According to the latest annual survey of large U.S. employers released by the Business Group on Health (BGH), healthcare costs could rise by nearly 10% in 2027. BGH executives stated that this forecast reflects the "unprecedented" environment facing employee benefits teams.

2025 marks the third consecutive year that actual healthcare costs have exceeded BGH members' expectations. The 127 employers surveyed cover 8.7 million insured individuals in the U.S. Additionally, the year-over-year increase of 8.8% in 2025 is the highest level ever reported by BGH members.

"Clearly, employers are at a turning point," said Brenna Shebel, vice president of BGH, during a press conference announcing the results on Tuesday.

The organization found that disease categories such as cancer, musculoskeletal, and cardiovascular conditions are the primary drivers of this trend—consistent with findings from previous editions of the survey—while rising prices for hospitals, outpatient facilities, and pharmaceuticals also contribute. Pharmacy costs alone are projected to rise 12% in 2027 before plan design changes.

Ellen Kelsay, president and CEO of BGH, said the cost increase findings are "undoubtedly alarming," and more challenging is that most employers have already locked in their 2026 employee benefits budgets. She noted that many employers may not be able to take significant cost-cutting measures until 2028 at the earliest.

For many employers, the first step in addressing high costs is a closer examination of vendor and third-party partnerships. The vast majority of respondents (95%) have issued requests for proposals (RFPs), and 58% plan to replace underperforming vendors and/or eliminate low-utilization programs. Additionally, 83% of employers have expanded performance guarantees with health partners.

Kelsay added that employers will not stop at these measures, and non-traditional and emerging care models are gaining increasing attention.

Take pharmacy benefit management (PBM), for example—a role often criticized in healthcare that is being reexamined. Nearly one-third of BGH respondents said they will adopt "transparent" or "next-generation" PBM arrangements by 2027, with another 47% considering following suit in the coming years. Kelsay said this process typically takes 12 to 18 months on average, as employers want to ensure due diligence and a smooth transition to new partners.

"These are very significant processes for employers," Kelsay continued. "They are not things that can be turned around quickly."

Employers are also weighing whether to require plan participants to use Centers of Excellence (COE) for specific medical procedures. Shebel said that this year, 82% of BGH respondents have established COE models, and another 12% are adding or considering this option. Value-based solutions, high-performance networks, and accountable care organizations (ACOs) are also under consideration.

Meanwhile, employers are pulling back in one specific coverage area: GLP-1 drugs, especially those used for weight management. In fact, no employer in the BGH survey indicated plans to add GLP-1 weight management coverage in 2027—14% of employers said they have already eliminated or plan to eliminate this coverage by 2027.

These findings echo the results of this year's SHRM employee benefits survey, which also found that GLP-1 coverage for diabetes management is far higher than for weight management. Even among the 60% of BGH members who said they would maintain this coverage, most plan to implement stronger utilization controls, such as verifying members' clinical eligibility or requiring participation in weight management programs.

According to Kelsay, employers' concerns about GLP-1s, beyond their high cost, also involve their emerging role as the default option for weight loss, rather than one of many available pathways for patients. In recent years, direct-to-consumer channels for these drugs have also expanded, giving employees more avenues to access them.

"For many employers, they have to make difficult decisions to maintain the overall viability of the plan, and whether they can continue to offer GLP-1s," she said. "This is partly a reexamination of all other long-standing programs, such as other anti-obesity medications, lifestyle, behavioral, nutritional programs, bariatric surgery, and more."