2027 Is Not a Renewal Problem. It Is a Healthcare Strategy Problem.

The biggest healthcare cost drivers are not difficult to identify. Chronic disease, specialty pharmacy, cancer, hospital pricing and general medical inflation continue to compound year after year. What is difficult is changing how a health plan responds to them.

Chronic conditions are the deepest structural issue. CDC data shows that the overwhelming majority of U.S. healthcare spending is tied to chronic and mental health conditions, and roughly three out of four adults are living with at least one chronic condition. As the workforce ages and conditions such as diabetes, cardiovascular disease, obesity and behavioral health issues become more prevalent, employers cannot simply wait for a claim to become expensive and then try to manage it after the fact.

This is where I believe employers need to be far more demanding. Prevention cannot mean a generic wellness portal that nobody uses. Primary care access, chronic condition management, navigation and early intervention should be designed around measurable engagement and measurable outcomes. Direct primary care, virtual primary care and targeted disease management can all be valuable, but only when they are connected to the rest of the health plan and supported by real data.

Pharmacy may be the clearest example of why traditional benefit management is no longer enough. PwC reports that more than 85% of surveyed organizations expect pharmacy trend to outpace overall medical trend in 2027. GLP-1 utilization continues to expand, specialty drugs account for a growing share of new therapies, and the pipeline is moving toward more complex and more expensive treatments.

Employers should not respond by simply excluding medications or shifting the cost to employees. They should understand how their PBM is paid, where rebates are going, how specialty drugs are sourced, what the formulary is designed to accomplish and whether lower-cost clinical alternatives are actually being used.

GLP-1 coverage, for example, should be tied to a defined clinical strategy with appropriate prior authorization, ongoing eligibility requirements and weight-management support. The question should not be whether a drug is expensive. The question should be whether the plan is paying the right price for the right patient through the right channel.

Cancer has been the leading driver of employer healthcare cost increases for several years, and that trend is unlikely to reverse. Treatments are improving, which is good news, but the financial exposure is becoming much harder to predict. Cell and gene therapies, immunotherapies, targeted drugs and advanced oncology treatments can create claims measured in the hundreds of thousands — and sometimes millions — of dollars.

Waiting until a large claimant appears is not a strategy.

Employers should know in advance how their plan will handle oncology navigation, second opinions, centers of excellence, site-of-care decisions, specialty pharmacy sourcing and high-cost claimant oversight. They should also understand how those strategies interact with stop-loss.

A well-designed cancer program is not about restricting care. It is about getting members to the right care earlier, improving outcomes and avoiding unnecessary variation in cost and treatment.

Medical inflation continues to run ahead of general inflation, and hospital and provider costs remain a major part of the equation. For years, many employers have accepted network discounts as proof that they are receiving a competitive price.

That is no longer enough.

A 50% discount from an inflated charge master can still be a terrible price.

Employers need better visibility into unit cost, site of care and provider variation. They should be asking what an MRI costs at different facilities, where infusions are being administered, whether outpatient hospital care can be shifted to lower-cost settings, and whether their network contract is actually producing competitive pricing in the markets where employees receive care.

Transparency without action is just another report. The value comes from using the information to change behavior and contracting.

I expect more employers to evaluate level funding, self-funding, captives and other alternative financing structures as fully insured premiums continue to rise. That can be a very smart move, particularly for employers that want better claims data, greater transparency and more control over vendors and plan design.

But changing the funding mechanism by itself does not reduce healthcare costs. It only changes where the risk sits.

A self-funded employer with a poor PBM contract, weak vendor oversight, no high-cost claimant strategy and no access to usable data can still have a poorly performing health plan.

Alternative funding works best when it creates the ability to manage the plan differently — not when it is treated as a cheaper version of the same plan.

A 9% projected trend should be a signal to act earlier and manage more aggressively. Employers should know what is driving their own claims, not just what national trend says.

They should be able to identify their largest cost categories, understand their pharmacy economics, measure vendor performance, review high-cost claimants, evaluate site-of-care opportunities and determine whether their funding arrangement supports the level of control they need.

They should also stop assuming that higher deductibles are a cost-containment strategy.

At some point, cost shifting simply creates affordability problems, delayed care and employee dissatisfaction without meaningfully changing the underlying cost of healthcare. The better path is to remove waste from the system before asking employees to absorb more of it.

I believe 2027 will separate employers that actively manage healthcare from employers that simply purchase insurance.

The strongest plans will not necessarily be the plans with the richest benefits or the lowest deductibles. They will be the plans with better data, better contracts, stronger primary care, more disciplined pharmacy management, intentional cancer and high-cost claimant strategies, and vendors that are held accountable for results.

Employers do not need to implement every cost-containment idea in the market. In fact, stacking too many disconnected point solutions can create its own problems.

What they do need is a clear multi-year strategy built around the actual drivers of their plan. That means deciding what to manage, who is accountable, how performance will be measured and what changes will be made if a vendor or strategy is not producing value.

The employers that begin that work now will have more options at renewal and will be in a much stronger position to protect both the business and their employees. The employers that wait until the renewal is delivered will be negotiating from a position of weakness.

The goal for 2027 should not be to make a 9% increase feel less painful. The goal should be to build a health plan that deserves to cost less.