Average Employer Healthcare Cost: What to Budget for in 2027

Key Takeaways

• The average employer healthcare cost runs about $7,885 a year per employee for single coverage and $20,143 for family.
• Independent forecasts put the 2027 health cost trend near 9%, the steepest in 17 years, so budgets should start there and model reductions down from it.
• Cost-shifting levers move the bill onto employees, while addressing the real drivers, like specialty drugs, consolidation, and provider billing variation, is what lowers total spend.

In 2025, the average family premium for employer coverage reached a record $26,993, and employers shouldered about $20,143 of it. In 2027, employers are bracing for an increase near 9%, the steepest jump in 17 years. Compounded, a 9% trend doubles a plan's cost in roughly eight years. But there’s a catch. The benchmark itself is inflated by spending at higher-cost, lower-performing providers, so a plan that merely matches the average is still overpaying.

Total premium vs. employee share: reading the right number

The sticker price of a health plan and the amount a worker pays are two different numbers, and easy to confuse, since most online searches surface only one of them. A published premium is the full cost of coverage, while the employee share is the portion of that premium deducted from paychecks.

The three-column benchmark: total premium, employee contribution, and employer share

Every premium splits three ways: the total cost, the employer's contribution, and the employee's share. The 2025 averages for each, from KFF’s Employer Health Benefits Survey, are below.

‍

On a monthly basis, that puts the average employee health insurance cost per month near $120 for single coverage and $571 for family coverage, while the full premium runs about $777 and $2,249, respectively. Workers pay 16% of the single premium and 26% of the family premium on average.

Navigating conflicting data: why numbers vary across sources

Two credible sources can report very different costs because they measure different things. Some cite the total premium, others the employee share. Averages also blend firm sizes, plan types, regions, and single versus family tiers into one figure that matches almost no individual employer. Survey year matters too, since premiums reset at each plan’s annual renewal, typically January 1. When a number looks off, the first question is which column, population, and year it describes before assuming your own plan is an outlier.

How average monthly costs vary by plan type, employer size, and location

A single average conceals a wide range of actual monthly costs, and where an employer lands depends on three variables working at once: the architecture of the plan, the size of the company, and the local cost of care. Each variable moves the monthly number independently.

Plan architecture and employee share: PPO, HDHP, and HMO

Plan structure shapes what employees actually pay, not just the premium. PPOs, which cover 46% of workers, carry higher premiums in exchange for broad access and lower deductibles. High-deductible plans with a savings option, which cover 33% of workers, trim the premium but shift exposure to the member, with the average single deductible now $1,886 and more than a third of workers facing $2,000 or more. HMOs, which cover at 12% of workers, hold premiums down by narrowing the network. Comparing plans on premium alone is a common mistake, because total cost exposure—premium plus deductible plus out-of-pocket maximum—is what a member actually risks in a bad year.

Employer size dynamics: small, mid-size, and large company differences

Company size also changes what employees pay. Large employers spread risk across more workers and typically subsidize a greater share of the premium, while smaller firms pass more of it on. For family coverage, workers at firms with 10 to 199 employees contribute 36% of the premium, an average of $8,889, compared with 23%, or $6,227, at larger firms, per KFF. And location matters too. Unit prices for the same care vary widely by market, making identical plans cost more in some regions than others.

The deeper drivers behind the 9% annual cost trend

The headline trend is easy to quote and hard to act on. For 2027, PwC projects a 9.0% group medical cost trend, the highest in 17 years, and it has since raised its earlier 2026 estimate from 8.5% to the same figure. Specialty drugs and GLP-1s remain among the fastest-growing line items behind that trend, with pharmacy now rising faster than overall medical spending. Hospital consolidation keeps pushing unit prices up, and AI-enabled upcoding is inflating the intensity of billing for the same visits, a driver Garner Health's claims analysis estimates at 1.7% of annual employer spend growth. These are the structural forces that plan-design changes never touch.

The most overlooked driver sits at the individual provider level. Garner Health's analysis of more than 60 billion medical records across 320 million patients finds that a large share of cost growth comes not from members receiving more care, but from variation in how providers bill and practice. And as the gap between brand and quality shows, a bigger name doesn’t guarantee better value. Two patients with the same condition can generate very different costs depending on which doctor they see.Raising deductibles does nothing to address this hidden cost driver.

Strategic levers employers can use to manage employee costs

Most cost management still runs through plan design, and each lever moves the same money around. Raising the employee contribution share lowers the employer's premium outlay but takes more from paychecks. Changing cost-sharing through higher deductibles, copays, or out-of-pocket maximums trims premium while raising exposure at the point of care. Network tiering and value-based insurance design steer members toward preferred providers or high-value services, though tiering can narrow access and value-based design takes time to move trend. Every one of these trades employer savings against employee cost or access.

A structurally different lever leaves cost-sharing and networks intact and targets where care is delivered instead. Provider-performance analytics identify the highest-performing doctors in the existing network, and first-dollar incentives guide members toward them, lowering total spend by reducing complications, redundant care, and billing intensity rather than by shifting cost. This is the approach behind Garner Health's model, and employers pairing it with their existing plans have reported lower medical costs than matched peers.

‍

‍When traditional group coverage isn't the right fit

Fully insured group coverage works well for many employers, but it creates structural cost problems in specific situations. For example, small employers often face the steepest community-rated premiums and the least pricing flexibility. And groups with a few high-claims members can watch renewals spike with little they can do about it. Meanwhile, organizations with geographically dispersed workforces struggle to fit everyone into a single network.

In these cases, alternative funding can be a better fit, but the exact method depends on who carries the claims risk:

• Fully insured: The employer pays the carrier a fixed premium and the insurer takes on the claims. This is the traditional plan most people are likely already familiar with.
• Self-funded: The employer pays claims directly and keeps what it does not spend. This can fit larger or stable groups that want control and their own claims data.
• Level-funded: A middle path with fixed monthly payments, a refund if claims run low, and stop-loss insurance to cap the downside if they run high.
• HRAs: The employer gives employees a set amount to buy their own coverage on the individual market. This includes plans like ICHRAs and QSEHRAs.
• Association health plans: Small employers pool together to reach group-style pricing.

The right choice depends on size, claims stability, risk tolerance, and how much administrative complexity the organization can absorb.

Taking control of your health insurance costs

No matter your choice of plan, the framework always remains the same: read the employee share, not just the sticker premium; compare plans on total cost exposure rather than premium alone; and look past the headline trend to the drivers conventional benchmarks hide. Those drivers — specialty drugs, consolidation, and provider billing variation — are why two employers with identical demographics can spend very differently.

The employers pulling ahead are moving past cost-shifting toward provider performance, layering analytics and incentives that steer members to higher-performing doctors and lower total trend without disrupting carrier relationships or raising employee cost-sharing. That is the core of Garner's model, and the real-world PEPM reductions it has produced show the approach at work.

See how much better your benefits spend could work for your employees by using our Savings Calculator to find out how much you could save by layering Garner on top of your health plan.

FAQs

What's a reasonable expected medical trend for 2027 budgeting?

Plan for a group medical trend around 9%. PwC's 2027 projection puts it at 9.0% for the group market, the highest in 17 years, driven by provider AI billing tools, pharmacy and GLP-1 spending, and rising behavioral health use. Treat that as a starting point, then model down from it based on the plan design and vendor decisions you can realistically make, since the number comes before any changes you apply. Budgeting to the lowest figure you can find tends to leave a gap at renewal.

How can we benchmark our PEPM against peers in our industry?

Start with per-employee-per-month (PEPM) data segmented by industry, region, plan type, and workforce demographics, since a raw average hides most of what drives your number. Useful sources include your carrier or TPA reporting, broker benchmarking databases, and consultant surveys.

The more important step is adjusting for provider mix, because two employers with identical demographics can post very different PEPM based purely on where members receive care. Benchmark against high-performing peers, not the median, so the target becomes beating the average rather than meeting it.

Are level-funded plans actually cheaper than fully insured plans long-term?

They can be, but not automatically. Level-funded and self-funded arrangements let an employer capture savings when claims run below expectations and gain access to claims data that fully insured plans rarely provide. The trade-off is risk: a high-claims year can erase the savings, and stop-loss premiums rise after large claims. Level-funded plans tend to pay off for employers with younger or healthier populations, stable enrollment, and the appetite to manage a plan actively. For small or high-claims groups, fully insured coverage can still be the safer long-term choice.

What questions should we ask our broker about 2027 renewals?

Ask what your gross trend is before and after proposed plan changes, and what specifically drives the difference. Then press on the cost drivers the renewal assumes: specialty drug and GLP-1 exposure, hospital unit-cost increases, and how much of your spend traces to provider billing variation rather than more care. Ask how the renewal addresses provider performance, not just cost-sharing, and whether alternatives like level-funding fit your population. Finally, request PEPM benchmarking against high-performing peers so you can tell whether you are beating the average or just tracking it.