Employer health costs: Why it could be another tough year

Employers anticipate another challenging year for health care expenses in 2027, as projected by Aon, a benefits consultancy. This prediction comes after a trend of near double-digit health cost increases over the past three years. The rising costs are a matter of concern as companies and their employees face one of the longest periods of sustained health care inflation in recent decades.

Several factors contribute to this upward trend. The demand for health services is rising, chronic diseases are more prevalent, and the use of medications like GLP-1s is increasing. These elements are expected to drive up employer health costs by 9.5% next year, reaching over $19,000 per employee, according to Aon. This projection is higher than the $19,000 per employee cost in 2026.

Workers are also facing increased financial responsibility for their health coverage. As of this year, the average cost of health coverage, including payroll contributions and out-of-pocket spending, is $5,297, a $388 increase from 2025. This rise is attributed to the growing use of AI in billing and coding, which leads to more detailed documentation and, in some cases, higher charges.

The situation is even more severe when considering the cost pressures over the past years. Employer health care cost increases have more than doubled since 2022, escalating from 3.7% to 8.8% in 2026. Historically, employers have had limited leverage to influence health costs. However, they are now becoming more proactive, aiming to offset the increases through changes in benefits and other cost-management strategies.

Companies are currently responsible for about 82% of health plan costs. They are considering measures such as removing high-cost providers from their networks to manage the rising expenses. However, it remains to be seen whether such cost-control measures might lead to backlash from workers.