Healthcare spending isn’t just skyrocketing for U.S. companies. It’s also getting more difficult to predict, complicating efforts to keep cost growth in hand, according to new research.

Employers are projecting a median 9.2% increase in health costs in 2027, as hospital prices rise, drugs get more expensive and workers and their families simply get sicker, the Business Group on Health, a nonprofit that represents employers on health benefits issues, found in its latest survey.

Health cost growth is expected to dip to around 8% after plan benefit changes — still an uncommonly sharp year-over-year spike, if predictions bear out. But employers have underestimated actual medical spend for the past three years. And each subsequent “miss” has been bigger than the one before it, according to experts with the BGH.

That means the swell of healthcare costs coming for employers in 2027 could be even more dramatic than feared.

2025 marked “not only the highest annual cost increase, but also the largest gap between the projected and actual cost since we started collecting this data,” with the exception of 2020, the first year of the coronavirus pandemic, Ellen Kelsay, the president and CEO of BGH, said during a call with reporters on Tuesday.

“This pattern suggests that current forecasts for 2026 and 2027 may actually be too optimistic,” she said.

The BGH surveyed 127 employers covering some 8.7 million Americans for its research.

The 9.2% median increase uncovered by the group aligns with other recent polling from consultancies, including from Aon, which found employers expect healthcare costs to jump 9.5% next year.

Another survey from WTW forecasts a whopping 11.1% increase, which would represent the highest spike in costs in nearly two decades.

The findings put numbers around the unease dogging benefits professionals and human resources departments. Experts are anxious that employers — and the U.S. writ large — may be contending with an uncomfortable new normal as healthcare spending continues to surge past the nation’s economic growth, and that existing forecasting and budgeting strategies may no longer be adequate in the face of spiking medical costs.

Employers are still committed to providing health benefits to their workers, Kelsay said. But staring down another year of healthcare spending growth kissing the double-digits, employers are reconsidering the offerings on deck: trimming benefits, cutting programs and kicking vendors unable to provide cost savings to the curb.

Pernicious cost growth is also spurring a broader reappraisal of employers’ role as the backbone of the U.S. insurance system, according to the BGH CEO.

“Employers are facing, I would say, a growing existential reckoning about their role in healthcare,” Kelsay said. “For them, the calculus is really around kind of this philosophical role that they play, and how can they continue to do that on a sustainable basis.”

“That said, their backs are increasingly going to be up against a wall on these affordability challenges,” she added. “And they’re going to have to make some harder decisions.”

‘An inflection point’

Factoring in predicted trend for 2026 and 2027, cumulative healthcare costs will have jumped 76% over the past decade — more than double the rate of general inflation, the BGH found.

Employers chalk the quick growth up to skyrocketing hospital prices, as rampant consolidation eats away at competition in the sector. In particular, hospital operators have raced to acquire independent doctor’s offices, which allow them to charge additional facility fees, driving up the cost of claims.

Employers are also on the hook for higher drug spending, amid rising demand for pricey GLP-1 medications for weight loss, expensive specialty drugs entering the market and an overall decline in population health.

Pharmacy costs already make up one-fourth of total healthcare spending, and the category is projected to rise 12% in 2026 and another 12% in 2027 — a sharper uptick than overall trend, the BGH found.

For the fifth year in a row, cancer is far and away the most dominant condition driving up healthcare spending, with “no close second,” Kelsay said. Seventy percent of respondents said it was their No. 1 cost driver in 2026, up from 58% in 2025.

But other conditions, especially musculoskeletal and cardiovascular, are also reliable drivers. And employers are wary of categories necessitating complex care where spending appears to be on the rise, including maternity, gastroenterology and autoimmune conditions, like rheumatoid arthritis and lupus.

Accelerating spending on such conditions — and the expensive therapies that treat them — is an indication that America’s workforce is getting sicker. It’s a concerning trend that experts attribute to the pause in preventive care and screening during the COVID-19 pandemic, which led to doctors missing early warning signs of some serious health needs, as well as the general aging of America’s population.

“It’s clear employers are at an inflection point,” Brenna Shebel, the vice president of the BGH, said during the briefing.

Employers are also concerned about other areas that seem to be driving up spending, including artificial intelligence. More providers are putting the algorithms to work on billing, which appears to be contributing to upcoding. Some 64% of employers reported a cost impact from providers’ AI-driven revenue optimization.

Infusions, especially those related to oncology, are also drawing attention. And employers are bracing for higher costs as a result of GOP cuts to Medicaid and the loss of more generous subsidies for Affordable Care Act plans, which are expected to increase the number of uninsured Americans.

That could result in more potentially sick (and therefore costly) Americans looking for coverage through employment. Meanwhile, hospitals and doctors will likely try to make up for losses from treating uninsured people by raising prices for commercially insured individuals.

The No Surprises Act’ dispute resolution process is also a problem, employers told the BGH. The 2020 law holds consumers harmless for unexpected out-of-network medical bills by forcing insurers and providers to negotiate payment for those services themselves, with a backstop of an independent arbiter if needed.

The mechanism was meant to nudge more providers to enter contracts with insurers. But it’s had opposite effect, as providers have flooded arbiters with disputes, and reaped the lion’s share of payouts. That’s driving up U.S. health spending by billions of dollars, according to research, and inflating medical cost trend for employers by around 2%, Kelsay said, citing estimates from vendors that work with the BGH.

More than half of employers reported already experiencing high volumes of No Surprises claims, or are expecting a jump in the future.

“It’s a very, very large concern,” Kelsay said.

Making hard decisions

Employers are getting creative in light of spiking costs, increasingly reassessing benefits strategies and the vendors they partner with, the BGH found.

More employers are embarking on value-based arrangements meant to improve care quality while keeping costs in check. Some 92% of employers report they’ll be using one or more strategy like a center of excellence, a high-performance network or an accountable care organization by 2027.

More are also considering alternatives to traditional benefits arrangements, including deals with transparent pharmacy benefit managers, the BGH found. One-third of employers expect to have a transparent or “new generation” PBM in place by 2027, while almost half are considering shifting to the models in the following two years.

It’s the latest evidence that employers are fed up with the pharmacy benefits status quo. Along with concerns about rebates, leading PBMs have also been slammed for hidden fees, self-dealing and complex black box contracts that health insurers and employers say leave them in the dark.

Employers are also eschewing existing relationships if a vendor can’t demonstrate improved outcomes or lower costs, the BGH found. Some 95% of employers say they’ve issued a request for proposals for at least one vendor category. Most companies are also increasing scope of performance guarantees (83%) or increasing vendor reimbursement tied to outcomes (71%).

Another 58% of employers say they’ve already replaced or plan to replace vendors that aren’t performing in the coming year.

“One of the most visible demonstrations of employer disruption is the willingness to reevaluate these long-standing vendor partnerships and relationships to analyze their program value,” Shebel said.

To manage rising pharmacy costs, employers are also reassessing their coverage of GLP-1s.

The drugs are clinically effective but come with a steep price tag of hundreds of dollars or even upwards of $1,000 each month, leaving employers grappling with whether or not to cover them for obesity. And more businesses are electing not to, the BGH found.

The percentage of employers covering GLP-1s in that category dropped from 72% last year to 60% this year, according to the survey. Not a single employer said they plan to add GLP-1 coverage.

Companies that continue to offer GLP-1s are increasing the parameters around who can get them, including validating an individual’s clinical eligibility by checking their biometrics or requiring participation in a weight management program, the BGH found.

“Just generally speaking, healthcare affordability is becoming increasingly untenable for employers. GLP-1s have been a significant factor in that affordability equation. And for many employers, they’re having to make some hard decisions,” Kelsay said.