory friction is compounding the problem. The No Surprises Act's Independent Dispute Resolution process, designed to settle billing disputes between providers and insurers, has produced what Marsh analysts call an "unintended consequence" on costs. A recent analysis found that total costs tied to the IDR process hit $22.4 billion by the end of 2025. That is a substantial sum flowing through a mechanism meant to protect patients from surprise bills, and it is now showing up in employer cost projections.

The response from employers is not passive. Fifty-nine percent plan to make cost-cutting changes to health benefits next year, according to the Marsh survey. Plan design changes, tighter networks, higher deductibles, and narrower drug formularies are all likely tools in that toolkit.

"Few organizations can absorb health cost increases that outpace inflation without making difficult financial decisions," said Simon Camaj, Marsh's U.S. health and benefits leader, in a statement accompanying the report.

That line is worth sitting with. Inflation has cooled from its post-pandemic peak, yet healthcare costs keep outrunning it year after year. When cost growth persistently exceeds inflation, something has to give: employer margins, employee take-home pay, or benefit generosity. Often it is a combination of all three.

Marsh's numbers are not an outlier. Aon released a separate report in August projecting a 9.5% spike in employer healthcare costs, which would push average per-employee spending above $19,000. Aon's analysts flagged this as the fourth consecutive year in which costs rose by or close to double digits. Two independent surveys pointing toward similar directional pressure, even with differing magnitudes, reinforces the broader signal: this is not a modeling quirk unique to one firm's methodology.

For workers, the practical effect of these trends rarely shows up as a line item they can see directly. Instead, it shows up in stagnant wage growth, higher deductibles, narrower provider networks, or reduced coverage for specific drug categories. Employers facing an 8% to 9% cost increase every year for four or five years running eventually pass some of that burden downstream. That's simple math, not speculation.

The GLP-1 situation illustrates the tension well. These drugs offer genuine clinical benefit for many patients managing obesity and diabetes. But their cost has forced employers into an uncomfortable choice: pay for a treatment with real health value, or protect the broader benefits budget. Some have chosen to drop coverage entirely rather than negotiate around the edges. That is a blunt instrument, and it will likely draw employee pushback in workplaces where the coverage disappears.

The IDR cost figure, $22.4 billion, also deserves scrutiny beyond this single report. The No Surprises Act was designed to shield patients from unexpected out-of-network bills. If the dispute resolution mechanism meant to settle those billing disagreements is itself generating billions in administrative and settlement costs, that expense does not vanish. It gets absorbed somewhere in the system, and employer-sponsored plans are clearly one destination.

The Bottom Line

Employer healthcare costs are on a trajectory that outpaces general inflation for a fifth consecutive year, with Marsh pegging 2027 growth at 8.2% and Aon projecting 9.5% in a separate analysis. GLP-1 drugs, provider consolidation, and regulatory friction from the No Surprises Act's dispute resolution process are all contributing. Fifty-nine percent of employers plan active cost-cutting measures next year, which means workers should expect changes to plan design, drug coverage, or cost-sharing arrangements sooner rather than later. The structural drivers behind this increase show no clear sign of reversing in the near term.