Medical cost trends are approaching double digits for the second consecutive year with levels not seen in nearly 15 years, placing renewed pressure on US employers and the brokers advising them.
The 2027 Segal Health Plan Cost Trend Survey, the firm’s 30th annual survey of managed care organizations, health insurers, pharmacy benefit managers (PBMs), and third-party administrators (TPAs), projects a median medical trend of 9.9 percent for open-access Preferred Provider Organization (PPO), Point of Service (POS), and pharmacy benefit managers (POS) plans in 2027, while prescription drug costs are projected to climb 11.5 percent.
Eric Miller, FSA, CERA, MAAA, vice president and consulting actuary at Segal in the National Health Consulting and Analytics practice, helped develop the survey findings and spoke with Insurance Business America about what the numbers mean for brokers navigating renewal season with mid-market employer clients.
The trajectory of medical cost trends were lower pre-COVID, running at 5 to 6 percent, but even at that level they were viewed as a problem.
Coming out of the pandemic, they climbed to 6 to 7 percent, then 7 to 8 and 8 to 9 and are now expected at approximately 10 percent across multiple consecutive years. For employers at or above the median, the compounding effect is severe with expectation of rising budgets.
Segal’s own SHAPE (Segal Health Analysis of Plan Experience) data warehouse confirms the trajectory: actual medical trend reached 8.9 percent in 2025, up from 8.0 percent in 2024.
Outpatient hospital expenses were the primary driver, while professional expense trend climbed from 2.5 percent in 2022 to 8.2 percent in 2025, a fourfold increase in three years, according to the survey.
The practical consequence for employers is a conversation that recurs every renewal cycle: how much can we absorb and how much must we pass along?
“Employers want to offer great benefits, but at a certain point they’re limited in what they can absorb and what strategies can be effective in mitigating it without causing consternation for their employees,” said Miller.
Broad economic inflation plays a role — it flows through providers, carriers, and brokers into the price of medical services. But Miller is clear that inflation is only part of the story.
Provider consolidation has been reshaping the healthcare market for years, and private equity’s entry into the sector has added further upward pressure on pricing. The Segal report notes that PE-acquired practices charge higher prices and experience increased spending while generating higher patient volumes, with consolidation strategies strengthening market leverage and driving higher negotiated rates.
At the same time, the population is managing a greater burden of chronic disease. The survey notes that over 76 percent of adults have at least one chronic condition, with utilization of newer therapies for conditions including neurology, inflammatory disease, and mental health all accelerating as treatment guidelines evolve.
One of the most significant and underreported cost drivers is the independent dispute resolution (IDR) process created by the No Surprises Act, which was designed to shield patients from unexpected out-of-network bills. While the legislation solved a genuine problem for patients, it transferred financial exposure to plan sponsors.
“Providers can use the IDR process to get payments that are 3, 4, 5, even 10 times more than what would be common for an in-network provider doing the same service,” said Miller. “And they are winning the lion’s share: 80, 90% of those disputes instead of the payer winning those disputes. That creates a lot of upward pressure on costs, especially in things like the emergency room, surgeries, or anesthesiology.”
The Segal survey corroborates this, noting that the IDR process has generated an estimated $5 billion in additional system costs since 2022, including higher provider payments and administrative expenses, with arbitration outcomes favoring providers in 88 percent of disputes.
Glucagon-like peptide-1 (GLP-1) receptor agonists have become one of the most visible cost drivers on the prescription drug side.
The Segal survey identifies GLP-1 expansion as a primary contributor to the projected 11.5 percent outpatient Rx trend for 2027, noting these drugs have moved beyond diabetes management into obesity, cardiovascular risk reduction, sleep apnea, and other emerging indications.
Segal’s SHAPE data illustrates the stakes starkly: plans that covered GLP-1s for obesity management recorded a prescription drug trend rate of 18.3 percent in 2025, with 8.8 percentage points of that directly attributable to GLP-1s. By contrast, plans that did not cover GLP-1s for obesity management saw prescription drug trend of 10.5 percent in 2025, per the same data.
Miller notes that the issue extends beyond drugs currently approved.
“It’s also existing drugs being approved to treat new things,” he said. “GLP-1s initially were focused on diabetics, and then obesity, and then sleep apnea and there are several others being explored. Over time, more and more people will be eligible to be prescribed the GLP-1 for a condition that they have.”
That expanding eligibility pool has also heightened employer awareness of how benefit plans stack up when recruiting.
“The average individual consumer has become much more aware of how that works and to check things like that,” Miller said. “If you’re the only one in your industry that has particularly generous coverage (or particularly restrictive coverage) that’s going to impact your ability to recruit and retain talent.”
Perhaps the least-discussed dimension of rising healthcare costs is the role artificial intelligence is beginning to play on both sides of the claims equation.
The Segal survey explicitly identifies AI-driven billing practices, allowing more precise coding, as a factor influencing medical cost trend for 2027. A March 2026 study by the Blue Cross Blue Shield Association (BCBSA) and Blue Health Intelligence, cited in the Segal report, found that expanded AI-assisted documentation often captures additional diagnoses or comorbidities without corresponding changes in treatment.
As a result, approximately 20 percent of inpatient cost growth within a 9 percent overall increase was driven by coding intensity rather than more care delivered, according to that study.
Miller sees it as setting up a competitive dynamic between providers and payers. On the provider side, AI is being integrated into billing and clinical documentation. On the payer side, AI is being deployed to detect fraud, waste, and abuse more effectively. He framed the billing risk with a pointed analogy.
“Before, maybe a hospital is billing generally, saying everybody’s between five and six feet tall. But the concern is now AI comes in and it’s listing everybody’s exact height and all of a sudden everybody’s six feet exactly. The highest end of that range,” he said.
And that ability of AI to give more precise data is likely to mean further upward cost pressure.
“I think it would be naive to think that there won’t be some element of trying to increase revenue by maybe going into a gray area a bit.,” Miller said. “That’s the thing that the industry is keeping an eye on and there’s already some noise around that as a cost driver, especially on risk adjustment, which is based on diagnoses specifically.”
For brokers advising plan sponsors, Miller points to three priorities: transparency in communication, network strategy, and population-level engagement.
On transparency, he argues that brokers should help employers explain, not just announce, benefit changes.
“Communicating how that happened, what the situation was, how much you absorbed as the employer, because the cost might have gone up 10% and you’re absorbing half or 80% of that. Helping the employee see your thought process is helpful.”
The Segal survey’s ranking of top employer cost-management strategies for 2026 aligns with this approach, with site-of-care steerage now among the top five medical strategies — moving patients from hospitals to lower-cost settings such as ambulatory surgery centers (ASCs), physician offices, or home-based care.
Network decisions are where Miller expects most employer action to land over the next two years, shifting from broad PPO plans toward narrower products or tiered networks.
“I think on the network side is where you’re going to see employers probably make the most decisions over the next couple years,” he said. “Each employer is going to be a bit different in their own geography, with their own demographics. Understanding what’s driving the cost in your population and seeing what solutions might exist, you always want to be doing that.”
“I don’t think trends will stay at this kind of eye-catching 10% level. I think trends will moderate and the situation will improve,” Miller said.
He points to several potential moderating forces: increased competition in the GLP-1 market, biosimilar medications reducing specialty drug costs bipartisan legislative momentum around both the No Surprises Act’s IDR process and pharmacy benefit manager reform.
The Segal survey notes that federal PBM reform enacted under the Consolidated Appropriations Act (CAA) of 2026 will require PBMs serving covered group health plans to pass through 100 percent of manufacturer rebates, fees, and other remuneration to plan clients. Though many commercial-market requirements do not take effect until 2028–2029.
Price transparency data, which is still relatively new in the US market, may also begin to exert competitive pressure at the network level, particularly as large employers become more engaged with their own plan data.
For brokers working the renewal circuit right now, understanding what is specifically driving costs in each employer’s own plan, communicating the journey to employees, and actively managing network and pharmacy strategy are the most valuable things a broker can offer.
