Healthcare costs are expected to climb again in 2027, adding another layer of pressure for employers already navigating years of elevated healthcare spending.
PwC’s annual medical trend report projects a 9% commercial healthcare cost trend for 2027, the highest level in 17 years and an increase from the 8.5% trend that has held steady over the past several years.
But the 9% projection is only part of the story.
From artificial intelligence and provider reimbursement pressures to pharmacy and behavioral health utilization, several factors are contributing to the expected increase. For employers, understanding what’s driving the trend can be an important first step in determining where there may be opportunities to act.
What Does a 9% Healthcare Cost Trend Mean?
Medical cost trend represents the expected increase in healthcare costs experienced by health plans. For 2027, PwC projects a 9% cost trend for the group market and 8.5% for the individual market. The findings are based on surveys and interviews with actuaries from 27 U.S. health plans representing more than 103 million employer-sponsored members and 8 million Affordable Care Act marketplace members.
PwC identified five primary factors contributing to the projected increase.
1. AI Is Emerging as a Healthcare Cost Inflator
Artificial intelligence is often associated with greater efficiency. But within healthcare, certain uses of AI may be contributing to higher costs. Providers are increasingly adopting AI-enabled documentation and coding tools that can capture greater specificity and reimbursable severity without a proportional increase in the intensity of care being delivered.
Nearly 70% of health plans surveyed identified AI-enabled documentation and coding as one of their top three healthcare cost trend inflators.
For employers, this adds a relatively new factor to an already complex healthcare cost environment.
2. Provider Reimbursement Pressure Remains High
Providers continue to face inflationary pressure across their underlying cost structures. At the same time, healthcare market consolidation can limit alternatives within certain markets, further contributing to reimbursement pressure.
Together, these dynamics are helping keep provider costs elevated heading into 2027.
3. Pharmacy Costs Continue to Outpace Medical Trend
Pharmacy remains another significant source of cost pressure. According to PwC, pharmacy trend continues to outpace overall medical trend, driven in part by advances in specialty medications and expanding indications for GLP-1 drugs.
As new treatments become available and utilization evolves, pharmacy management continues to be an important component of the broader healthcare cost conversation.
4. Behavioral Health Utilization Continues to Grow
Behavioral health is also experiencing cost and utilization growth that outpaces the broader medical trend. PwC reports that behavioral health utilization increased 62% between 2018 and 2024.
For employers, the continued growth underscores another area contributing to overall healthcare utilization and spending.
5. The No Surprises Act Arbitration Process Is Affecting Reimbursement
PwC also identified the No Surprises Act’s Independent Dispute Resolution arbitration process as a healthcare cost inflator. In 2025, 2.6 million cases were filed, with providers winning 88% of disputes.
PwC describes the arbitration process as a durable reimbursement inflator, adding another factor to the cost environment health plans are navigating.
Traditional Cost-Saving Measures Are Still Working, But They Aren’t Enough
Strategies that have historically helped reduce healthcare spending haven’t disappeared. Biosimilars, generic drugs and site-of-care optimization continue to serve as cost deflators. However, according to PwC, these strategies are now largely embedded in the baseline.
In other words, they’re helping keep the projected trend where it is, but they aren’t enough to reverse the overall upward trajectory. That shifts more attention toward the areas health plans and employers may be able to influence directly.
PwC identifies opportunities including:
- Payment integrity
- Utilization management
- Pharmacy management
- Reimbursement strategy
- Event-driven care management
What Can Employers Do?
A projected 9% trend doesn’t mean every employer will experience exactly a 9% increase. But it does reinforce the importance of approaching benefits planning proactively.
Employers may want to evaluate strategies such as:
- High-performance networks
- Centers of excellence
- Pharmacy carve-outs
- Tighter utilization management
The right strategy will look different for every organization. What matters is understanding what’s driving your own plan before deciding how to respond. Waiting until renewal to react to an increase can limit the options available. Looking at cost drivers earlier gives employers more time to evaluate where changes may make sense for their organization and employees.
9% Is a Projection. Your Strategy Isn’t.
Healthcare costs aren’t being driven by one issue. AI-enabled coding, provider reimbursement pressure, pharmacy costs, behavioral health utilization and reimbursement dynamics are all contributing to a healthcare environment that continues to become more expensive.
For employers, the goal isn’t simply to absorb another increase. It’s to understand what’s driving your plan, where you have opportunities to influence costs, and which strategies make sense for your organization.
A 9% trend may be the projection for 2027. What employers do in response is where strategy comes in.
