Key facts
- Employers are projecting a median 9.2% increase in health costs in 2027, according to the Business Group on Health.
- Aon projects U.S. employer health care costs to rise 9.5% in 2027, pushing average costs above $19,000 per employee.
- This represents the fourth consecutive year of health care cost increases approaching double digits.
- Rising costs are attributed to increasing hospital prices, expensive prescription drugs (including GLP-1 therapies), and declining population health.
- Employers absorb approximately 82% of health plan costs, influencing workforce and business planning decisions.
U.S. employers are bracing for a significant surge in health care costs, with projections indicating a median increase of 9.2% in 2027, according to a survey by the Business Group on Health (BGH). Aon forecasts a similar 9.5% rise for the same year, pushing average costs above $19,000 per employee. This marks the fourth consecutive year of near double-digit increases, a sustained period of health care inflation not seen in decades.
The escalating costs are driven by several factors, including rising hospital prices due to consolidation, increasing expenses for prescription drugs like GLP-1 medications and specialty treatments, and a general decline in population health leading to more chronic conditions and high-cost claims. Experts note that employers have underestimated actual medical spend for the past three years, suggesting that current forecasts might be too optimistic.
Employers are increasingly absorbing the majority of these costs, with estimates suggesting they are responsible for about 82% of health plan expenses. This financial pressure is forcing companies to re-evaluate their benefits strategies, consider trimming benefits, cutting programs, and seeking vendors that can offer cost savings. The situation is prompting a broader reconsideration of the employer's role as the primary provider of health insurance in the U.S., with leaders facing difficult decisions to ensure sustainability.
Over the past decade, cumulative healthcare costs are projected to have jumped 76%, more than double the rate of general inflation. The BGH surveyed 127 employers, representing approximately 8.7 million Americans, for its research.