Last updated: November 3, 2026 · By Chip Smith, CEO, Centered Partners
I've signed a lot of health insurance renewals as an owner.
At least one came late in the process, with a deadline that made the decision for me.
That's the part I'd change. The 2027 forecasts are the reason to change it now.
What the forecasts actually say
Every major benefits firm has now published its outlook for next year:
Mercer: In its preliminary survey of more than 1,800 US employers, total health benefit cost per employee is expected to rise 8.2% in 2027, the highest increase since 2003. That's after planned cost-cutting. With no changes, employers expect 11% (Mercer, Sept 2, 2026).
Aon: It projects 9.5%, pushing average employer cost above $19,000 per employee (Aon, Aug 20, 2026).
WTW: It projects 11.1% if employers take no action, or 9.7% with plan redesign (Insurance Business, Aug 24, 2026).
Business Group on Health (large employers): median trend of 9.2%, or 8% after plan changes (Business Group on Health, Aug 25, 2026).
The firms use different methods, but they all point the same way.
Mercer lists the drivers plainly. New treatments often cost more than the ones they replace. Health systems keep consolidating. GLP-1 drugs alone add about a full percentage point to 2027 cost growth by Mercer's estimate. AI-enabled billing software has led to more claims, and higher-level claims. And out-of-network arbitration awards under the No Surprises Act have been larger than expected (Mercer).
Here's what I keep coming back to: an increase this size isn't a benefits problem. It's a P&L problem.
Put the percentage in dollars
Here's a simple illustration. It's not a forecast for your plan.
Say 100 employees are on your plan, and your total cost is right at Aon's average of about $19,000 per employee. That's $1.9 million a year. A 9.5% increase adds roughly $180,000 in recurring cost.
If your business trades at 8x EBITDA, that recurring cost is worth about $1.4 million of enterprise value, and it compounds every year you don't address it.
Your people feel it too. About two-thirds of large employers expect to raise employees' share of premiums, and 59% of employers plan cost-cutting changes such as higher deductibles (Mercer). Aon's data shows employees already paid an average of $5,297 toward their own health care in 2026, counting premiums and out-of-pocket costs (Aon, Aug 20, 2026).
For an owner, that's a retention issue as much as a cost issue.
The decision most owners never get shown
Most renewal conversations are about the rate. The bigger question is how you pay for the plan at all. There are three basic funding models:
Fully insured. You pay a fixed premium and the carrier takes the claims risk. It's predictable and simple, but you have little visibility into what's driving your cost.
Level-funded. You make a fixed monthly payment that funds expected claims plus stop-loss protection. If claims come in low, some money may come back. This is a common middle step for mid-size groups.
Self-funded with stop-loss. You pay claims as they happen and buy stop-loss insurance to cap large losses. You get the most control and the most data, and you also take on the most volatility.
None of these is automatically right. Fully insured may be the correct answer for your company.
But notice this: WTW found 56% of employers are unwilling to take "disruptive" steps, which WTW describes as moves like self-funding, reference-based pricing, direct contracting and pharmacy carve-outs (Insurance Business).
I understand that instinct. I've had it.
Still, "unwilling" and "never saw the numbers" aren't the same thing. The worst outcome isn't picking fully insured. It's picking it because nobody put the alternatives in front of you early enough to judge them.
Pharmacy deserves its own look. It's now 25% of large employers' total health spend (Business Group on Health). How your pharmacy benefit manager (PBM) contract is written, and how you handle GLP-1s, can move your number more than the medical rate does. We're publishing a separate guide on the GLP-1 coverage decision.
Before you sign your 2027 renewal
Questions I'd want answered, in this order:
Are we starting at least 120 days out? If your renewal is January 1, the work should have started in September. If it didn't, start today. (It's one of the six things you should expect from any advisor.)
What's actually driving our cost? Large claims, pharmacy, utilization, or demographics? Ask for whatever claims data your plan size allows.
What would level-funding or self-funding look like for us, with real quotes and a realistic worst-case year, not a brochure?
What does our PBM contract say about rebates, spread pricing, and specialty drugs?
What's our GLP-1 policy, and what does it cost us per member?
How much of the increase will we pass to employees, and how will we explain it?
What does this renewal do to EBITDA, and what's it worth in enterprise value if we're thinking about a sale in the next few years?
Who's quarterbacking this across benefits, finance, and HR?
If you'd like a second set of eyes on your renewal, from people who've paid for these plans out of their own company's cash flow, start a conversation with us.
Rates are going up for almost everyone. How you handle it is still your call.
This post is general information, not legal, tax, or benefits advice. Plan options, costs, and eligibility depend on your company's size, location, and situation. Talk with your advisors before making changes.
Ready to explore this further?
Schedule a confidential conversation with Centered Partners.