The average cost of providing group healthcare for employees is expected to rise by 9% in 2027 for a second consecutive year, according to research by PwC.
The medical cost trend, which was at a comparatively manageable 5.5% as recently as 2022, shot up the following year and has continued to inflate since then.
The increase “reflects the convergence of several powerful forces reshaping the healthcare landscape,” PwC wrote in its research report, based on a survey and interviews with actuaries at 27 U.S. health plans that cover more than 103 million employer-sponsored members and 8 million Individual Affordable Care Act marketplace members.
Current major cost inflators, PwC said, include:
- Medical providers’ adoption of AI-enabled revenue optimization tools
“More complete, detailed documentation can increase the capture of billable complexity, support higher-severity coding, and raise reimbursement per encounter or admission under current payment models,” PwC wrote.
The report added that a recent survey of 43 health systems found that ambient notes for clinical documentation was the only AI use case with “adoption activity reported across all respondents, with 53% reporting a high degree of success.”
In response, PwC counseled, companies should “move payment review upstream, validating high-dollar claims before payment leaves the plan, tracking provider-level severity drift, and integrating contract terms, payment policy, and claims edits into a single accuracy engine.”
- Growing provider reimbursement pressure
“Hospitals and health systems continue to face elevated labor expense, higher input costs for drugs and supplies, and persistent reimbursement shortfalls in public programs,” the report said.
This is not a new scenario, but hospital and related services inflation spiked in early 2026 to post-pandemic highs, reaching 7.59% year over year in February. For 2027, 65% of survey respondents ranked it among their top three cost inflators.
In response to these pressures, said PwC, utilization management should become more targeted, not just more restricted. “Retire low-yield prior authorization requirements,” the company said. “Instead, concentrate clinical review on the services where cost and variation are genuinely highest.”
- Rising pharmacy spending
More than 85% of survey participants cited a 2027 pharmacy cost trend that was outpacing the overall medical cost trend.
The report cited higher-cost specialty and physician-administered drugs, expanding utilization of GLP-1 drugs, and growing uncertainty around pharmacy benefit manager transformation and pricing transparency.
- Sustained growth in behavioral health utilization
“Unlike many other medical cost categories, where trend is driven primarily by price and unit cost, behavioral health growth has been fueled more directly by rising utilization,” PwC noted.
A recent report from Trilliant Health found that behavioral health visit rates increased from 828 to 1,346 visits per 1,000 people between 2018 and 2024.
- Escalating out-of-network payment disputes under the No Surprises Act
The Act’s Independent Dispute Resolution arbitration process has become a reimbursement inflator, PwC noted, with providers winning 88% of disputes with payers in 2.6 million cases filed in 2025. Emergency department and radiology services accounted for a large share of that activity.
