The 2027 Renewal Shock: Somebody Has to Absorb a Double-Digit Health Trend

Renewal season usually opens with an argument about a number. This year the number arrived early, and it arrived from three directions at once. Segal's 30th annual Health Plan Cost Trend Survey, published August 5, puts the median projected 2027 trend for open-access PPO and POS plans at 9.9%, with prescription drug trend at 11.5%. PwC's Behind the Numbers, released June 11 after interviews with actuaries at 27 US health plans covering more than 103 million employer-sponsored members, lands at 9.0% for the group market and calls it the highest in nearly two decades. And employers themselves, surveyed by the International Foundation of Employee Benefit Plans, put their own median projection at a flat 10%.

Those three numbers are close enough to be the same story and far enough apart to be worth reading carefully. All of them describe gross trend: what a plan costs next year if nobody touches the plan. None of them is what employers will actually book. The distance between the two is the entire subject of the next four months.

Nine Point Nine Is What Happens Before Anyone Does Anything

The drivers behind the 2027 projections are unusually specific, which is what makes them hard to negotiate away. Segal's survey traces professional expense trend climbing from 2.5% in 2022 to 8.2% in 2025, a repricing of ordinary physician and outpatient services, not a spike in how sick anyone got. It attributes roughly $5 billion in additional cost since 2022 to the No Surprises Act's independent dispute resolution process, where providers have prevailed in 88% of disputes.

"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." – Eric Miller, FSA, CERA, MAAA, Vice President and Consulting Actuary, Segal

The pharmacy line is where the split between plans gets dramatic. Segal reports drug trend of 18.3% for plans that cover GLP-1s for obesity, with 8.8 percentage points of that coming from GLP-1s alone, against 10.5% for plans that don't. That is not a rounding difference; it is two different renewals. Employers noticed: per Mercer's 2027 survey findings, 27% tightened GLP-1 coverage criteria in 2026 or 2027 and 5% considered dropping the coverage entirely.

The IFEBP survey points at the same terrain from the employer seat: catastrophic claims were named the top cost driver by 32% of respondents and specialty drugs by 21%. Segal's actuaries add one genuinely new item: AI-assisted clinical documentation and coding, which they estimate accounted for roughly 20% of inpatient cost growth inside a 9% overall increase. Nobody delivered more care. The care simply got billed more completely.

The Gap Between Gross and Net Is Where the Employee Lives

Employers rarely report gross trend, because they rarely pay it. Mercer's national survey of 2,010 employers shows the mechanic plainly: for 2026, the expected increase before plan changes was 9.2%, and the expected increase after plan changes was 6.7%. Fifty-five percent of employers said they would reduce their initial rate increase by changing plan design. Those 2.5 percentage points did not evaporate. They moved into deductibles, copays, coinsurance, and network restrictions.

For 2027, the same lever is being pulled harder. Mercer's survey of 604 US organizations, fielded April 15 to May 8, 2026, found 48% of employers with 500 or more employees expect to make medical plan changes that raise employee out-of-pocket costs. Roughly two-thirds of large companies expect to raise monthly premium contributions as well. Mercer's own research director estimates workers on richer PPO plans could see their costs rise by as much as 8%.

"Employers are under intense pressure to manage another year of elevated health benefit cost growth, but they also know that affordability matters deeply to employees." – Simon Camaj, US Health Leader, Mercer

That is the tension worth naming out loud. The public commitment across almost every employer benefits statement is affordability for employees; the operating reality is a fourth consecutive year of cost growth above 6% against an average that already exceeds $18,500 per employee. There is a third road: 31% of large employers offer or plan to offer a non-traditional medical plan in 2027, such as a high-performance network or a variable copay design, and another 38% are considering one. But redesign is slow, and renewal deadlines are not.

The Total Rewards Math Doesn't Close

Here is why 2027 feels different from the last three renewal cycles even though the trend number has been elevated all along: there is no longer any slack elsewhere in the rewards budget to quietly absorb it. Payscale's 2026 Compensation Best Practices Report, built on 3,413 responses, puts the median planned pay increase at 3.5%. Sixty-one percent of organizations say investment in benefits will stay flat, 16% say they are reducing it, and just 14% say they are expanding it. Variable pay is thinning too: 75% of organizations are giving it, down six points year over year.

Put those two data sets side by side and the arithmetic is blunt. Medical trend is running at roughly three times the median salary increase, and three-quarters of employers have already decided their benefits investment will hold flat or shrink. A 9.9% gross trend against a flat budget has exactly one place to go, and everyone in the room knows where. The remaining questions are how much of it employees see, and whether anyone explains it before the enrollment window opens.

That last question is the one HR actually controls. An 8% jump in a PPO enrollee's cost that arrives with context, comparison, and a plausible reason reads as a hard year. The same 8% arriving as a silent change on a benefits portal reads as a pay cut, and gets scored against the employer in every engagement survey that follows.

For benefits and total rewards leaders working the 2027 renewal, the practical response looks like this:

• Model gross and net separately, in writing. A 9.9% trend reduced to 6.7% by plan changes is not a 6.7% year; it is a 9.9% year with 3.2 points reassigned. Show your CFO both numbers.
• Price the GLP-1 decision on its own line. Segal's data puts drug trend at 18.3% for plans covering GLP-1s for obesity versus 10.5% for plans that don't, the single largest discretionary swing in most renewals.
• Stress-test the network before the cost share. With providers winning 88% of IDR disputes and professional expense trend at 8.2%, contracting and steerage now move more money than another $500 on the deductible.
• Start non-traditional plan design a cycle early. The 38% of large employers still only considering high-performance networks or variable copay plans will not have them ready for a January 1 effective date.
• Write the compensation story and the benefits story together. A 3.5% raise and an 8% benefits cost increase are one conversation for the employee, whether or not they are one conversation for you.

Nobody in this cycle gets to be the hero. The trend is real, the drivers are structural, and the money has to come from somewhere: the employer's margin, the employee's paycheck, or the plan's design. Choosing deliberately among those three is the job. Letting the renewal choose for you is how a cost increase turns into a trust problem.