Employer health costs expected to see sharpest increase in 20 years: Survey

The cost of employer health benefits is projected to jump by the highest degree in more than 20 years next year, according to new projections released this week.

Estimates released by the financial consulting firm Mercer project that annual employer health benefit costs will go up by 8.2 percent in 2027 because of ongoing cost restraints and the higher price tag of improved therapeutics.

Employer health benefits have been trending up since 2022, and if costs go up as expected, it will be the largest spike in employer health spending since 2003.

“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 firm stated.

“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.”

Mercer cited the adoption of AI-enabled software to assist in submitting claims as contributing to the expected jump in costs, as the technology has helped to submit more claims and higher-level claims. The firm also cited the No Surprises Act of 2022, which prohibits surprise out-of-network bills from emergency room visits, as disputes over bills have far exceeded expectations.

Employers surveyed by Mercer cited managing high-cost claims and measuring the performance of health plans as among their top strategies to manage health programs.

These projections from Mercer echo similar findings by the global insurance broker Aon, which projected employer health costs in the U.S. could rise by 9.5 percent in 2027. Aon’s projections would mean an added $19,000 per employee on average.