Every big benefits consultancy has now published its forecast for the 2027 employer health cost increase, and they barely disagree with each other. They all land somewhere between 8% and 11%, which is not the range anyone had in the budget template.
Marsh (the firm that was called Mercer until it switched names in September) surveyed more than 1,800 US employers and reported on September 2 that cost per employee should rise 8.2% on average next year. That's after the plan changes employers already intend to make. Without them it's 11%, and either way it's the biggest jump since 2003. Aon says 9.5% before any mitigation, which would push the average past $19,000 per employee. Business Group on Health, whose members are very large employers, has 9.2% at the median before plan changes.
Now set that next to the rest of your 2027 budget. The CFOs in the Richmond Fed's September survey expect wages up about 4% at the median and prices up 3%. So covering an employee is getting more expensive about twice as fast as paying them, and faster than anything you can pass on to customers. At a manufacturer, where plant labor and its benefits sit in cost of goods sold, that difference lands in gross margin.
This was already the top worry before those numbers came out. MetLife's benefits study in January found employers naming "controlling health care costs" as their number one benefits objective, ahead of attracting and keeping talent, for the first time since 2022.
Why your renewal could come in worse than the survey
Those are averages across huge populations, and a company with 300 people on the plan doesn't behave like an average. One premature baby or a transplant can swing your group's claims experience for a year, and your renewal gets priced partly on that experience whether you're fully insured or self-funded with stop-loss behind you.
Pharmacy is the other swing factor. Marsh says GLP-1 drugs on their own add a full percentage point to 2027 cost growth. If your plan covers them for weight loss, your exposure depends on how many of your people are taking them, and I'd guess a lot of finance teams couldn't tell you that number today. Business Group on Health found the share of big employers covering GLP-1s for obesity fell from 72% to 60% in a single year, so plenty of companies have already had this argument internally.
Then there's timing. If your plan renews January 1, the renewal can easily land after the board approves the budget, and the 5% somebody typed into that line in August turns into an item for the first quarterly variance review.
Nobody outside your company will warn you about this one
Most lines in a budget come with some outside early warning, whether it's a steel index or the Fed or a competitor complaining about hiring on an earnings call. Health benefits mostly don't. When we look across the briefings we build for mid market companies, labor comes up all the time, but almost always as wages and hiring. Benefits barely appear, largely because companies don't talk about them on earnings calls, so watching peers won't tell you much. In practice the first real number most companies see is the broker's renewal.
So I'd get it in front of the CEO before the renewal does. Walk in over the next couple of weeks with a range, say 8% to 11% before plan changes, plus what each lever for bringing it down would mean for employees. Then the renewal, when it comes, is a number people were braced for rather than a reason to reopen the budget.
The people paying for part of this deserve some of the same treatment. About two-thirds of large employers told Marsh they plan to raise employees' share of premiums next year. If you end up doing that, have someone who understands the numbers explain why, in plain language, and admit it's real money coming out of people's paychecks. A notice in the benefits portal is a lousy way for people to find out.
What to do before the renewal meeting
- Ask your broker for your claims experience now instead of waiting for the renewal package. Self-funded or level-funded, you should have monthly data. Fully insured and big enough to get an experience report? Ask for it, with large claims and pharmacy broken out.
- Budget a range rather than a point. Something like 7%, 9.5% and 12%, with what each does to EBITDA.
- Make GLP-1 coverage a decision somebody makes on purpose, with the cost and the employee impact on the same page.
- Settle the employee cost share before open enrollment materials get printed.
- If the renewal comes in well above the survey range, have the broker market the plan. Even if you stay put, a competing quote gives you something to negotiate with.
For the outside costs that do show up in public, like wages, input prices and what peers are saying about labor, a free first briefing can pull them together for you. And if benefits are only one of several assumptions making you nervous, our post on the 2027 budget assumptions most likely to break by March covers the others.
CFOmarketIQ is a briefing service for mid market CFOs on the outside events behind their numbers, and the first briefing is free.
Questions CFOs ask about the 2027 health cost increase
How much will employer health insurance costs increase in 2027?
The big consultancies land between about 8% and 11%. Marsh expects 8.2% on average after planned changes and 11% without them. Aon projects 9.5% before mitigation, which would take average cost above $19,000 per employee. Business Group on Health's median is 9.2% before plan changes. A smaller group's renewal can land well outside that range in either direction.
Why are employer health costs rising so fast?
The forecasts point at the same things: heavier use of care, rising chronic illness and a growing number of very large claims, plus pharmacy spending driven by specialty drugs and GLP-1s. Marsh puts a full percentage point of 2027 growth on GLP-1s alone. Business Group on Health members named cancer as their biggest cost driver.
Should a mid market company switch to a self-funded health plan?
It can lower cost over time for a stable, fairly healthy group, since you stop paying the insurer's margin. In exchange you take on claims volatility, backed by stop-loss insurance that has its own renewal and its own price increases. It suits companies with enough cash to absorb a bad year. Model several years of claims with your broker before deciding.
How much of the increase should employees pay?
There's no standard answer, and it's as much a retention decision as a cost one. About two-thirds of large employers told Marsh they plan to raise the employee share of premiums for 2027. Whatever you pick, decide it before open enrollment and explain it plainly, with the real numbers attached.
A note on all of this: it is general information, not financial, legal or tax advice. Run anything you plan to act on past your own advisors first.