Healthcare costs are on the rise

In a new PwC report, researchers spoke with actuaries at 27 health insurers that cover 103 million employer-sponsored health plan members and 8 million Affordable Care Act (ACA) enrollees between April and May 2026 to estimate medical cost trends for 2027.

For the fifth year in a row, health plan actuaries predict that medical cost trends for both group and individual markets will increase. In 2027, the group medical cost trend is projected to be 9%, while the individual medical cost trend is projected to be 8.5%.

A separate report from Mercer also projected that total health benefit cost per employee will continue rising. In 2025, total health benefit cost per employee increased by 6%, and it is expected to grow by 6.7% in 2026 — the highest increase in 15 years. Aside from 2022, increases in total health benefit cost per employee have outpaced inflation.

Some factors driving up costs include growing AI adoption, provider reimbursement pressures, higher drug costs, increased demand for behavioral health services, and regulatory pressures. According to the Mercer report, prescription drugs are one of the fastest-growing expense categories, increasing by roughly 9% in 2026.

"The pressure created by specialty drugs, gene therapies, and GLP-1 medications is forcing employers to take a much harder look at their pharmacy strategies," said Alysha Fluno, Mercer's U.S. Pharmacy Practice Leader. "For many plan sponsors, the priority now is not just managing pharmaceutical utilization by their health plan members, but gaining more transparency, control, and confidence that every dollar spent is delivering maximum value."

"Employers are under intense pressure to manage another year of elevated health benefit cost growth, but they also know that affordability matters deeply to employees," said Simon Camaj, Mercer's U.S. Health Leader. "What we're seeing for 2027 is that employers are using different levers to manage costs — both traditional cost-sharing tactics and strategies that guide their people to higher-value care and provide support where it can have the greatest impact."