PwC’s annual medical trend report projects commercial healthcare costs will rise 9% in 2027, the highest increase in 17 years and up from 8.5% in recent years. The report, based on input from actuaries at 27 U.S. health plans covering more than 111 million members, cites growing use of AI billing tools among providers as one factor driving this continued period of elevated cost growth.
For 2027, group medical costs are projected to rise 9%, with the individual market at 8.5%. PwC identifies these top five cost drivers:
- AI-powered documentation and coding tools help providers capture more billable detail without increasing care intensity, and nearly 70% of surveyed health plans rank this among the top three drivers of rising healthcare costs.
- Provider reimbursement pressure remains high as inflation drives up provider costs and market consolidation reduces alternatives.
- Pharmacy costs continue to outpace overall medical costs, driven by high-cost specialty drugs and growing use of GLP-1 therapies.
- Behavioral health costs are rising faster than overall medical costs, with utilization up 62% from 2018 to 2024.
- The No Surprises Act’s Independent Dispute Resolution arbitration process is now a lasting cost driver, with 2.6 million cases in 2025 and providers winning 88% of disputes.
Historical cost deflators like biosimilars, generics, and site-of-care optimization are now baked into the baseline. They help, but they are not enough to offset rising costs, which means real savings must come from active cost-of-care strategies such as payment integrity, utilization and pharmacy management, reimbursement strategy, and targeted care management.
Federal policy uncertainty is another wild card. Potential shifts in Medicaid and ACA marketplace funding could slow spending over time, prompting earlier adjustments from hospitals, health plans, and drug manufacturers. For a deeper dive, see PwC’s Behind the Numbers 2027 report.
Employer Takeaway
For employers, a 9% cost trend calls for a proactive benefits strategy. Now is the time to strengthen plan design such as high-performance networks, centers of excellence, pharmacy carve-outs, and tighter utilization management before AI-driven coding, rising behavioral health use, and potential Medicaid cost-shifting further limit their options. Download the bulletin for more details.
