Healthcare costs projected to surge 9% in 2027

Health plans are anticipating the highest medical cost trend in nearly two decades, with the commercial healthcare cost trend expected to rise to 9% in 2027, the highest in 17 years. This increase reflects the convergence of several powerful forces reshaping the healthcare landscape, according to a PwC report.

“The challenge now is not simply understanding what is driving healthcare costs higher,” the report said, “but whether health plans can deploy cost-of-care strategies quickly and effectively enough to slow the trajectory before affordability, coverage and access come under greater strain across the health care system.”

The report cites five factors that are contributing to this trend:

• AI-enabled tools help providers capture more revenue;
• Inflation and provider consolidation drive up reimbursement rates;
• Pharmacy costs continue to increase;
• Behavioral health utilization keeps growing; and
• The No Surprises Act arbitration process adds a new source of out-of-network reimbursement.

Together, these dynamics signal the urgency to find counterbalances to medical cost inflators in a healthcare system under constant affordability pressure. PwC recommends that health plans prioritize five cost-of-care actions:

Start with payment integrity. As AI-enabled documentation and coding tools become more widespread, health plans are seeing higher paid amounts per claim and greater variation in coding intensity. Payers should respond by assessing high-dollar claims before payment is made, tracking provider-level severity drift and integrating contract terms, payment policy and claims edits into a single accuracy engine. The goal should be fewer inaccurate payments, not more denials of claims.

Manage utilization in a more targeted and not simply restrictive way. Retire low-yield prior authorization requirements, reward high-performing providers and concentrate clinical review on the services where cost and variation are highest.

Focus on critical pharmacy management. GLP-1s, specialty drugs and medical-benefit therapies are contributing to pharmacy trends. Plans need class-specific governance, disciplined GLP-1 access policies by indication, accelerated biosimilar conversion for real savings and tighter alignment among pharmacy, utilization management and site-of-care programs.

Use a network and reimbursement strategy. Plans should use price transparency along with their own claims experience to identify high-cost outliers, reset value-based contracts around specific cost drivers and direct members to lower-cost sites of care.

Make care management more disciplined and event-driven. Plans should set explicit trend-deflation targets by leveraging, holding vendors to outcomes that matter and stopping funding programs that cannot demonstrate avoided utilization or measurable savings.

Researchers write that this is a “watershed moment” for healthcare leaders to “reflect on what will happen in the next few years, as employers will likely not be able to sustain the same benefits and will likely mimic the actions of government health plans,” they say. “As health plans engineer their programs to bring costs to a sustainable level, every sector is encouraged to adapt to changes in how care is funded and delivered. Whenever possible, in the interest of patient care, industry leaders should seek collaboration. Transparency, consumer education and clarity on benefits and policy could improve patients’ health and reduce the administrative burden across the health economy.”