U.S. employers are preparing for their largest increase in health-benefit costs in more than two decades, raising the prospect of higher paycheck deductions and out-of-pocket expenses for workers in 2027.
Total health-benefit costs per employee are projected to rise an average of 8.2% next year, according to preliminary results from Marsh’s survey of more than 1,800 U.S. employers. That would be the largest increase since 2003 and the fifth consecutive year of unusually high healthcare cost growth.
The estimate already assumes employers will make changes intended to control spending. Without those measures, companies told Marsh that the cost of maintaining their current health plans would rise about 11%.
The increase is running well ahead of the broader economy. U.S. consumer prices were up 3.4% from a year earlier in August, while private-sector wages and salaries increased 3.2% over the year through June.
That gap creates a difficult choice for employers: absorb more of the increase, reduce benefits, charge workers more, or find savings elsewhere in compensation and operating budgets.
Many are preparing to pass at least part of the increase along.
About two-thirds of employers with at least 500 workers expect to increase employees’ share of health-insurance premiums in 2027, according to a separate Marsh survey. Another 59% of employers said they plan cost-reduction changes to their health plans, including measures such as higher deductibles that can increase employees’ direct expenses when they receive care.
For some workers, that means the increase visible on their paychecks could exceed the overall 8.2% growth in employer health-plan costs.
Healthcare Is Taking a Larger Share of Compensation
Employer-sponsored insurance remains the largest source of health coverage for Americans under 65. About 165.6 million people had coverage through an employer in 2025, according to KFF.
The expense is already a significant part of labor costs.
Private employers spent an average of $46.89 per employee hour on total compensation in June, according to the Bureau of Labor Statistics. Wages accounted for $32.82, while benefits cost another $14.07. Health insurance alone represented $3.48 per hour, roughly one-quarter of total benefit spending.
Workers pay a substantial portion themselves. In 2025, the average employer-sponsored family policy cost $26,993 annually, with employees contributing $6,850 through premiums deducted from their paychecks. Single coverage averaged $9,325, with workers contributing about $1,440.
Those numbers could move higher again as 2027 benefit packages are finalized.
The financial pressure does not stop with higher insurance deductions. Health insurance is part of total employee compensation, which means faster benefit-cost growth can compete with salary increases and hiring budgets.
The Congressional Budget Office has documented that shift over decades. Wages and salaries accounted for about 91% of worker compensation in 1960 but roughly 83% in 2023, with rising health-insurance costs a major reason for the decline.
For businesses, an 8.2% healthcare increase can therefore appear in several places: higher operating expenses, slower wage growth, reduced hiring, benefit redesigns or, where companies have enough pricing power, higher prices charged to customers.
Drug Costs Are Only Part of the Increase
Several forces are pushing medical spending higher at once.
Marsh estimates that greater use of GLP-1 medications for weight management alone will add about one percentage point to healthcare cost growth in 2027. The drugs have become an increasingly important benefit for employees but remain expensive enough that some employers are limiting or eliminating weight-loss coverage.
New cancer therapies and treatments for rare diseases are also increasing the frequency of extremely expensive claims.
Provider consolidation adds another layer. As hospitals and physician groups combine into larger systems, they can gain bargaining power in negotiations with insurers and employer health plans, contributing to higher reimbursement rates.
Marsh also identified two less obvious sources of pressure: AI-assisted medical billing systems that can help providers submit a larger number of higher-value claims, and unexpectedly high costs flowing through the dispute-resolution system created by the federal No Surprises Act.
The result is a healthcare inflation problem that looks increasingly separate from ordinary consumer inflation.
Employer Plans Become a 2027 Economic Variable
The impact on the broader economy will depend on how much of the increase employers ultimately absorb.
Large companies with strong margins may choose to shoulder more of the additional expense to protect employee benefits and retention. Businesses already under cost pressure have less flexibility and may rely more heavily on premium increases, higher deductibles or narrower plan options.
That could matter for consumer spending. Higher payroll deductions reduce disposable income before workers receive their checks, while larger deductibles and copays increase the amount households have to reserve for medical expenses.
There is also a corporate earnings angle. Marsh noted that very large medical claims can create meaningful quarterly volatility, particularly for employers that self-insure their health plans rather than paying an insurer a fixed premium to assume most of the risk.
Employers are already trying alternatives. Some are introducing plans that steer workers toward lower-cost providers, tightening management of high-cost claims or reassessing coverage for expensive medicines. Twelve percent of large employers expect to offer variable-copay plans in 2027, rising to 18% among companies with at least 20,000 workers.
Those measures may slow the increase, but they have not stopped it. Even after employers’ planned cost reductions, Marsh still expects health-benefit costs to rise 8.2%.
The next important numbers will arrive as companies complete their 2027 enrollment packages and Marsh releases the final results of its employer survey later this year. Those decisions will show how much of the healthcare increase stays on corporate expense lines—and how much lands directly on workers’ paychecks.