Employers in the United States are bracing for a sharp rise in health-insurance expenses next year. A survey of 1,800 firms by Mercer forecasts an 8.2% increase in the cost per employee for 2027, the biggest jump in more than two decades and the fifth consecutive year of rising outlays.
Why costs are climbing
Several structural and market forces are driving the surge. Hospital consolidation and reduced government spending on health care keep overall prices above inflation. At the same time, new cancer therapies, GLP-1 weight-loss drugs and AI-enabled medical billing add to the upward pressure. According to Mercer's chief actuary Sunit Patel, GLP-1 usage alone accounts for about one percentage point of the projected increase.
Impact on employee take-home pay
When employers face higher premiums, they often shift part of the burden to workers. Two-thirds of companies with 500 or more staff say they will raise employee premiums, meaning payroll deductions could climb faster than the overall 8.2% rise. Workers with family coverage already paid an average of $6,850 in premiums last year.
"The reality is this does eat into money that could be invested in wages," said Nick Stefanizzi, CEO of Northwell Direct, a provider of health benefits to self-insured employers.
Higher deductibles and copays are also on the table. Almost half of large employers surveyed plan to adjust plan designs, which would raise out-of-pocket costs for employees.
"They're going to absorb some portion of it at the employer level, and then they're going to push the rest to the employee," explained Brandy Thompson, CEO of benefits-technology firm BenefitBay.
Economists note that rising health-insurance contributions can compress wages because total compensation budgets are fixed. Navin Nagiah, CEO of Daffodil Health, said that when health costs take a larger share of the compensation pie, less money remains for salaries and other benefits.
The Congressional Budget Office treats employer health contributions as a substitute for cash wages in its household-income analyses. Its data show that the share of total worker compensation represented by wages fell from 91% in 1960 to about 82% in the past decade, a trend the agency expects to continue as health costs outpace wage growth over the next 30 years.
What may lie ahead
If the projected increase materialises, employees could see a noticeable dip in take-home pay, even as overall compensation packages remain unchanged. Companies may also explore cost-containment strategies such as higher cost-sharing, wellness programmes or alternative funding models. Monitoring the evolution of employer-provided health benefits will be crucial for workers, policymakers and analysts watching the broader dynamics of labour-market compensation.