The costs of employer health benefits are expected to rise next year at the highest rate in more than 20 years, according to new projections released this week.
Annual employer health benefit costs will rise by 8.2 percent in 2027, according to estimates from financial consulting firm Mercer, due to ongoing cost constraints and the higher price of improved therapeutics.
Employer health costs have been rising since 2022. If costs rise as expected, it would be the largest increase since 2003.
“The consolidation of providers into fewer, larger health systems and provider groups gives them considerable bargaining power when negotiating prices with insurers, contributing to higher charges,” the firm stated.
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“And when government funding for healthcare doesn’t keep pace with inflation, it puts more pressure on private health plan payors as providers seek to make up for lower public health plan reimbursements and more uncompensated care.”
The Mercer survey said the adoption of AI-enabled software to help submit claims is contributing to the expected jump, as the technology has helped submit more claims and higher-level claims. It also said the No Surprises Act of 2022, which prohibits surprise out-of-network bills from emergency room visits, is a contributor, since disputes over bills have far exceeded expectations.
Employers surveyed by Mercer cited managing high-cost claims and measuring the performance of health plans as among their top strategies for managing health programs.
There have been similar findings from global insurance broker Aon, which projected that employer health costs in the U.S. could rise by 9.5 percent in 2027. Aon’s projections would mean an added $19,000 per employee on average.
Aon said medical spending has climbed as patients use more healthcare services, chronic conditions become more prevalent and the number of high-cost claims increases, and that healthcare costs for employers are set to rise by near double digits for a fourth straight year in 2027.
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“Additional cost pressure is emerging as providers adopt technologies, including AI, that support more detailed clinical documentation and coding, contributing to higher billed charges in some instances,” said Aon.
Aon based its estimates on data from more than 1,100 U.S. employers covering 7.9 million employees and $135 billion in 2026 healthcare spending.
Aon’s projection assumes employers do not make benefit changes or introduce care-management programs to curb expenses.
“Aon consultants expect many employers to implement cost-saving changes or programs to help mitigate this increase,” it said.