Segal Survey Projects Health Plan Cost Trend to Reach 15-Year Historic Highs

Key findings from the 2027 Survey

• The pharmacy surge. Prescription drug trends are projected at 11.5 percent, driven by surging specialty drug costs and expanding indications for GLP-1 anti-obesity medications.
• Industry consolidation. Increasingly concentrated market power and the expansion of private equity interests in healthcare have led to higher prices and increased utilization.
• AI impacts. Increased coding intensity, without corresponding changes to patient care, driving approximately 20 percent of inpatient cost growth
• No Surprises Act arbitration. The Independent Dispute Resolution (IDR) arbitration process has drastically favored providers, generating an estimated $5 billion in system costs since 2022.

“Medical providers are prevailing 88 percent of the time in No Surprises Act disputes, at costs much higher than standard in-network rates,” said Eileen Flick, Leader of Healthcare Informatics and Senior Vice President at Segal. “These outcomes are fueling unnecessary cost growth across the healthcare system. It’s imperative that plan sponsors have visibility into these outcomes and are armed with the information necessary to better navigate this complex process.”

Cost management solutions

Plan sponsors are pivoting toward direct, hard-dollar savings strategies. The report identifies the top cost-management protocols being implemented, which include:

1. Network optimization: Deploying narrow networks, direct contracting, risk sharing and centers of excellence to focus on preferred providers.
2. Transparent contracting: Moving away from inflationary, rebate-driven models toward transparent, pass-through pricing arrangements with pharmacy benefit managers (PBMs).
3. Site of care steerage: Shifting patient volume from high-cost hospital environments to lower-cost settings like ambulatory surgical centers (ASCs) or home infusions.

“There has never been more information available, including transparency, plan and claims data for plan sponsors to leverage,” said Eric Miller, Vice President and Consulting Actuary at Segal. “While the feeling of exasperation is palpable throughout the economy, there is always some benefit to taking an active role in managing plan costs through strategies that are targeted and data informed.”

Additional details, experience exhibits and cost-management strategies are available in the 2027 Segal Health Plan Cost Trend Survey report.

About the Segal Health Plan Cost Trend Survey

Recognized as one of the most definitive surveys on employer-sponsored health plans, the Segal survey is now in its 30^th year. The survey provides industry-leading insights on healthcare costs and guidance for how plan sponsors can manage those costs for their plan and people. Survey participants include health insurers, managed care organizations (MCOs), pharmacy benefit managers (PBMs) and third-party administrators (TPAs). Survey respondents represent about 80 percent of the commercially insured and self-insured market. Respondents shared their trend forecasts for medical, prescription drug, dental and vision coverage and actual health cost trends based on their group health plan experience.

This survey is for informational purposes only and does not constitute consulting, legal, tax or investment advice. Readers are encouraged to discuss the issues raised in the survey with their own legal, tax and other advisors before taking or refraining from taking any action.