Employer healthcare costs are expected to skyrocket next year, rising 8.2 percent — the largest increase in over two decades – according to new projections released this week.
Estimates released by the consulting firm Marsh predict that the cost of annual employer health benefits will increase by 8.2 percent in 2027 amid ongoing cost pressures and the high cost associated with advanced therapeutics, like cancer treatments.
The cost of employer-sponsored health insurance has been going up since 2022, but if Marsh’s prediction is correct, 2027 will see the biggest increase in employer health spending since 2003.
Part of the reason costs are expected to go up is because of the consolidation of hospital systems across the country.
“The consolidation of providers into fewer, larger health systems and provider groups gives them considerable bargaining power when negotiating prices with insurers, contributing to higher charges,” the consulting firm said in the report.
“And when government funding for healthcare doesn’t keep pace with inflation, it puts more pressure on private health plan payors as providers seek to make up for lower public health plan reimbursements and more uncompensated care,” it added.
Marsh attributed a full percentage point of the estimated eight-point increase to the increased use of GLP-1 weight loss drugs, which are expensive for employers who choose to cover them on their insurance plans.
Another percentage point is due to medical providers’ rapid adoption of artificial intelligence software, which many use to find more claims they can bill patients for.
The firm also cites the No Surprises Act, which was intended to protect patients against surprise out-of-network bills from hospital visits, but has led to millions of disputes over medical bills, with many ending in massive payouts for doctors and physician assistants. The number of cases submitted for review also exceeded expectations.
Employers surveyed by Marsh said they plan to focus on managing high-cost claims and measuring the performance of health programs to ensure they provide good value as among their strategies to manage health programs in the coming years.
Many employers told the firm that they are trying to keep costs down — though employers said that the cost of their current plans would increase by 11 percent, on average, if they made no effort to lower it.