For many fully insured employers, renewal season brings higher premiums, even with favorable claims. Insurers set rates months in advance based on projected healthcare costs and broader market trends, so rising costs can drive significant increases across the market.
Healthcare Costs Continue to Rise
Healthcare costs continue to rise, and the trend is expected to persist. PwC projects a 9% commercial medical cost trend for 2027, the highest in nearly two decades, while employers anticipate further increases before plan design changes moderate the impact.
Actual increases will vary by geography, workforce and plan design, but rising provider costs, prescription spending, and healthcare utilization are already influencing premiums well before renewal.
Provider Costs Are Increasing
Healthcare providers are also under pressure, with labor accounting for about 60% of hospital expenses. Staffing shortages, wage growth and provider consolidation can drive higher reimbursement rates, which flow through to health plans and employers. For fully insured employers, these dynamics shape the assumptions insurers use to set future premiums.
Prescription Drugs Remain a Cost Driver
Prescription drug spending is a major driver of healthcare costs. GLP-1s are part of a broader trend that includes costly specialty medications for cancer, autoimmune and rare diseases, all of which can contribute to premium growth. While some insurers are reassessing coverage for certain drugs, emerging biosimilars may help moderate pharmacy costs over time.
Healthcare Utilization Continues to Grow
Higher healthcare costs reflect rising utilization as well as prices. Chronic conditions, behavioral health needs and an aging workforce are driving demand; the CDC reports that 90% of the nation’s $5.3 trillion in annual healthcare spending goes toward people with chronic or mental health conditions. For insurers, greater utilization means higher projected claims and contributes to medical trends and premium increases.
Employer Takeaway
Renewal increases often reflect broader healthcare trends, not just an employer’s own claims experience. Rising provider costs, prescription spending and utilization continue to pressure fully insured premiums. Staying informed can help employers prepare for future renewals. Download the bulletin for more details.
