Medical costs expected to rise nearly 10% in 2027, adding pressure on employers and employees
New research released by professional services firm Aon predicts that average U.S. employer medical costs will surpass $19,000 per employee in 2027, a 9.5% increase year-over-year. Although employers cover over 80% of health insurance costs, the burden on employees is also rising significantly: average employee out-of-pocket expenses are expected to reach $5,297 in 2026, up 7.9% from 2025. The study notes that rising chronic disease prevalence, specialty drugs, and the adoption of GLP-1 therapies are driving up medical expenditures, while AI applications are indirectly impacting medical billing. Employers face the dual challenge of balancing benefit sustainability with talent attraction.
Key Takeaways
- New research from Aon shows that average U.S. employer medical costs are projected to exceed $19,000 per employee in 2027, up 9.5% year-over-year.
- Although employers bear over 80% of health plan costs, employee burdens are also rising: in 2026, average employee out-of-pocket expenses are projected to reach $5,297, up 7.9% from 2025, with payroll deductions rising 6.4% year-over-year to $3,130, and out-of-pocket costs up 10.2% year-over-year to $2,167.
- The research attributes the rise in out-of-pocket costs to "increased healthcare utilization, as well as the selection of leaner plan designs." Additionally, some medical bill increases are linked to the use of technologies like artificial intelligence, which "support more detailed clinical documentation and coding."
Deep Insights
The research notes that this marks the fourth consecutive year of near-double-digit increases in medical costs, a trend that extends "one of the most sustained periods of medical inflation employers have faced in decades."
The rise in medical spending stems from various factors, including an increase in chronic disease prevalence, leading to more high-cost claims. Meanwhile, prescription drugs have become a significant factor—more patients rely on specialty drugs and GLP-1 therapies, forcing employers to balance healthcare access, affordability, and long-term sustainability.
"When healthcare costs reach this level, their impact goes beyond budget challenges and permeates organizational decision-making, from benefits strategy and employee affordability to broader workforce and financial planning priorities," said Mike Pasterick, North America Health Solutions Leader at Aon, in a statement. "Leaders are under pressure to maintain affordable benefits while continuing to invest in attracting, supporting, and retaining talent."
Over the past few years, employer medical cost increases have more than doubled: from 3.7% in 2022 to 8.8% in 2026.
"The organizations that will be best positioned in the future are those that can proactively identify emerging risks and take targeted action before costs escalate," said Debbie Ashford, Chief Actuary for North America Health Solutions at Aon, in a statement.
As medical costs climb, a recent report from Mercer shows that nearly half of U.S. employers with 500 or more employees say they will adjust their 2027 insurance plans to shift more costs to employees.
Meanwhile, a survey by the National Alliance of Healthcare Purchaser Coalitions shows that 83% of employers say rising healthcare costs will force them tomake trade-offs in wages and salary increases。