The consultants agree: Healthcare premiums in 2027 for employer-sponsored insurance (ESI) are going up once again at an exceptionally elevated rate. As has been the case in all the years since the COVID-19 pandemic ended, the forces driving costs higher are overwhelming those working in the other direction. The added pressure from yet another year of significant premium hikes is likely to further intensify voter interest in a political response.

As employers get set to administer their open enrollment seasons for 2027 workplace benefit programs, a consensus has emerged among the outside firms monitoring trends in this sector that ESI is going through a sustained period of unusually rapid cost growth.

• WTW (rebranded from Willis Towers Watson) projects that total costs for ESI will rise by 11.1 percent in 2027, which the firm says is the highest annual rate increase it has observed in two decades.
  
• Aon forecasts a 9.5 percent increase for 2027, which would come on top of an 8.3 percent jump in 2026.
  
• Marsh (previously Mercer) expects a modestly slower growth rate in 2027 of 8.2 percent after taking into account coverage adjustments, such as higher deductibles. The firm says the 2027 increase comes after a 6.7 percent rise in 2026 and 6.0 percent in 2025.
  
• PricewaterhouseCoopers (PwC) predicts a 9.0 percent increase in covered medical expenses, on average, for ESI plans in 2027, which is the same rate it found for 2026 and slightly above the 8.5 percent rate it observed in 2025.

The PwC report points to multiple sources for ESI cost growth above general consumer inflation:

• New AI Tools. Hospitals and physician groups are using artificial intelligence (AI) to maximize what they get paid for every interaction they have with patients. Insurers also have new AI platforms to better identify opportunities for cutting costs, but, to date, the provider-focused products are having more of an effect on total costs.
  
• Provider Consolidation. Employers continue to struggle to hold down payment demands made by dominant health systems. With the industry already heavily consolidated, insurers have limited options to work around the major players.
  
• Pharmaceutical Spending. Price increases for specialty therapies and expanded use of GLP-1s are pushing up drug costs.
• Behavioral Health. Utilization of covered mental health services remains on a steep upward trajectory, with cumulative growth of 62 percent over the six-year period 2018 to 2024.
• The Unintended Fallout from the No Surprises Act (NSA). Congress approved the NSA assuming it would lower overall costs for consumers, but it has had the opposite effect because physicians keep winning in arbitration. The added costs have grown to the point that they are noticeable in ESI premiums.

With cost pressures building, one might expect big employers to become more assertive in pushing for lower costs, yet WTW found continued reluctance among employers to take on the healthcare sector. In its survey, only 15 percent of the firms responding said they would be willing to back disruptive changes to secure a 5 percentage point drop in premiums. Further, 61 percent said they preferred to avoid upsetting their employees to securing meaningful cost reductions from disruptive ESI changes.

These findings confirm that the ESI market suffers from a collective action problem. Firms offering healthcare coverage want to attract the best workers possible within the budgets they allocate to labor costs. They do not want to develop reputations for offering less generous ESI than their competitors. Moreover, individual firms generally do not wield sufficient market power to change the business practices of major health systems.

The inability of employers to solve this problem on their own is certain to increase the pressure on Congress to provide a fix through legislation. In the coming years, many policymakers could get behind some version of additional rate setting in the ESI market to put a lid on premium growth.

Elected officials who might be wary of such remedies need to consider what they would offer as an alternative.

One option would be to force firms with ESI to run something like a premium support plan. Workers would get fixed levels of subsidization from their employers, which they would then apply to the plans they prefer rather than to the plans their companies choose on their behalf. The offered plans would need to be standardized (to a degree) to allow for apples-to-apples premium comparisons. This design would move responsibility from the firms to the workers to make economizing choices, with a strong likelihood of producing better results. Many employees might gladly accept coverage with market-disrupting changes if doing so would increase their take-home pay.