Mercer’s latest look at employer health costs lands with an uncomfortable number attached. The consulting firm’s preliminary survey of more than 1,800 U.S. employers projects that total health benefit cost per employee will climb 8.2% on average in 2027, the largest year-over-year increase since 2003, even after employers have already trimmed their plans to hold the number down. Part of that pressure is expected to reach paychecks directly, since a separate body of Mercer research points to many large employers shifting a bigger share of premium costs onto workers next year.
An 8.2% Jump After Employers Already Trimmed the Bill
The 8.2% figure comes from Mercer’s National Survey of Employer-Sponsored Health Plans, an annual study the firm has run for years and describes as one of the largest of its kind. This year’s early look draws on responses gathered between June and August 10 from more than 1,800 employers, with a fuller report covering more than 2,000 employers due later this year. Mercer is explicit that the number is preliminary: it is a survey-based projection of what employers expect to spend in 2027, gathered before the year has started, not a final accounting of costs that have already occurred.
What makes the projection notable is what employers are already doing to soften it. Employers told Mercer that if they made no changes at all to their current plans, the cost of maintaining them would rise by 11% in 2027. The 8.2% figure already reflects planned cost-cutting moves, which means employers are absorbing roughly three percentage points of the increase through changes to plan design and vendor contracts rather than letting the full amount flow through, according to Mercer’s August 31 analysis.
The number also extends a run of accelerating increases. Mercer’s own research page on the survey shows per-employee cost rising 6.0% in 2025 and a projected 6.7% for 2026, a figure the firm called the highest in 15 years at the time it was published, according to the survey’s research page. The 2027 estimate of 8.2% breaks that record again, making it, by Mercer’s own count, the fifth straight year of elevated cost growth after a decade of more moderate annual increases.
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GLP-1 Drugs, AI Claims Software and a Federal Dispute Process Are Driving the Spike
Mercer’s actuaries point to a mix of long-running and newly emerging cost drivers behind the jump. Provider consolidation into fewer, larger health systems continues to give hospitals and physician groups more leverage when negotiating prices with insurers, and advances in cancer treatment and other specialty care keep producing better outcomes at a higher price than the treatments they replace. Government health-program funding that fails to keep pace with medical inflation adds further pressure, since providers try to make up lower public reimbursements by charging private health plans more. Extremely high-cost individual claims have also become more common as new therapies for cancer and rare diseases reach the market, and Mercer notes that this volatility can disrupt annual budgets and quarterly earnings, particularly for smaller employers with fewer people to spread the risk across.
Three newer factors are doing outsized damage to the 2027 number, according to the same analysis. Rising use of GLP-1 medications for weight management accounts for a full percentage point of the overall cost growth on its own, even as some employers have started dropping the coverage to control expenses. A separate percentage point comes from the rapid spread of AI-enabled software that helps physicians submit insurance claims, which Mercer says has resulted in more claims, and higher-value claims, being filed than before the software was adopted. A third driver traces back to the No Surprises Act’s Independent Dispute Resolution process, created to settle billing disagreements between providers and insurers; the volume of cases submitted for resolution, and the size of the payments awarded to providers, have both run well past what regulators originally predicted.
A Companion Survey Points to Bigger Paycheck Deductions for Many Workers
A separate Mercer survey of large employers, released earlier this year, found that nearly half of organizations with 500 or more employees plan to change their medical plans in ways that raise workers’ out-of-pocket costs, such as higher deductibles or copays, according to a June 11 Mercer news release. Mercer’s August 31 analysis cites that same body of research to estimate that about two-thirds of employers with 500 or more workers expect to increase the specific share of premium costs employees pay in 2027. If that estimate holds, many workers will see their payroll deductions for health coverage climb by more than the 8.2% average increase in total plan cost, since the employee portion is being raised on top of the overall cost trend rather than in step with it.
Variable Copay Plans and Quality Steering as the Employer Alternative to Cost-Shifting
Not every employer is leaning on cost-shifting alone. Mercer’s preliminary survey found that 59% of employers plan to make cost-cutting changes to health benefits in 2027, and some of those changes are aimed at avoiding higher costs for members rather than passing bills along. Roughly 12% of large employers plan to offer a variable copay plan in 2027, a design that charges members less when they choose higher-performing providers for specific services, and that share rises to 18% among employers with 20,000 or more employees.
Guiding employees toward higher-quality, lower-cost care has also moved up the priority list. Mercer’s survey found that 58% of large employers now rank “guiding members to higher-quality care” among their top three priorities for managing health programs, up from fifth place in last year’s survey. Managing high-cost claims specifically remains employers’ single highest priority overall, reflecting how a small number of expensive claims can now swing a plan’s entire annual budget. It is a sign that at least some employers are betting on smarter provider selection, rather than higher deductibles alone, to offset a cost increase that Mercer’s own survey describes as the worst it has recorded since 2003.
The Gap Between What’s Announced and What Shows Up on a Medicare Bill
Mercer’s 8.2% projection covers employer-sponsored coverage, but many of the same workers absorbing higher premiums and deductibles today will move onto Medicare within a few years of retiring, where the cost pressure takes a different shape. Medicare’s own premium surcharges, prescription drug spending caps and appeal windows run through separate agencies and separate forms, not a single employer benefits portal. A worker tracking a rising payroll deduction this year may not realize the same cost-shifting pattern continues into IRMAA brackets and Part D coverage phases after 65.
The Medicare Cost & Coverage Protection Kit gathers 51 state Medicare cost-help packs together with a plain-language breakdown of the new Part D out-of-pocket cap.
See the 51 state Medicare cost-help packs inside The Medicare Cost & Coverage Protection Kit.
AI-assisted research and drafting; reviewed by an editor.
