Rising Health Care Costs in 2027: Practical Strategies for Employers
Key takeaways
- Mercer projects employer health benefit costs will rise 8.2 percent on average in 2027 after plan changes, and about 11 percent if employers changed nothing. That is the largest increase since 2003.
- In Maryland, regulators approved an average 10.2 percent increase for 2027 small group plans. Actual increases vary by carrier, network type and the quarter your plan renews.
- Prescription drugs are the fastest-growing cost. Maryland regulators cited a 14.8 percent prescription drug trend, and GLP-1 medications alone account for roughly a point of national cost growth.
- The biggest levers are plan design, pharmacy management, network choice, remarketing and an HSA-qualified option. Level funding can help some groups but carries real tradeoffs.
- Employers in DC, Maryland and Virginia who start renewal work early have more options. Capitol Benefits can model your renewal against the alternatives.
Renewal season has arrived, and the numbers are higher than most employers have seen in a long time. Balancing the budget while keeping benefits competitive is harder in 2027 than it was a year ago. This guide covers what is driving the increase, what it looks like in the DMV, and the strategies that actually move a renewal.
How Much Are Costs Rising in 2027?
National surveys point in the same direction:
- Mercer projects total health benefit cost per employee will rise 8.2 percent on average in 2027 after planned changes, up from 6.7 percent in 2026. Without those changes, employers estimated about 11 percent. It is the largest projected increase since 2003.
- Aon projects a 9.5 percent increase, which would push average employer cost above $19,000 per employee.
- WTW expects an 11.1 percent increase.
Closer to home, the Maryland Insurance Administration approved an average 10.2 percent increase for 2027 small group plans, below the 13.1 percent carriers requested. Approved carrier averages range from 3.1 to 11.7 percent, and Maryland approves small group rates by quarter, so a January renewal and an October renewal face different numbers in the same market. We break down the carrier and quarterly figures in our post on Maryland’s 2027 small group rates.
What Is Driving the Increase
- Prescription drugs. The Maryland Insurance Administration cited a 14.8 percent prescription drug trend, nearly double the 7.8 percent hospital trend. Mercer estimates GLP-1 medications alone add about one percentage point to national cost growth.
- Hospital and professional costs. Maryland regulators cited hospital trend of 7.8 percent and professional services at 8.6 percent, along with higher utilization of inpatient care and prescriptions.
- Billing and dispute costs. Mercer points to AI-enabled claims coding and the No Surprises Act dispute process as each adding roughly a point of cost growth.
- Ongoing pressures. Advanced therapies, provider consolidation and specialty drugs continue to push costs up.
Strategies That Actually Move a Renewal
Rework Plan Design
Deductibles, out-of-pocket maximums, copay structure and pharmacy tiers are the first places to look. Mercer found that 59 percent of employers plan cost-cutting changes for 2027, including higher deductibles. The goal is to make deliberate tradeoffs, not across-the-board cuts, and to communicate them clearly at open enrollment.
Manage Pharmacy Costs Directly
With drug trend outpacing everything else, the formulary and specialty tier deserve real attention. Review how your plan covers GLP-1 medications, whether prior authorization and step therapy are in place for high-cost drugs, and whether manufacturer programs or alternative pricing are available. Lifestyle and nutrition programs can complement, not replace, these steps.
Compare Networks and Remarket
Network type matters more than usual this year. In Maryland’s 2027 small group filing, PPO plans were approved at 4.9 percent against 11.3 percent for HMO plans. That will not hold every year, but it is worth modeling now. With approved carrier averages ranging from 3.1 to 11.7 percent, a full market review can change the answer.
Add or Strengthen an HSA-Qualified Option
An HSA-qualified plan can hold premium while giving employees a tax-advantaged way to fund the deductible. For 2027 the HSA contribution limits are $4,500 for self-only coverage and $9,000 for family coverage. An employer HSA contribution can soften the move to a higher deductible. See our guide to HSA-eligible expenses and 2027 limits.
Price Level Funding Honestly
Level-funded plans are rated on the health of your group, which fully insured small group plans in Maryland are not. A younger, healthier group can save money. A group with significant claims can be quoted higher or declined. These plans are also partly self-insured, which brings employer responsibilities and fewer of the protections state law gives fully insured plans. It is worth seeing the quote and worth a real conversation about volatility before switching.
Keep Investing in Prevention, Care Navigation and Mental Health
Preventive care is covered at no cost on most plans, and early detection avoids more expensive treatment later. Care navigation and nurse lines steer employees to appropriate, lower-cost settings, and Mercer found 58 percent of employers prioritize guiding members toward higher-quality providers. Telehealth and virtual mental health support offer flexible access, and telehealth can now be covered before the deductible on an HSA-qualified plan without affecting HSA eligibility.
Start Early
The single most useful step is time. Employers who see their renewal 90 to 120 days out can remarket, model plan changes and build the communication plan. Those who see it three weeks out usually accept what arrives. Our Gaithersburg-based team works with employers across DC, Maryland and Virginia on exactly this. Talk with our benefits team about your 2027 renewal.
Frequently Asked Questions
How much are employer health costs expected to rise in 2027?
Mercer projects an average increase of 8.2 percent after plan changes, about 11 percent without them, the largest since 2003. Aon projects 9.5 percent and WTW projects 11.1 percent.
Why are health care costs rising so fast?
Prescription drugs, including GLP-1 medications and specialty drugs, are the fastest-growing cost. Hospital and professional service costs, higher utilization, billing changes and No Surprises Act dispute costs also contribute.
What did Maryland approve for 2027 small group health plans?
The Maryland Insurance Administration approved an average 10.2 percent increase, below the 13.1 percent requested. Carrier averages range from 3.1 to 11.7 percent, and the increase also depends on the quarter your plan renews.
What is the fastest way for an employer to reduce a renewal increase?
Start early, then compare plan design changes, pharmacy management, alternative networks and carriers, and an HSA-qualified option side by side. The right mix depends on your workforce and claims.
Is a level-funded plan a good way to control costs?
Sometimes. A healthy group can save, but level-funded plans are rated on group health, can be quoted higher for groups with large claims, and are partly self-insured, which brings additional employer responsibilities.
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