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Employer health costs near 15-year high as medical and drug trends rise
Segal projects 2027 median medical cost trends of 9.9 percent, alongside 11.5 percent expected prescription drug cost growth.
Medical and prescription drug cost trends are nearing levels not seen in nearly 15 years, putting renewed pressure on US employers and the brokers who advise them on benefit renewals, according to Insurance Business America. In its 2027 Segal Health Plan Cost Trend Survey, Segal projects a median medical trend of 9.9 percent for open-access PPO, POS, and pharmacy benefit manager plans in 2027, while prescription drug costs are expected to rise 11.5 percent.
Segal said medical cost trends are approaching double digits for a second consecutive year, after a lower pre-COVID range of about 5 to 6 percent. Coming out of the pandemic, the survey describes increases into the 6 to 7 percent range, then further into 7 to 8 percent and 8 to 9 percent, with levels now expected around 10 percent across multiple consecutive years, creating compounding pressure on employer budgets at or above the median.
The survey also ties the outlook to specific spending drivers using Segal’s SHAPE data warehouse. It said actual medical trend reached 8.9 percent in 2025, up from 8.0 percent in 2024, with outpatient hospital expenses identified as a primary driver, and professional expense trend rising from 2.5 percent in 2022 to 8.2 percent in 2025.
Insurance Business America noted Segal’s consulting actuary Eric Miller said employers want to offer strong benefits, but constraints emerge when costs are difficult to absorb or mitigate without creating issues for employees. The report points to broad economic inflation flowing through providers, carriers, and brokers, and also highlights provider consolidation and private equity involvement as additional upward pressures on pricing, with PE-acquired practices charging higher prices and experiencing increased spending and patient volumes.