2027 Health Benefits Renewal: An 8% Cost Increase Playbook

Employers should plan for health benefit costs to rise 8% to 10% in 2027. Marsh projects an 8.2% increase after cost-cutting moves, the steepest since 2003, and employers say the jump would be 11% if they did nothing. Aon puts 2027 growth at 9.5%, pushing average cost above $19,000 per employee. The employers who come out ahead start renewal work months before carrier letters arrive.

How Much Will Employer Health Costs Rise in 2027?

Every major survey points to the biggest increase in two decades. The range runs from about 8% to 11%, depending on the survey and whether employers take action.

• Marsh: 8.2% after planned changes, 11% without them, based on more than 1,800 employers (Fierce Healthcare).
• Aon: 9.5%, with average cost per employee above $19,000.
• Business Group on Health 9.2%, IFEBP 10%, and WTW 11.1%, as summarized by PLANSPONSOR.
• Small-group insurers are seeking a median 14% increase for 2027, per Healthcare Finance News.
• For context, KFF put average family coverage at $26,993 in 2025.

Why 2027 is different from past renewal years

This is the fifth straight year of elevated trend, so the easy fixes are gone. Employers that already raised deductibles need new tools.

• Cumulative increases since 2023 have outpaced wage growth for many employers.
• Employees are already absorbing higher contributions and out-of-pocket costs.
• Another round of simple cost-shifting risks hurting retention.
• Structural changes, such as funding model and PBM terms, now offer more than design tweaks.
• Boards and CFOs want a multi-year cost plan, not a one-year patch.

2027 Employer Health Cost Projections

What Is Driving the 2027 Cost Increase?

Pharmacy is the fastest-growing piece, but it is not the only one. Several forces are hitting at once, and they compound.

• GLP-1 drugs alone add about one percentage point to 2027 trend, according to Marsh.
• Specialty drugs and cell and gene therapies create large, unpredictable claims.
• Hospital and physician consolidation is raising unit prices in many markets.
• AI-powered billing software is increasing the number and complexity of claims submitted.
• Lower public program reimbursements push costs onto commercial plans.

Why catastrophic claims matter more now

One or two large claims can swing a mid-size employer’s renewal. With specialty therapies costing six or seven figures, that risk is growing.

• High-cost claimants drive a large share of total spend in most groups.
• Self-funded employers feel those claims directly unless stop-loss responds.
• Stop-loss attachment points set years ago may be too low for today’s claim sizes.
• Fully insured groups see the impact in renewal rating and pooling charges.
• Large-claim management and case management programs are worth reviewing before renewal.

When Should Employers Start Renewal Planning?

Late summer, for a January 1 renewal. Groups that wait for the renewal letter in Q4 have little time to market alternatives or change plan design.

• Carriers enter their busiest underwriting season in late summer.
• Marketing to other carriers needs 60 to 90 days of lead time.
• Funding changes, such as moving to level-funded, need claims data well before open enrollment.
• Plan design changes require employee communication before enrollment opens.
• Our open enrollment guide covers the communication side.

What a pre-renewal review covers

It starts with data and ends with options. The goal is to know your number and your choices before the carrier tells you.

• Audit 12 to 24 months of claims to find the real cost drivers.
• Run a competitive market review across carriers and funding models.
• Evaluate level-funded and captive arrangements for groups of the right size.
• Review PBM contracts and pharmacy carve-out options.
• Build an employee communication plan that supports any changes.

A realistic pre-renewal calendar

Working back from January 1 gives each step the time it needs. Most delays come from late claims data.

• July: request 24 months of claims, pharmacy, and large-claim reports.
• August: analyze cost drivers and decide which funding models to quote.
• September: market to carriers and stop-loss vendors; review the PBM.
• October: negotiate, finalize plan design, and prepare communications.
• November: open enrollment with clear explanations of every change.

Should Mid-Market Employers Consider Self-Funding in 2027?

For many groups with 100 to 500 employees, yes, at least as a quote. Self-funding and level-funding give employers access to their own claims data and keep surplus in good years.

• Fully insured plans carry carrier margin, taxes, and pooling charges that self-funded plans avoid.
• Level-funded plans add stop-loss protection with a fixed monthly cost.
• Group captives let mid-size employers share stop-loss risk with similar companies.
• Self-funded plans are governed by ERISA and overseen by the Department of Labor’s EBSA.
• Funding changes require reliable claims data and an appetite for some year-to-year variation.

How to check your stop-loss before renewal

Stop-loss terms set years ago may no longer fit. Rising claim sizes and new billing patterns can leave a gap.

• Compare your specific attachment point with your recent large claims.
• Check for lasers, which raise the deductible on known high-cost members.
• Review contract basis, such as 12/15 or paid basis, for run-in and run-out gaps.
• Confirm specialty drug and gene therapy claims are not excluded.
• Price an aggregate stop-loss option if cash flow predictability matters.

Which Plan Design Changes Are Employers Making for 2027?

Most employers are combining cost-sharing with steering. Marsh found 59% plan cost-cutting changes for 2027, but the smartest moves change behavior instead of just raising deductibles.

• Higher deductibles and out-of-pocket maximums, which shift cost but can hurt retention.
• Variable copay plans that charge less for high-value providers and more for expensive ones.
• Narrow or tiered networks built around cost and quality data.
• Centers of excellence for high-cost procedures such as joint replacement and cancer care.
• GLP-1 coverage rules, such as prior authorization, lifestyle program requirements, or coverage limits.

How to avoid hurting recruiting

Benefits are a competitive tool, and cutting them carelessly costs talent. The goal is to manage cost without becoming the weaker offer in your market.

• Benchmark contributions and plan design with our employee benefits benchmarking guide.
• Protect the benefits employees value most, such as low-cost primary care.
• Use steering incentives instead of blunt cuts wherever possible.
• Explain the reason for changes clearly; employees accept change better with context.
• Tie decisions to a multi-year employee benefits strategy, not a one-year fix.

How Should Employers Review Their PBM Contract?

Pharmacy is the fastest-growing line, so the PBM contract deserves the hardest look. Many plan sponsors have never seen a full accounting of rebates and spread pricing.

• Ask whether you receive full pass-through of manufacturer rebates.
• Check for spread pricing, where the PBM charges you more than it pays the pharmacy.
• Review formulary decisions: are they built on clinical value or on rebate size?
• Confirm audit rights and how often you can exercise them.
• Price a pharmacy carve-out against the bundled carrier arrangement.

Why PBM scrutiny is rising

Lawmakers in both parties are pushing for PBM transparency, and some employers have sued their PBMs. Fiduciary expectations for plan sponsors are rising with it.

• ERISA plan fiduciaries are expected to monitor service provider fees.
• New transparency rules require more disclosure of pharmacy costs.
• Cash-pay drug programs and direct manufacturer pricing are changing what plans pay.
• Benchmarking PBM terms against the market often uncovers savings.
• Documenting your review process protects the plan’s fiduciaries.

What Should CFOs Expect From Their Benefits Broker This Year?

Data, options, and a timeline, delivered early. If your broker is waiting for the carrier renewal to start the conversation, you are already behind.

• A claims analysis that names the top cost drivers and the members behind large claims, de-identified.
• Quotes from several carriers and at least one alternative funding model.
• A PBM review with specific dollar findings.
• A per-employee cost comparison like our cost per employee benchmarks.
• A written recommendation with trade-offs for budget, retention, and compliance.

Questions to ask before you sign the renewal

A few direct questions reveal whether the renewal was negotiated or simply delivered. Ask them before you accept any increase.

• What was the carrier’s initial renewal, and what did negotiation change?
• Which other carriers and funding models were quoted?
• How much of the increase comes from pharmacy, and from which drugs?
• Are any pooling or large-claim charges included, and on what basis?
• What plan design changes would bring the increase down by half?