Employer Health Costs Are Set to Rise 8.2% in 2027: An HR Plan for Open Enrollment
Marsh projects the steepest jump since 2003 even after cost-cutting. Here is how HR teams can plan benefits, budgets and employee communication.
In this report 10 sections
Employers expect health benefit costs per employee to rise 8.2% in 2027, according to Marsh's preliminary survey, the largest increase since 2003. Without any cost-control steps the rise would be about 11%. HR teams should model the budget now, review plan design choices and prepare clear employee communication before open enrollment decisions are locked.
Workfloor covers the people side of work, and benefits are where policy meets every paycheck. This guide is for HR leaders, benefits managers and small business owners who offer health coverage. It covers the Marsh numbers, the three newer cost drivers, the common responses and a step-by-step plan for the next renewal.
What Does Marsh's 2027 Health Cost Projection Say?
It says employers face the steepest increase in more than 20 years, and that cost-cutting only softens it. According to a summary of Marsh's September 2 release, employers expect total health benefit cost per employee to rise 8.2% on average. That figure comes after planned cost reductions.
The average projected increase for 2026 was 6.7%, so the pace is accelerating. Marsh calls 2027 the fifth straight year of elevated growth. The results are preliminary, drawn from more than 1,800 employers that responded through August 10, and final results are due later this year.
Simon Camaj, Marsh's US Health and Benefits Leader, noted that few organizations can absorb health cost increases that outpace inflation. For small and midsize employers, the math is harder because they have less room to spread risk.
By way of illustration, an employer with 100 employees spending $15,000 per person today would face about $123,000 more at 8.2%. That figure is a hypothetical, not a Marsh number.
What Is Driving the Increase?
Three newer drivers each add about one percentage point to the trend, according to Marsh's actuaries as reported by Insurance Business. Older pressures remain too, including provider consolidation, high-cost therapies and cost-shifting from government programs.
The table below lists the drivers and what each one means for plan sponsors.
| Driver | What is happening | What it means for employers |
|---|---|---|
| GLP-1 medications | Use has expanded beyond diabetes into weight management, heart risk and sleep apnea | A wider pool of eligible members and higher drug spend |
| AI-enabled claims software | Providers capture more diagnoses and submit more precisely coded claims | More claim volume and higher payment levels |
| Surprise-billing disputes | Providers filed 2.6 million disputes in 2025 versus about 22,000 projected per year | Costs pass through directly for self-funded plans |
The dispute figure comes from Georgetown research in Health Affairs, cited in the Insurance Business report. It is a striking gap between forecast and reality, and it matters most to employers that pay claims themselves.
GLP-1 coverage is the decision employees notice most. Marsh estimates rising use accounts for a full percentage point of the 2027 trend. Some employers have dropped weight-management coverage to find relief, though Insurance Business warns that can create a recruiting gap.
How Are Employers Responding?
Most are changing plan design. Marsh found that 59% of employers plan cost-reduction efforts for 2027, such as raising deductibles. About two-thirds of employers with 500 or more workers expect to raise employees' share of premiums, based on a separate Marsh survey of large employers.
Newer models are spreading too. Twelve percent of large employers plan variable copay plans in 2027, rising to 18% among those with 20,000 or more employees. These plans lower member costs for higher-performing providers. Over a third of large employers plan some non-traditional medical plan.
Quality is part of the pitch. Fifty-eight percent of large employers say guiding members to higher-quality care is important or very important. The aim is to bend costs by steering people to better value, not just shifting costs to them.
Small employers have fewer options than large ones. They usually buy fully insured plans from one carrier and have less leverage at renewal. That makes preparation and shopping around more important.
Step by Step: How to Plan for the 2027 Renewal
Use this sequence, starting as soon as you receive renewal quotes:
- Request claims data and utilization reports from your carrier or broker.
- Model the renewal at the projected 8.2% and at 11% to see your range.
- List the plan design options and what each would save and cost employees.
- Decide your split between employer and employee premium contributions.
- Decide your approach to GLP-1 and other high-cost drug coverage.
- Ask your broker for at least two alternative plan designs or carriers.
- Draft employee communication and schedule it before enrollment opens.
Pressure-test the budget before you decide. If a design change saves money but sends your best people to a competitor, it is not a saving. Talk to managers about which benefits they hear about most.
Do not forget the paperwork that follows a plan change. When employees lose coverage or change plans, rules on notices apply. Our guide to COBRA notices and what employers must send covers the basics.
How Should You Protect the Benefits That Matter Most?
Start by asking employees what they value. Surveys and short focus groups reveal which benefits are essential and which are nice to have. A dollar spent on something nobody uses is a dollar wasted.
Consider shifting money toward the areas with the highest value per dollar. Primary care access, mental health support and fair out-of-pocket maximums often rank high. Perks that are cheap to provide but widely valued can offset a higher deductible.
Retirement benefits matter for the same reason. If medical benefits get leaner, a strong 401(k) match keeps the total package competitive. Our piece on 401(k) auto-enrollment changes for employers explains what changed this year.
Pay competitiveness is part of the equation as well. Our overview of pay transparency laws in 2026 is a reminder that candidates compare total compensation openly. Benefit cuts should be weighed against what peers offer.
How to Talk to Employees About Changes
Explain early, plainly and with numbers. Employees tolerate change better when they understand the reason and the options. A short message that gives the cost trend, what is changing and what is staying the same builds more trust than a dense plan document.
Show real examples. For instance, compare what a typical employee would pay under the old and new designs for a routine year and for a bad year. People respond to concrete dollar amounts more than to percentages.
Offer help. Host Q&A sessions, share a plan comparison tool and give people time to decide. Make sure managers know the basics so they can answer questions without guessing.
Our read at Workfloor is that the biggest mistake is silence. Employees who learn about a change from a payroll deduction feel blindsided. Employees who hear about it two months earlier feel respected, even if they do not like the change.
What Should You Ask Your Broker or Carrier?
Good questions turn a renewal letter into a negotiation. Ask which claims drove the increase and how much came from a few large claims. Ask how much of the rise is trend and how much is your group's own experience. Ask whether specialty drug management, prior authorization or a pharmacy benefit change could lower costs without cutting coverage.
Self-funded employers should also ask about stop-loss contracts. Confirm where attachment points sit and whether they were set before dispute volumes rose. A mismatch there can leave you carrying more risk than you expect.
What Should Small Employers Do Differently?
Small employers should lean on their broker and compare options early. A small group has little leverage, so the goal is to find a plan that fits your workforce rather than to negotiate hard. Ask about level-funded plans, reference-based options and different carriers, and compare the total cost including employee out-of-pocket.
Consider contribution strategy carefully. Covering employee-only premiums at a high level and asking more for dependents is a common compromise. It protects the lowest-paid workers while keeping the budget in check.
What Could Change Before Open Enrollment?
The Marsh numbers are preliminary, and final results will use more than 2,000 responses. Your own renewal may land above or below the average depending on your claims history, region and plan type. Treat the projection as a planning range, not a quote.
Policy and market shifts matter too. The market for GLP-1 drugs is evolving in ways that could lower costs over time, Marsh noted. That means a decision to drop coverage this year should be revisited next year.
Conclusion
An 8.2% projected rise makes benefits one of the toughest budget items of 2027. HR teams that model the range, weigh plan design choices against retention and communicate early will handle it best. Employers who wait for the renewal letter will have fewer options.
This week, ask your broker for utilization data and two alternative designs. Workfloor will update this guide when Marsh publishes its final survey results.
