2027 Group Health Insurance Renewal Forecast: What Employers Should Do Before Accepting Another Big Increase
Healthcare costs are heading higher again in 2027—and employers should be preparing before their renewal arrives.
Aon projects that U.S. employer healthcare costs will increase 9.5% in 2027 before employers make cost-mitigation changes.[1] Mercer has also documented sustained cost pressure, with average employer health-benefit cost expected to exceed $18,500 per employee in 2026.[2]
For an organization with 50, 100, 250 or 500+ employees, increases of this magnitude can turn health insurance into one of the company's most significant operating expenses.
The common response to a large renewal is predictable: negotiate with the carrier, shop competing carriers, increase employee contributions or raise deductibles.
Those tactics may have a place.
But before accepting a 15%, 20% or 30% increase, employers should ask a more important question:
What is actually causing our healthcare costs to increase—and which parts of the problem can we control?
For many employers, answering that question creates considerably more opportunity than simply shopping the same benefits plan to another insurance carrier.
Why Are Employer Health Insurance Costs Increasing?
There isn't one cause behind rising health insurance premiums.
Healthcare inflation reflects a combination of increasing provider prices, greater utilization, expensive specialty medications, high-cost claimants and changes in the types of healthcare employees consume.
Prescription drug spending is an especially important area to watch. Mercer reports that prescription drug benefit costs are rising about 9% in 2026, making pharmacy one of the fastest-growing expense categories for employers.[3]
The result can become an expensive annual cycle:
Healthcare costs increase → insurance premiums rise → employers shift more cost to employees → employee benefits become less affordable → the company repeats the process the following year.
Eventually, increasing deductibles and employee contributions stops being an effective long-term benefits strategy.
A High Health Insurance Renewal Should Trigger an Investigation
When an employer receives a large renewal increase, the first question should not necessarily be:
"Which insurance carrier is cheaper?"
It should be:
"Why did our plan increase?"
The answer depends on how the health plan is funded and what data is available. But employers should attempt to understand several areas before making a renewal decision.
1. Claims Experience
Determine whether healthcare spending is being driven by ongoing utilization patterns or a relatively small number of high-cost claims.
This distinction is particularly important for level-funded and self-funded employers.
A handful of catastrophic claims may materially affect a plan's recent experience without necessarily representing what the employer should expect indefinitely. Conversely, recurring claims trends may indicate a structural cost issue that changing carriers alone will not solve.
Understanding the difference can materially change the renewal strategy.
2. Prescription Drug Spending
Pharmacy should be analyzed separately from the broader medical plan.
Employers should understand:
Specialty-drug utilization
GLP-1 utilization and coverage
Formulary design
Pharmacy benefit manager arrangements
Rebates and other pricing components
Opportunities for greater transparency
The objective isn't simply to restrict access to medications.
It is to understand where the employer's pharmacy dollars are going and whether the current arrangement is delivering appropriate value.
3. Provider and Network Costs
The cost of medical care can vary substantially among providers, facilities and health systems.
That means network design and care-navigation strategies can influence both employer spending and employee out-of-pocket costs.
Employers are increasingly considering alternatives to the traditional broad-network model. Mercer reports that 31% of large employers either currently offer or plan to offer at least one nontraditional medical plan in 2027, such as a high-performance network or variable-copay plan.[3]
Not every workforce is suited for these strategies, but employers should understand what options exist in their market.
4. High-Cost Claims and Stop-Loss Exposure
Self-funded employers should evaluate stop-loss coverage independently rather than treating it as an afterthought.
The stop-loss market itself has been experiencing significant cost pressure. Mercer reported that its January 2026 placements experienced an average stop-loss renewal increase of 23%, compared with 18% during the previous cycle.[4]
Specific deductibles, contract provisions, lasers and renewal protections can therefore become important components of an employer's overall benefits strategy.
7 Strategies Employers Should Evaluate Before Accepting a Large Renewal
There is no universal solution to a high health insurance renewal.
The right strategy depends on workforce demographics, geography, claims experience, cash flow, risk tolerance, employee expectations and recruiting objectives.
However, employers with 50 or more employees should generally evaluate the following options.
1. Negotiate the Incumbent Renewal
The initial renewal isn't always the final renewal.
Your benefits broker should understand the carrier's rationale for the increase, challenge assumptions where appropriate and determine whether additional information or competitive pressure can improve the offer.
Negotiation alone may not solve the underlying healthcare-cost problem, but it should normally be part of the process.
2. Conduct a Meaningful Market Evaluation
Shopping a benefits plan should be strategic rather than ceremonial.
Moving from one fully insured carrier to another may create immediate savings, but price should not be considered in isolation.
Employers should also evaluate:
Provider-network disruption
Prescription-drug coverage
Employee disruption
Plan design
Contribution requirements
Administrative capabilities
The sustainability of first-year pricing
A lower initial rate isn't necessarily a better three-year strategy.
3. Evaluate Level Funding
Level-funded health plans can provide employers with some of the economics and transparency associated with self-funding while packaging the arrangement with stop-loss protection and predictable monthly funding.
The model has become increasingly common. According to KFF, 37% of covered workers at firms with 10–199 employees were enrolled in level-funded plans in 2025.[5]
For employers that have outgrown the limitations of traditional small-group insurance—or larger employers considering alternatives to fully insured coverage—level funding can be worth evaluating.
But level funding is not automatically better.
Claims exposure, stop-loss protection, contract provisions, potential surplus treatment and renewal methodology should all be understood before making a change.
4. Evaluate Self-Funding
Self-funding can give an employer greater access to claims information and greater flexibility over plan design and cost-management strategies.
It is already the dominant funding model among larger organizations. KFF reports that 80% of covered workers at firms with 200 or more employees were enrolled in self-funded health plans in 2025.[5]
Self-funding does not magically make healthcare less expensive.
Instead, it can create an infrastructure through which employers have greater ability to understand where their healthcare dollars are going and implement strategies intended to manage those costs.
For organizations with sufficient scale, appropriate cash flow, suitable risk tolerance and properly structured stop-loss protection, that distinction can be extremely valuable.
5. Examine the Pharmacy Arrangement
Employers frequently spend considerable time negotiating medical premiums while paying much less attention to pharmacy economics.
That is becoming increasingly difficult to justify as prescription drug costs continue to rise.
A serious benefits analysis should examine the pharmacy benefit manager arrangement, specialty medications, formulary design, rebates and other components of drug spending.
For some employers, pharmacy represents one of the most meaningful areas in which greater transparency can uncover opportunities.
6. Consider Network and Care-Navigation Strategies
Traditional broad provider networks maximize employee choice, but they do not always give employees strong incentives or assistance in identifying high-value care.
Depending on the workforce and geography, employers may evaluate strategies such as:
High-performance networks
Centers of excellence
Advanced primary care
Direct primary care
Care-navigation programs
Alternative network arrangements
Other value-based plan designs
The appropriate strategy depends heavily on where employees live, which providers they use and the needs of the workforce.
The objective should not simply be limiting choice. It should be helping employees access high-quality care while improving the economics of the health plan.
7. Model Employee Affordability Before Shifting More Costs
Increasing deductibles is relatively easy.
Understanding what those increases mean to employees is more difficult.
A renewal strategy should model both sides of the equation:
Employer cost and employee cost.
Moving an expense from the company's budget to an employee's deductible does not eliminate healthcare inflation. It simply changes who pays for it.
Over time, excessive cost shifting can also affect recruiting, retention, employee satisfaction and the perceived value of the company's compensation package.
Questions CFOs and HR Leaders Should Ask During Renewal
For employers with 50+ employees, health insurance deserves the same financial scrutiny given to other major operating expenses.
Before making a renewal decision, leadership should be able to answer questions such as:
What specifically produced this year's increase?
Which costs appear recurring and which may be anomalous?
What are we spending per employee?
How much of the increase are we considering transferring to employees?
What does our pharmacy spending look like?
How much usable claims information are we receiving?
What alternatives did our broker actually model?
Are we evaluating funding structures in addition to insurance carriers?
What additional risks would we assume under an alternative arrangement?
How will a change affect employees?
What is our three-to-five-year healthcare strategy?
That final question is particularly important.
Don't Manage a Multimillion-Dollar Expense One Year at a Time
For a 250-person employer, healthcare can easily represent a multimillion-dollar annual expense.
Yet many organizations still manage health insurance through essentially the same annual process:
Receive renewal → negotiate → shop carriers → adjust deductibles → renew.
Then the process begins again the following year.
A more strategic approach is to create a multi-year benefits plan.
That strategy may include improving data access, identifying major cost drivers, reviewing pharmacy economics, evaluating funding alternatives, improving employee navigation and deciding which parts of the healthcare supply chain deserve greater scrutiny.
The right answer may still be to remain with the existing carrier.
The difference is that the decision is made intentionally—not simply because the renewal deadline arrived.
When Should an Employer Start Evaluating Its Health Insurance Renewal?
Ideally, before the insurance carrier delivers the renewal.
Employers should spend the year understanding their benefits program rather than trying to diagnose it during the final weeks before renewal.
That includes evaluating:
Claims and utilization trends
Pharmacy spending
Employee needs
Funding strategy
Network performance
Stop-loss exposure when applicable
Marketplace alternatives
Waiting until 30 days before renewal can dramatically reduce the number of practical options available.
If your organization expects another significant increase in 2027, the best time to begin evaluating alternatives is before the renewal forces the decision.
Frequently Asked Questions About 2027 Health Insurance Renewals
What Is a Normal Health Insurance Renewal Increase for 2027?
There is no universal "normal" renewal because pricing depends on factors such as funding structure, geography, workforce demographics, claims experience and plan design.
However, Aon currently projects that U.S. employer healthcare costs will increase 9.5% in 2027 before employer cost-mitigation actions, indicating that elevated healthcare cost pressure remains a broad market issue.[1]
Should an Employer Change Insurance Carriers After a High Renewal?
Sometimes, but not automatically.
Employers should compare price alongside provider networks, prescription coverage, disruption, plan design, employee experience and longer-term economics.
Changing carriers can be valuable when the economics make sense, but changing carriers every time a renewal is high is not a substitute for understanding what is driving healthcare spending.
At What Company Size Should an Employer Consider Self-Funding?
There is no universal employee threshold for self-funding.
Suitability depends on factors including employee population, claims credibility, cash flow, risk tolerance, stop-loss protection and management objectives.
However, self-funding becomes much more common as company size increases. KFF reports that 80% of covered workers at firms with 200 or more employees were enrolled in self-funded plans in 2025.[5]
Is Level Funding the Same as Self-Funding?
Level funding is generally a form of self-funded arrangement structured to provide predictable monthly payments and stop-loss protection.
Employers still need to understand how claims are funded, what risk the company retains, how stop-loss protection works, what happens to any surplus and how future renewals are calculated.
Can an Employer Reduce Healthcare Costs Without Reducing Employee Benefits?
Potentially.
Strategies involving pharmacy, provider networks, care navigation, funding structure and claims management may give employers opportunities to address underlying healthcare costs instead of relying solely on higher deductibles or employee contributions.
Results vary by employer, and no strategy should be presented as guaranteeing savings.
Before You Accept Your 2027 Health Insurance Renewal
A large renewal should be the beginning of the analysis—not the end of it.
For employers with 50, 100, 250 or 500+ employees, even incremental improvements in healthcare cost trends can become meaningful over several years.
Health insurance should therefore be treated as more than an annual insurance purchase.
It should be managed as a long-term financial and employee-benefits strategy.
Proper Benefits Brokerage helps employers understand their existing benefits program, identify the factors driving healthcare costs and evaluate fully insured, level-funded and self-funded alternatives.
If your organization is facing a significant health insurance renewal, consider evaluating the plan before simply accepting the increase or passing more of the cost to employees.
Talk with Proper Benefits Brokerage about your upcoming renewal.
Sources
[5] KFF — 2025 Employer Health Benefits Survey, Section 10: Plan Funding.