Healthcare costs, and consequently employee benefit costs, have been growing at an alarming rate in recent years, and they’re not slowing down. Mercer projects that the total health benefit cost per employee will rise 8.2% on average in 2027, after accounting for cost-cutting measures, the highest increase in 15 years. To put it in perspective, the past decade normally increased 3% annually. In addition, PwC expects medical costs to grow at 9% to reach their highest level in 17 years. The Business Group on Health (BGH) similarly projects a median 9.2% increase in healthcare costs for 2027, which employers expect to offset to about 8% through plan design changes. Regardless of the exact figure for 2027, employees can expect their healthcare costs to continue to skyrocket throughout the next year.
Faced with sustained high healthcare costs, more employers are passing costs along to their employees. That can show up as higher premiums, deductibles and copayments. According to a Mercer survey, two-thirds of large companies expect to raise monthly premiums for employee health coverage through paycheck deductions in 2027. While some organizations may try to limit the premium increase, they could raise other out-of-pocket costs, such as deductibles and copayments, making it important to review all aspects of your healthcare costs. Lastly, individual Marketplace plans are likely to go up even higher, as much as 15%-20%, the second consecutive year of double-digit hikes. Understanding today’s drivers of healthcare costs can help you make informed decisions about your coverage and financial planning. This article explores key factors driving increases in employees’ healthcare costs in 2027.
Cancer Care
According to the BGH, cancer care has been the top driver of employer cost increases for five years in a row. The spending has worsened due to the growing prevalence of cancer diagnoses and the escalating cost of treatment. Cancer is complex; therefore, its diagnosis and treatment don’t follow the same path for every individual.
Cancer diagnoses are increasing, not just among older adults but also among younger working-age individuals. This means more employees and dependents are entering treatment, often requiring long-term and intensive care. Additionally, new and innovative therapies—including cell and gene therapies, immunotherapies, targeted drugs and personalized medicine—may offer better outcomes but come with high price tags. These treatments often cost hundreds of thousands of dollars per patient, especially in late-stage cases.
With cancer cases and costs on the rise, employers may try to focus on healthy lifestyle promotion, cancer prevention and screenings, or centers of excellence partnerships.
GLP-1s and Prescription Drugs
Glucagon-like peptide-1 (GLP-1) drug use for weight loss is already widespread, and adoption continues to climb. According to Gallup’s 2026 National Health and Well-Being Index, 11% of U.S. adults currently take a GLP-1 medication for weight loss, up from just 3% in 2024, and 15% report having used one at some point. Awareness of these drugs has also surged, rising to 91% of U.S. adults in 2026 from 80% in 2024. GLP-1 medications typically cost hundreds of dollars per month with insurance or manufacturer discount programs, but can exceed $1,000 per month without coverage. Many plans only cover GLP-1s for diabetes or won’t cover these prescriptions at all. These costly medications are intended to be taken in perpetuity to achieve their benefits. This means that GLP-1 users may experience health benefits but will be required to use these high-cost treatments on an ongoing basis.
In response to the popularity of GLP-1s, more employers may require employees who use these medications for weight loss to get prior approval, participate in weight management programs or meet other requirements.
AI-driven Billing and Documentation
A newer factor is reshaping how much employers pay for care. According to PwC, AI-powered documentation and coding tools are helping providers capture more billable detail without necessarily increasing the intensity of care delivered. Nearly 70% of health plans surveyed named this among their top three drivers of rising healthcare costs in 2027. As these tools become more widespread across provider networks, employers may see claims reflect higher billed severity even when patient treatment itself hasn’t changed.
Chronic Health Conditions
Chronic conditions affect millions of Americans and require ongoing treatment, monitoring and medication, which adds up quickly for both individuals and employer-sponsored health plans. In fact, around 90% of U.S. healthcare spend is on people with chronic and mental health conditions. Chronic conditions include heart disease, stroke, cancer, diabetes, arthritis and obesity.
In general, chronic disease is increasing in prevalence in the United States and is projected to continue to do so in 2026 and the coming years.
Catastrophic Claims
Catastrophic claims, which are extremely high-cost medical events, are significant contributors to recent healthcare costs. These claims typically involve severe illnesses, complex treatments or long-term care needs and occur across all ages of employees. Catastrophic claims are often associated with cancer treatments, neonatal intensive care (or NICU) stays, organ transplants, mental health crises, severe trauma or accidents, genetic disorders and advanced therapies (e.g., cell and gene therapy). General inflation and the consolidation of health systems are driving up prices for services, making catastrophic claims even more expensive.
Healthcare Labor Costs
The supply of healthcare workers continues to fall short of the growing demand for utilization. This shortage is due to rising healthcare demands, an aging population, retiring workforces and insufficient talent entering the healthcare industry. When key players in the healthcare industry are required to spend more on labor, those expenses are often passed on to both employers and users of the healthcare benefit: employees and their dependents.
What Can You Do?
While you can’t necessarily control these driving factors, educating yourself as a healthcare consumer is one way to help manage healthcare costs. Start by fully understanding what your health plan does and doesn’t cover to help reduce your healthcare spending. This step can help you plan and budget accordingly. Additionally, prioritize preventive care services to help avoid costly treatments later.
If you have more questions about your benefits, please contact us.
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