With healthcare costs jumping 9%, employers are shifting strategy 

Key Insight: The real reason companies are slashing coverage for popular weight-loss medications.
What's at Stake: Employers facing unpredictable medical costs that are rising at twice the rate of inflation.
Forward Look: Prepare for employers to aggressively eliminate underperforming healthcare vendors.
Source: Bullets generated by AI with editorial review

With healthcare costs expected to rise by 9% in 2027, employers are feeling the cumulative impact of years of increases, forcing many to take a hard look at how they offer medical benefits. 

The volatility employers have experienced in healthcare costs over the last decade is unprecedented, according to Business Group on Health's 2027 Employer Healthcare Strategy Survey, with costs rising at roughly twice the rate of inflation. 

"An array of forces across the healthcare industry, from soaring hospital and drug costs to the rapid innovation of specialized treatments and unintended impacts from federal health policy changes, have contributed to a considerable unpredictability in cost," said Ellen Kelsay, president and CEO of Business Group on Health. "This represents an unfortunate new reality for employers, who now face growing difficulty in budgeting and forecasting. It's a call to take a more disruptive approach and rethink how to deliver value and improved health outcomes."

Read more: Healthcare costs are forcing employers to reconsider their benefits strategy

In response to these pressures, the share of companies offering GLP-1s for obesity has dropped from 72% in 2025 to 60% in 2026. Overall, pharmacy now represents 25% of employers total healthcare spend, while drug costs are estimated to rise 12% in 2026.

"The steep cost of GLP-1s, coupled with growing demand, has prompted more employers to drop coverage of the medication for weight loss," Magda Rusinowski, vice president, Business Group on Health. "However, some employers may see the direct-to-consumer channels as an option and may offer solutions to financially assist patients in getting GLP-1s at a lower price via the direct-to-consumer channel." 

Beyond the rapid growth in GLP-1 use for obesity and other conditions, broader availability of cell and gene therapies and a greater prevalence of chronic conditions are also driving spending higher.

"Employers remain deeply committed to sponsoring health coverage and are uniquely positioned to transform the current landscape through near- and long-term strategies," Kelsay added. "That means engaging both leadership and the workforce in discourse about the need for disruption that eliminates waste, rewards value, and holds vendor partners accountable for results. The right kind of disruption can improve affordability and clinical outcomes."

The 2027 Employer Healthcare Strategy Survey, conducted in June 2026, drew responses from 127 employers across industries representing more than 11 million people globally, including 8.7 million in the U.S. 

What's driving the cost increases?

Cancer continues to be the top condition driving employers' healthcare spending, ranking No. 1 for the fifth consecutive year. Seventy percent of employers identified cancer as their top cost driver in 2026, up from 58% in 2025, while 92% ranked it among their top three.

Musculoskeletal and cardiovascular conditions followed, cited by 68% and 37% of employers, respectively. Employers also identified maternity (21%), gastrointestinal (15%) and autoimmune (14%) conditions as emerging cost drivers. Treatment for many of these conditions involves complex care and costly therapeutic approaches.

Employers are responding with more aggressive strategies to improve outcomes, including using the RFP process to secure lower pricing (71%), elevating prevention and primary care (60%), and eliminating underperforming vendors (58%). More than half (52%) are adding programs to address high-cost areas, while 84% plan to offer at least one center of excellence in 2027.

Read more: Employer health plans leave many workers skipping needed care due to costs

"To get costs under control in the coming year, benefits leaders will need to embrace disruption to help employees access higher-quality, more cost-effective care that also improves the value of employer health benefit investments," Rusinowski said. "As they focus on areas of significant cost increases, they will also need to consider approaches such as alternative vendor models, stronger vendor accountability and greater employee engagement."