In September 2026, reporting on Marsh’s survey of 1,800 US employers indicated that average health-benefit cost per employee is expected to rise by 8.2% in 2027, the largest annual increase since 2003.
The forecast already assumes that employers will make plan changes to reduce spending. Without those measures, the increase could reach about 11%. Fifty-nine percent of surveyed employers plan new cost-saving actions for 2027, including changes to deductibles and tighter management of expensive medicines. The figures signal that medical trend is becoming a strategic workforce and financing issue rather than an annual renewal problem.
Several pressures are converging. Hospital prices and labour costs remain high, utilisation is increasing and new treatments are entering the market at significant cost. GLP-1 medicines used for obesity and diabetes are expected to contribute roughly one percentage point to 2027 cost growth. Employers face strong demand for access while evidence, eligibility criteria and long-term budget effects continue to evolve.
Cost Shifting Cannot Be the Main Strategy
Higher deductibles and employee contributions can reduce the employer’s immediate expense, but they may also discourage necessary care and create affordability problems. Delayed treatment can lead to more severe claims, absence and disability. Employers should therefore distinguish waste reduction from simple cost transfer.
A more durable response starts with data. Plans need to identify which conditions, providers, sites of care and medicines are driving trend. Pharmacy analysis should separate list prices, net costs, rebates and clinical outcomes. GLP-1 policies should define eligibility, continuation criteria and behavioural or clinical support, then track health outcomes and total cost rather than drug spend alone.
Vendor consolidation may also help, but only when it improves coordination. Employers often purchase navigation, virtual care, disease management and pharmacy programmes from separate providers. Each may report savings against a different baseline. A unified measurement framework should prevent double counting and show whether interventions change claims experience across the whole plan.
Provider contracting deserves equal attention. Employers can compare unit prices, quality indicators and referral patterns, then steer members toward higher-value care without removing meaningful choice. Centres of excellence may improve outcomes for selected procedures, but travel, eligibility and continuity of care must be addressed. Savings estimates should include the full episode and any follow-up treatment.
Captives Can Finance Risk but Cannot Replace Management
Rising and persistent medical trend strengthens the case for self-funding and captive solutions among employers large enough to absorb volatility. A captive can retain predictable layers of risk, centralise data and align stop-loss purchasing across business units. Multinational groups may also use the structure to coordinate local benefits risks where regulation and market practice permit.
The design must reflect claims credibility and tail risk. Employers should model specific and aggregate stop-loss attachment points, concentration in high-cost claimants, pharmacy exposure and cash-flow stress. A captive dividend is not evidence of success if it results from inadequate reserving or unusually favourable experience. Independent actuarial review and clear governance remain essential.
For global benefits teams, the US increase will affect budgets, employee relations and internal comparisons. Local cost growth cannot be judged against general inflation or benefit trends in other countries. Headquarters should require a clear bridge from gross trend to negotiated trend, plan changes, employee impact and retained risk.
Communication will be critical when employees absorb part of the increase. Employers should explain why costs are rising, which services remain protected and how members can obtain help. A technically sound plan change can still damage trust if people first discover it during treatment or at the pharmacy counter.
An 8.2% forecast does not mean every employer will experience the same increase but it does mean that passive renewal is unlikely to be sufficient. Employers need a multi-year health-risk strategy combining benefit design, clinical management, transparent contracting and appropriate financing.
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