Health insurance is getting more expensive in virtually every market segment heading into 2027, with the forces driving the increases showing little sign of easing.
Employer-sponsored healthcare costs grew at least 7.9% this year, the highest annual increase in more than a decade, according to the 2026 Milliman Medical Index. Outpatient hospital costs and pharmacy spending accounted for 69% of the year-over-year rise, with pharmacy costs alone climbing 14.8%, driven by GLP-1 utilization and high-cost specialty drugs. Milliman also flagged AI as a factor in healthcare cost trends for the first time, noting that hospitals are using AI to optimize billing and claims coding while payers use it to enhance claims adjudication.
On insurers’ earnings calls throughout 2025, executives pointed to elevated medical cost trends eating into margins, citing increased utilization of specialty drugs, behavioral health services and emergency care, rising acuity in the Medicare Advantage and ACA populations, more aggressive provider coding, and growing demand for stop-loss insurance from employers.
While full-year profit outlooks have since largely been boosted across the industry, insurers have attributed the improvement to actions like exiting unprofitable markets, trimming benefits and raising premiums rather than to any meaningful decline in underlying cost trends.
What’s driving health insurance costs even higher in 2027:
1. The commercial group market is facing the steepest cost trend in 17 years
PwC projects a 9% medical cost trend for the commercial group market in 2027 and 8.5% for the individual market, the former being the highest the firm has projected in 17 years. PwC also revised its 2026 projections upward, lifting the group trend to 9% from 8.5% and the individual trend to 8.5% from 7.5%.
Through a survey of 27 health plans covering more than 103 million employer-sponsored members and 8 million individual marketplace enrollees, the firm identified five inflators driving the 2027 trend: provider adoption of AI documentation and coding tools, provider reimbursement pressure and consolidation, pharmacy spending, behavioral health utilization, and a high insurer loss rate under the No Surprises Act’s arbitration system.
2. ACA insurers are proposing a median premium increase of 15%
ACA marketplace insurers are proposing a median rate increase of 15% for 2027, the second consecutive year of double-digit premium hikes, according to a Peterson-KFF Health System Tracker analysis. For context, the median finalized ACA rate change last year was 20%.
Looking at a subset of the 276 insurers that have filed proposed rates, the median medical trend estimate is 10% for 2027. Insurers cited inflation, labor supply issues, claims severity, GLP-1s, provider consolidation and No Surprises Act disputes as cost drivers, along with the expiration of enhanced ACA premium tax credits and the resulting increase in morbidity.
3. Small group insurers are proposing a median premium increase of 14%
Insurers are proposing a median premium increase of about 14% for small group plans in 2027, according to a Peterson-KFF Health System Tracker analysis that reviewed rate filings from 295 insurers across all 50 states and D.C.
The median insurer estimate of underlying medical cost growth is 10.8%, reflecting rising prices for hospitalizations, physician care and prescription drugs alongside increased utilization. High-cost specialty drugs, increased utilization of mental health and substance use services, and the IDR process were also frequently cited as cost drivers.
4. A growing share of health plans are operating at a loss
In 2025, 73% of health plans reported an operating loss, up from 70% in 2024 and 54% in 2023, according to a report from HealthScape Advisors. Operating losses were most common among BCBS plans and regional nonprofits.
While median premium increases were 5.5%, 9.9% and 11.8% across commercial, Medicare and Medicaid businesses from 2024 to 2025, medical costs rose 8.5%, 11.6% and 12.2% across those same segments. Provider consolidation, specialty pharmacy spending, outpatient utilization and higher-acuity utilization were all cited as driving medical costs beyond what premium increases can offset.
5. Employers are running out of easy levers to pull
A survey of 112 corporate and single employers conducted in late July by the International Foundation of Employee Benefit Plans found that respondents expect a median 10% increase in medical plan costs from 2026 to 2027. The primary reasons employers cited for those increases were catastrophic claims (32%), specialty and costly prescription drugs (21%), utilization tied to chronic health conditions or mental health (14%) and provider costs (13%). Among the employers who named specialty drugs as the primary cost driver, 67% pointed to GLP-1 medications, followed by autoimmune and inflammatory therapies (54%) and cancer drugs (42%).
Nearly half (48%) of large employers expect to make changes to their medical plans for 2027 that will result in higher out-of-pocket costs for employees, such as raising deductibles or copays, according to Mercer’s Survey on Health and Benefit Strategies for 2027. At the same time, nearly a third (31%) of large employers currently offer or plan to offer at least one non-traditional medical plan next year, such as a high-performance network or variable copay plan, and another 38% are considering one of those approaches.
While employer coverage for GLP-1s for weight loss reached 49% of large employers last year, the trend seems to be shifting. Six percent of large employers dropped coverage for the medications in 2026, and another 5% plan to drop coverage in 2027 or are actively considering it, according to Mercer. Twenty-seven percent tightened utilization controls on GLP-1s this year or plan to in 2027. Meanwhile, two out of five large employers (41%) are evaluating different PBM contracting models, and 37% are evaluating new and emerging PBMs.
More than a third of covered workers are already enrolled in plans with a $2,000+ deductible for single coverage, and nearly half of large employers say their workers have high or moderate concerns about current cost-sharing levels. In the IFEBP survey, cost-sharing initiatives were still the strategy employers expected to have the most impact in 2027 (19%), followed by plan design changes (15%) and purchasing or provider initiatives (14%).
A Commonwealth Fund survey of more than 25,000 U.S. adults conducted in May found that about three-quarters of respondents across party lines identified the cost of premiums or high out-of-pocket costs as the biggest problem currently facing the healthcare system.
At the Becker's 5th Annual Fall Payer Issues Roundtable, taking place November 2–3 in Chicago, payer executives and healthcare leaders will come together to discuss value-based care, regulatory changes, cost management strategies and innovations shaping the future of payer-provider collaboration. Apply for complimentary registration now.
