Segal has projected that the median cost trend for employer-sponsored medical plans will reach 9.9% in 2027, bringing expected healthcare claims growth close to its highest level in 15 years. The benefits and human resources consulting firm’s 30th annual Health Plan Cost Trend Survey also forecasts an 11.5% prescription drug trend, driven by specialty therapies, broader use of glucagon-like peptide-1 medicines and a continued shift toward more expensive pharmaceutical products.
The findings signal that employers and other health plan sponsors face a more complicated cost environment than a conventional inflation story would suggest. Hospital price increases remain influential, but Segal also identified provider consolidation, artificial intelligence-assisted coding and the federal arbitration system created under the No Surprises Act as increasingly important contributors to claims expenditure.
The survey covers projections supplied by health insurers, managed care organizations, pharmacy benefit managers and third-party administrators representing about 80% of the commercially insured and self-insured market. That makes it a broad indicator of the assumptions being built into 2027 pricing and renewal negotiations, although it should not be interpreted as a guarantee that every employer’s healthcare bill will rise by exactly 9.9%.
What does Segal’s 9.9% medical cost trend projection actually mean for 2027 budgets?
Health plan cost trend measures the change in allowed per-capita claims costs before participant cost sharing. It reflects eligible billed charges after provider discounts, rather than the final amount an employer pays after benefit changes, employee contributions, vendor negotiations, rebates and other cost-management measures.
An employer could therefore experience a lower net increase by renegotiating provider arrangements, changing its pharmacy contract, adjusting coverage or moving members toward lower-cost care settings. Another plan could experience a higher increase because of adverse claims, a small covered population, unusually high specialty-drug utilization or several catastrophic cases.
This distinction helps explain why different industry forecasts can appear to conflict. Mercer previously estimated that employer health benefit costs would increase by an average of 6.5% in 2026 after planned cost-reduction measures. Without those changes, Mercer estimated that the increase would have been nearly 9%, much closer to the underlying medical trend projected by benefits consultants and insurers.
Milliman separately estimated that total employer-sponsored healthcare costs for an average person would rise 7.9% in 2026 to $8,460, excluding pandemic-related volatility. Its analysis identified pharmacy and outpatient facility services as the principal contributors, together accounting for 69% of the annual increase.
Segal’s 2027 forecast should consequently be read as a warning about underlying claims pressure rather than a ready-made premium forecast. The practical question for employers is how much of that pressure they can absorb, negotiate away or redirect before benefit renewals are finalized.
Why are GLP-1 medicines keeping pharmacy trend above 11% despite tighter controls?
Prescription drug cost growth remains the most visible source of pressure because GLP-1 medicines combine high demand, expanding clinical indications and potentially long treatment durations. Segal projects an 11.5% prescription drug trend for 2027, compared with an 11% projection in its previous annual survey for 2026.
The latest survey attributes the increase not only to anti-obesity treatment but also to specialty medicines and a broader shift toward high-cost products. Segal’s analysis of actual 2025 experience found that drugs launched during the preceding five years accounted for a majority of prescription drug trend, while plans covering anti-obesity medicines experienced considerably higher pharmacy trends than plans without that coverage.
Milliman’s 2026 analysis offers a similar directional signal. It estimated that pharmacy costs for an average person covered by an employer-sponsored plan increased 14.8% during the year, making pharmacy the fastest-growing component of its medical index. Milliman described GLP-1 medicines for diabetes and weight management as a meaningful and expanding component of employer drug spending.
Benefit managers are therefore confronting a difficult calculation. Restricting coverage may reduce immediate claims expenditure, but overly narrow policies can create access concerns and may fail to account for the broader clinical value of treatment in appropriately selected populations. Broad coverage, however, can expose plans to rapid budget growth if utilization expands faster than discounts, rebates or measurable health offsets.
Plan sponsors are increasingly examining eligibility criteria, prior authorization, continuation requirements, clinical-support programs and the design of pharmacy benefit manager contracts. The commercial issue is not simply whether GLP-1 medicines are covered. It is whether plans can determine which members are most likely to benefit, monitor persistence and obtain pricing arrangements that reflect real-world utilization.
The longer-term cost equation remains unsettled. Reduced complications associated with obesity and diabetes could potentially offset part of the pharmaceutical expense over time, but those savings may take years to emerge and may not remain with the same employer if workers change jobs or health plans. Budget holders, meanwhile, must fund the drug cost in the current plan year.
How can artificial intelligence raise claims costs while promising greater efficiency?
Artificial intelligence is usually presented to healthcare payers as a route to faster claims processing, better fraud detection and lower administrative expense. Segal’s survey introduces the other side of that equation by estimating that greater coding intensity, without a corresponding change in patient care, is responsible for approximately 20% of inpatient cost growth. The figure represents Segal’s assessment and should not be interpreted as an independently established measure across every hospital or health plan.
Artificial intelligence tools can analyze clinical documentation, identify diagnoses and suggest billing codes that might previously have been missed. More complete documentation can be legitimate and may improve payment accuracy, particularly where manual processes previously produced incomplete records.
The financial consequence, however, can be higher reimbursement even when the underlying treatment, procedure or length of stay is unchanged. A shift toward more specific or higher-severity coding can alter the payment assigned to an admission, particularly under diagnosis-related payment systems and contracts linked to documented acuity.
This creates an important distinction between accurate coding improvement and unsupported coding escalation. The use of an artificial intelligence system does not by itself establish that a claim is improper. Equally, technological sophistication does not remove the need for clinical validation, coding audits and contractual oversight.
Employers and payers will need to compare coding changes with utilization, patient severity, treatment intensity and outcomes. A hospital showing rapid growth in high-severity classifications without comparable changes in its patient mix may require closer review. Health plans may also need to update audit rights and payment-integrity systems so that their controls can evaluate machine-assisted documentation rather than relying exclusively on historical coding patterns.
The irony is difficult to miss. Artificial intelligence may reduce the cost of preparing and processing a claim while simultaneously increasing the amount paid on that claim.
Why has No Surprises Act arbitration become a major employer cost concern?
The No Surprises Act protects insured patients from certain unexpected out-of-network bills and established a federal Independent Dispute Resolution process for payment disagreements between providers and health plans. When the parties cannot agree during negotiation, a certified arbitration entity selects a payment amount.
Segal estimated that the process has generated approximately $5 billion in healthcare-system costs since 2022 and reported that providers prevail in 88% of disputes, frequently at payment levels above standard in-network rates. These figures are Segal’s interpretation of the arbitration environment rather than a direct government estimate.
Official data nevertheless confirm that the volume of disputes has been far greater than initially anticipated. By May 31, 2026, more than 6.33 million disputes had been initiated since the federal portal opened in April 2022, and approximately 4.59 million cases had closed through a payment determination.
The United States Government Accountability Office has also reported that providers won a large majority of disputes reaching determination. Its 2026 review noted concerns from insurers that high arbitration awards could influence broader healthcare costs by encouraging in-network providers to seek higher negotiated payments.
This does not mean that patient protections under the No Surprises Act have failed. The law addresses a genuine problem by preventing patients from being placed in the middle of payment disputes they often had no practical ability to avoid. The cost concern instead relates to how the provider and payer settle the remaining bill after the patient is protected.
The Centers for Medicare & Medicaid Services and other federal agencies finalized new operational rules in May 2026 to improve communication, clarify timelines and reduce ineligible disputes. The rule was published in June and was scheduled to take effect on August 3, 2026.
Whether those changes materially reduce administrative expense or alter payment outcomes will become an important variable for 2027 plan forecasting. Even modest improvements could matter when the system is processing hundreds of thousands of disputes each month.
Why are hospital inflation and provider consolidation making plan design harder?
Traditional medical inflation remains a major component of Segal’s forecast. The consulting firm pointed to healthcare labor costs, supply expenses, provider consolidation and the negotiating leverage of increasingly concentrated hospital and physician organizations. It also linked greater private equity participation to higher prices and utilization, although the effect will vary by market, specialty and transaction structure.
The latest available consumer inflation data support the broader direction of hospital cost pressure. United States hospital services prices were 5.1% higher in June 2026 than a year earlier, while outpatient hospital services increased 6.1%. Overall medical care services inflation was lower at 2.9%, demonstrating that headline medical inflation can conceal much faster price growth within specific care settings.
Milliman estimated that outpatient facility care represented about 31% of employer-sponsored healthcare spending in 2026. It identified outpatient-administered specialty drugs, physician-practice acquisitions and the continuing movement of services from inpatient to outpatient facilities as important contributors to growth.
Plan sponsors are responding through narrower provider networks, direct contracting, centers of excellence and site-of-care programs that move appropriate services from high-cost hospital environments to ambulatory surgical centers, physician offices or home-based infusion. Segal also highlighted transparent, pass-through pharmacy benefit manager contracts as an alternative to arrangements that depend heavily on rebates.
These strategies can produce meaningful savings, but implementation is rarely frictionless. Narrow networks may reduce employee choice, direct contracts require purchasing expertise, and site-of-care programs must consider clinical suitability rather than cost alone. Employers operating across multiple states may also find that a strategy delivering savings in a competitive metropolitan market has little effect in a region dominated by one hospital system.
What should plan sponsors watch before turning 2027 forecasts into benefit changes?
Segal’s projection is most useful as a negotiating and planning benchmark. Employers can compare the 9.9% median medical trend with their own claims, demographic profile, provider contracts and proposed renewal rates rather than accepting a vendor’s assumptions without examination. Segal specifically noted that trend forecasts can be used to challenge rate renewals and should be considered alongside actual plan experience.
The immediate temptation may be to raise deductibles, increase employee contributions or reduce coverage. Such measures can lower the employer’s share of spending, but they do not necessarily reduce the underlying cost of healthcare. They can also create affordability problems, discourage necessary care and weaken the perceived value of the benefits package.
More durable interventions require visibility into the source of the increase. Plans need to distinguish whether their pressure is coming from GLP-1 utilization, specialty medicines, hospital prices, outpatient migration, behavioral health demand, catastrophic claims, coding intensity or out-of-network arbitration.
The effectiveness of the new federal dispute-resolution rules will be another measurable indicator. Employers and insurers will be watching dispute volumes, provider win rates, payment levels and administrative costs after the August 2026 implementation date. Pharmacy managers will be assessing whether GLP-1 utilization stabilizes, whether biosimilar adoption offsets other specialty costs and whether new product launches continue to dominate drug trend.
Segal’s forecast ultimately suggests that passive annual renewal has become a particularly expensive strategy. The decisive test for plan sponsors will be whether greater claims transparency can be converted into stronger provider negotiations, better pharmacy contracting and clinically appropriate site-of-care decisions before a 9.9% projected trend is translated into higher employer contributions, worker premiums or reduced benefits.
