Healthcare cost increases have rapidly outpaced employee wages in recent years, and US employers are bracing for an even bigger price shock in 2027.
According to a new survey from WTW, a benefits consulting firm, 471 US large employers are projecting healthcare costs will increase 9.7% in 2027.
“We haven’t had such high increases in two decades,” said Jeff Levin-Scherz, Senior Managing Director and Population Health Leader at WTW. “And now we’re having a high increase on a very high base compared to two decades ago.”
According to the survey, most employers cite high-cost claimants, pharmacy costs, chronic conditions, cancer care and inflation for the increases they are encountering.
There’s also dwindling hope that the trend will change, with 80% expecting cost trends to remain elevated over the next three years and 65% expecting them to last for the next five years.
“And there are a limited number of things that employers can do,” Levin-Scherz said.
The survey found that by 2028, 71% of employers are planning to shift to plans with higher out of pocket expenses, 66% plan to put more emphasis on Account Based Health Plans, such as Health Savings Accounts, and 85% are planning to raise premium contributions.
A smaller, but growing, number of employers are also planning to restrict eligibility and cut more expensive plans.
Kent Erdahl: “All of the changes appear to just put more pressure on employees.”
Jeff Levin-Scherz: “That’s the truth. Many of them do. I mean, if you’re looking for savings that come very quickly, many of those do involve employees paying more… paying higher deductibles or being responsible for higher costs at the point of service.”
According to a recent report from Aon, another benefits consultant, employees are already shouldering more of the load, paying nearly $5,300 this year on average. The increased costs reflect both higher premiums and out of pocket costs for a total average increase of nearly 8%.
“Remember, whenever you’re looking at averages or when you’re looking at medians, you don’t appreciate what this means for people that are far above the average,” Levin-Scherz said. “There are many people who have $4,000 family deductibles where they do not have $4,000 around.”
Price hikes could once again be felt even more on Minnesota’s ACA marketplace, known as MNSURE.
According to the latest rate proposals for 2027, the 190,000 Minnesotans covered by the MNSURE individual market, are facing proposed increases ranging from 10-13 percent in 2027. For another 200,000 Minnesotans who receive their insurance through small businesses on the MNSURE small group market, rate hike proposals range from 10% up to more than 21% for United Healthcare plans.
“The risk pool is substantially worse for the exchange plans,” Levin-Scherz said. “The discontinuation of Affordable Care Act subsidies has really led to those high rate increases and the population (on state exchanges) is getting substantially smaller and sicker. The reason it’s getting smaller and sicker is healthy people under those circumstances are more likely to go uninsured, deciding that they just can’t afford to be insured.”
For now, those proposed rate changes for MNSURE, are still just proposals that are still subject to review. The actual rates will be finalized in the coming weeks. Remember, rate changes are also averages and that means a lot can change based on your specific plan, geography, age, etc.