For 3 consecutive years, actual healthcare costs exceeded employer projections, and each forecast miss was larger than the one before it. According to Business Group on Health's 2027 Employer Healthcare Strategy Survey, not only did actual healthcare costs reach a record-high 8.8% in 2025—2 full points higher than original projections, marking the widest gap in the history of the survey and a clear example of the volatility employers face.
As evident by the survey findings, employers are finding it increasingly difficult to predict where costs will come from and how quickly spending will grow. Traditional consulting and actuarial forecasting approaches are becoming less reliable as multiple cost drivers, from cancer care and specialty medications to provider consolidation and emerging technologies, reshape the healthcare landscape.
As uncertainty grows, budgeting, planning, and decision-making have become more complex. Employers are responding by reevaluating how they purchase, manage and measure healthcare benefits, with a stronger focus on accountability, outcomes, and value.
The Forces Driving Cost Volatility
In the past, employers, consultants, and actuaries could forecast healthcare spending with reasonable confidence. Costs generally increased each year, but the underlying drivers remained relatively stable. And when forecasts missed the mark, actual costs were often lower than projected.
Today, several forces are reshaping healthcare at the same time.
Cancer is one of the clearest examples. For the fifth consecutive year, employers identified cancer as their top cost driver. Among survey respondents, 70% ranked it first, and 92% placed it among their top 3 cost drivers. The challenge is being compounded by a growing prevalence of cancer diagnoses, with 74% of employers reporting higher rates of cancer within their populations.
Pharmacy spending is central to the affordability problem. It now accounts for 25% of employers’ total healthcare spending. Employers also project that pharmacy increases will rise faster than overall medical trend. Additionally, specialty medications, oncology therapies, GLP-1s, and cell and gene therapies continue to fuel uncertainty in pharmacy spending. A small number of cases can have a massive detriment to accurately predicting total costs.
Employers are also navigating policy-driven pressures that can be difficult to manage. The No Surprises Act's Independent Dispute Resolution (IDR) process is one example, with 32% of employers reporting high volumes of IDR claims and another 13% expecting those volumes to increase. At the same time, changes to Medicaid, Medicare and ACA marketplace coverage may lead to increased cost shifting from health systems, while simultaneously seeing more individuals to seek employer-sponsored coverage, increasing costs and utilization, particularly among populations with chronic conditions, complex health needs or high-cost specialty medication requirements.
Employers are also watching how providers are using artificial intelligence to optimize billing and coding practices. Nearly two-thirds (64%) report that these activities are already contributing to higher healthcare costs.
These pressures make forecasting more challenging and therefore employers have to do more to manage costs and to set new expectations with leadership and with employees about the need for disruption and change.
From Managing Trends to Purchasing for Impact
All this leads employers to examine what they’re offering and with whom they’re partnered to deliver programs and services to their workforce. They’re assessing whether current vendors, programs, and contracts deliver measurable value.
This focus is increasing scrutiny of vendor performance and strengthening accountability. It is also prompting employers to reconsider long-standing partnerships. Nearly all employers have issued a request for proposal for at least one vendor category. Many are also expanding performance guarantees and linking compensation more directly to outcomes. By 2027, 58% expect to replace vendors that do not meet performance expectations.
Employers are also heavily pursuing centers of excellence (COE), closely aligning their COE approach with drivers of healthcare costs. In fact, 50% of employers will require COE use in 2027 or are considering doing so by 2029. Employers are also exploring alternative health plans, transparent pharmacy arrangements, navigation solutions, and high-performance networks.
These approaches differ, but they support shared objectives. Employers want to improve quality, enhance employee experience, and use healthcare dollars more efficiently.
What This Means for Employers
Healthcare cost volatility is no longer a temporary disruption. It is becoming a defining feature of the healthcare landscape. After consecutive years of missing cost projections and facing record-high increases, employers are confronting a fundamental question: Which new strategies and approaches do we need to deploy to address this persistent and volatile landscape?
The employers that thrive in this environment will be the ones willing to rethink how care is purchased, act with a sense of urgency, demand greater accountability from partners, and embrace disruption when it creates better outcomes. In a market defined by uncertainty, standing still may be the riskiest strategy of all.
For more than two decades, the Business Group on Health Employer Healthcare Strategy Survey has provided employers and the industry with insights into emerging trends, leading practices and the future of employer-sponsored healthcare. Widely regarded as one of the industry's most influential sources of employer healthcare data, the 2027 survey reflects responses from 127 employers representing more than 11 million covered lives globally, including 8.7 million individuals in the United States. The survey was conducted in June 2026.
