New York — Employer-sponsored health plan costs are projected to rise at their fastest rate in 15 years in 2027, driven by prescription drugs, inflation, artificial intelligence-assisted medical coding and surprise billing arbitration, according to a new Segal survey.
The consulting firm’s annual Health Plan Cost Trend Survey projects a median medical plan cost increase of 9.9%. The report covers more than 80% of the commercially insured and self-insured healthcare market.
“We have seen elevated medical trends for several years, but costs now feel like they’re reaching a breaking point,” said Edward Kaplan, National Health Practice Leader and Senior Vice President at Segal. “Employers and Taft-Hartley plans are under intense cost pressures to manage the affordability of wage increases, price inflation and health benefit commitments, forcing more difficult choices for decision-makers.”
Prescription drug costs are expected to increase 11.5%, fueled by rising specialty drug spending and broader use of GLP-1 medications for obesity.
Segal also cited healthcare industry consolidation and growing private equity involvement as factors contributing to higher prices and increased use of services.
The report said greater coding intensity linked to artificial intelligence, without corresponding changes in patient care, is responsible for about 20% of inpatient cost growth.
Segal also criticized the arbitration process established under the No Surprises Act, estimating that independent dispute resolution cases have added about $5 billion in healthcare system costs since 2022.
“Medical providers prevail 88 percent of the time in No Surprises Act disputes, at costs much higher than standard in-network rates,” said Eileen Flick, Leader of Healthcare Informatics and Senior Vice President at Segal. “These outcomes are fueling unnecessary cost growth across the healthcare system. It’s imperative that plan sponsors have visibility into these outcomes and are armed with the information necessary to better navigate this complex process.”
To control expenses, employers and other plan sponsors are increasingly adopting strategies designed to generate direct savings.
These include using narrower provider networks, direct contracting, risk-sharing arrangements and centers of excellence. Employers are also moving toward more transparent, pass-through pricing agreements with pharmacy benefit managers rather than rebate-based models.
Another approach involves directing patients away from higher-cost hospital settings and toward ambulatory surgery centers, home infusion services and other lower-cost care locations.
“There has never been more information available, including transparency, plan and claims data for plan sponsors to leverage,” said Eric Miller, Vice President and Consulting Actuary at Segal. “While the feeling of exasperation is palpable throughout the economy, there is benefit to taking an active role in managing plan costs through strategies that are targeted and data informed.”
