Employer health insurance costs are heading into 2027 with the steepest increase in more than two decades. A U.S. survey from the benefits consultant Marsh puts the projected jump at roughly 11% per employee before any plan changes, and about 8% even after employers cut coverage. For a small or midsize company heading into a Q4 benefits renewal, that number frames a hard question: do you shift the cost onto your team, or do you find a way to absorb the trend without gutting the benefits that keep good people around?
This guide breaks down how much costs are rising in 2027, what is actually driving the increase, and the specific strategies scaling employers are using to protect both their budget and their benefits. It also explains how a service-first professional employer organization (PEO) changes the math on renewal, so you can walk into your next plan year with leverage instead of a spreadsheet full of cuts.
The 2027 health insurance cost increase is projected at an average of about 11% per employee before employers make any changes to their plans, according to a Mercer survey of roughly 1,800 employers, reported by The New York Times. Even after cost-cutting adjustments, the final increase is expected to land near 8%, which would be the sharpest rise since 2003. More than a third of the employers surveyed said they expected costs to climb at least 10% even after making cuts. These projections apply to employers with 50 or more employees, though the cost pressures they describe reach companies of every size.
Marsh is not alone in the forecast. The Business Group on Health projects a 9.2% median increase, falling to 8% after benefit changes, and estimates that from 2018 to 2027 health care costs could rise 76%, roughly twice the rate of general inflation. The insurance broker Aon projects a 9.5% increase that would push the average total health plan cost above $19,000 per employee per year if no changes are made. That is equivalent to more than $1,583 per employee per month on an annualized basis, although actual costs vary substantially by coverage tier, workforce, location, and plan design.
Why the two numbers matter: The widely quoted 8% figure is the increase employers expect after cutting coverage. The 11% figure is what the trend actually costs before those cuts. The gap between them is benefits your employees lose. For a scaling company competing for talent, that trade-off is the whole decision.
Several forces are converging at once. Employers and benefits consultants point to rising prices for hospital care, expensive new medicines for cancer and other conditions, strong demand for GLP-1 drugs, and newer pressures such as hospitals and physicians using artificial intelligence to document care in ways that increase reimbursement. Looming cuts to government programs like Medicaid are expected to push more uncompensated costs onto employer plans as well. Underneath all of it, pharmacy spending is the fastest-moving piece.
Prescription drug costs rose 9.4% in 2025, with specialty drugs up 8.9%, running well ahead of medical trend, according to the Marsh & McLennan Agency 2026 trends report. The concentration is striking: specialty drugs now make up just 2% of pharmacy volume but account for roughly 60% of pharmacy spend, and the specialty pharmaceutical market is projected to reach $965.5 billion by 2030. With 95% of new cancer therapies launching at prices above $100,000 per year, and depending on the employer’s funding arrangement and applicable rating rules, a high-cost claim can materially affect claims experience, stop-loss exposure, or future renewal costs.
GLP-1 medications have become one of the most closely watched line items in benefits. In the Marsh & McLennan Agency report, 41% of employers cited GLP-1s as one of the most significant cost drivers in 2025 and 2026, and plan sponsors anticipate these drugs will add 0.5% to 1% to overall medical spend in 2026. Coverage continues to expand year over year even as prior authorization requirements tighten, and 96% of employers report concern about the long-term cost implications. The result is a benefit employers want to offer responsibly, not cut outright.
Cutting benefits is the reflex the market is reaching for, and it comes with a cost that does not show up on the renewal quote. Workers are already absorbing more: out-of-pocket costs rose about 10% in 2026, to roughly $2,167 per worker, on top of higher premiums and deductibles. Every additional dollar shifted onto employees lands on household budgets already stretched by groceries and gas. For a company in the 10 to 150 employee range that is actively hiring, thinner benefits are a retention risk at exactly the moment competitive coverage matters most.
The better question is not how much to cut, but how to gain enough purchasing leverage that cutting stops being the only lever you have. That is where the structure of your benefits program, not just the plan you pick, starts to matter.
Larger organizations are responding with financing and contracting strategies that most small employers simply cannot access on their own. The Marsh & McLennan Agency report highlights several that are gaining traction, and each one is more effective at scale:
The catch for a standalone small business is that these tools reward size. A 40-person company negotiating alone has little leverage over a pharmacy benefit manager and may have fewer options for managing the financial volatility associated with a $200,000 specialty claim. Pooling changes that. When many employers participate through a shared benefits platform and a single sophisticated infrastructure, small and midsize companies gain access to the buying power, contracting strategies, and proactive risk management that were previously reserved for the enterprise.
A professional employer organization works through co-employment: your company remains the worksite employer and retains control over hiring, supervision, compensation, operations, and culture. The PEO serves as the administrative employer for specified purposes, including payroll-tax administration, benefits administration, and other responsibilities defined in the client service agreement. Through that shared structure, eligible client companies may participate in benefit plans offered through the PEO’s broader benefits platform. For a scaling business, that pooled purchasing power is the difference between accepting the market trend and negotiating against it.
Aon projects that average total health plan costs will exceed $19,000 per employee in 2027 if employers make no additional plan changes.
Helpside’s pooled model gives eligible small and midsize employers access to broader purchasing power and plan options, although actual pricing and savings vary by state, plan, census, and underwriting.
It is worth being precise about what co-employment is and is not. Co-employment is not the same as an Employer of Record arrangement used to hire a single worker in a location where a company has no entity. In a PEO relationship, you retain the employment relationship, direction, and culture of your team; the PEO shares specific employer responsibilities and liability defined in the client service agreement, and adds the infrastructure behind employee benefits, payroll, and HR and compliance support.
The service model matters as much as the buying power. A boutique, service-first PEO pairs large-group benefits economics with people who actually know your business, rather than routing you to a platform and a ticket queue. That combination is what lets a growing company scale its benefits without cutting them. Finicity, for example, grew past 250 employees across more than 20 states and through an acquisition by Mastercard while relying on a co-employment partner to carry the HR, benefits, and risk infrastructure that a company that size demands.
With most employers finalizing renewals before year end, the window to change your position for the 2027 plan year is now. A few steps to work through before you sign:
Facing a steep renewal this year?
See what pooled buying power and a service-first partner could do for your 2027 plan year before you cut a single benefit.
Talk with HelpsideEmployer health insurance costs are projected to rise about 11% per employee in 2027 before plan changes, and roughly 8% after employers cut coverage, according to a Mercer survey reported by The New York Times, for employers with 50 or more employees. That would be the steepest increase since 2003. The Business Group on Health projects a 9.2% median increase, and Aon projects 9.5%, which would push the average total health plan cost above $19,000 per employee per year if no changes are made.
Several factors are compounding at once: rising hospital prices, expensive new cancer medicines, strong demand for GLP-1 drugs, and pharmacy spending that is climbing faster than medical costs. Newer pressures include providers using artificial intelligence to document care in ways that raise reimbursement, and expected Medicaid cuts that shift more uncompensated costs onto employer plans. Pharmacy, and specialty drugs in particular, is the fastest-moving driver.
Yes. Prescription drug costs rose 9.4% in 2025, with specialty drugs up 8.9%. Specialty drugs are just 2% of pharmacy volume but roughly 60% of pharmacy spend, and the specialty market is projected to reach $965.5 billion by 2030. GLP-1s were cited by 41% of employers as a top cost driver and are expected to add 0.5% to 1% to medical spend in 2026, even as prior authorization requirements tighten.
Cutting benefits lowers the renewal number on paper, but it shifts cost onto employees who are already paying more. Out-of-pocket costs rose about 10% in 2026, to roughly $2,167 per worker. For a company that is hiring, thinner coverage is a retention risk when competitive benefits matter most. A stronger approach is to gain enough purchasing leverage, often through pooled buying power, that cutting is no longer the only available lever.
Larger organizations use strategies that reward scale: biosimilar-first pharmacy approaches, outcomes-based contracting, stop-loss protection, pharmacy benefit manager transparency, and proactive risk management. Most small employers cannot access these alone. Pooling with other companies through a co-employment arrangement lets a small or midsize business access a shared benefits platform and more sophisticated infrastructure, unlocking the buying power and contracting leverage that were previously limited to enterprise employers.
Through a co-employment relationship, eligible client companies may participate in benefit plans sponsored or administered through the PEO’s broader benefits platform. That pooled purchasing power can give small and midsize employers access to large-group benefits economics, stronger pharmacy benefit manager terms, and shared risk management infrastructure. The practical effect is more room to hold coverage steady while the broader market is cutting it. A service-first PEO adds people who know your business rather than routing you to a platform.
No. An Employer of Record is typically used to hire a single worker where a company has no legal entity. Co-employment through a PEO is a shared relationship across your whole workforce: you keep control of operations, direction, and culture, while the PEO shares specific employer responsibilities and liability defined in the client service agreement. That includes benefits, payroll, and HR and compliance support, all backed by pooled buying power your company would not have alone.
Start by modeling the real increase before benefit cuts, not just the after-cuts number. Review your pharmacy spend and pharmacy benefit manager arrangement, since specialty drugs and GLP-1s drive most of the trend. If your plan is self-funded or level-funded, confirm your stop-loss coverage fits the group’s exposure to high-cost claims. Quantify the retention cost of any cuts you are considering. Finally, compare a standalone renewal against what pooled purchasing power through a PEO would offer your specific census.
Sources: Mercer 2027 employer health cost survey (employers with 50 or more employees), as reported by The New York Times; Business Group on Health 2027 Employer Healthcare Strategy Survey; Aon 2027 projections; Marsh & McLennan Agency 2026 Employee Health & Benefits Trends report. Helpside provides HR, benefits, payroll, and risk management support to small and midsize businesses nationwide from its base in the Intermountain West. Benefit availability varies by state and plan.