Employers are facing the biggest healthcare cost increases in 15 years, and many plan to pass part of those costs on to workers.
For millions of American workers, a smaller paycheck in 2027 may have nothing to do with taxes, inflation, or a lack of raises.
Instead, the culprit could be health insurance.
New projections from major employee benefits consultants show employers are preparing for the largest increase in healthcare costs in more than a decade. To manage those expenses, many companies are expected to shift a greater share of costs onto workers through higher payroll deductions, larger deductibles, and increased copayments.
For families already struggling with housing costs, groceries, childcare, and transportation, the changes could quietly take hundreds or even thousands of dollars more from household budgets each year.
And for many California workers, particularly those in working-class and middle-income households, the impact could be significant.
According to a recent analysis from Mercer, employers are preparing for the highest health benefit cost increases in 15 years. Healthcare costs are expected to rise dramatically in 2027, forcing companies to look for ways to control spending.
Rather than absorbing the full increase themselves, many employers are expected to ask workers to pay a larger share.
Industry projections indicate:
- Employee premium contributions could rise by 6% to 7%.
- Nearly 60% of employers are considering increasing deductibles, copays, or payroll deductions.
- Healthcare plan costs are projected to increase between 8% and 10%.
- Workers with family coverage are likely to feel the greatest impact.
The result is simple: even if your salary stays the same, more money may be deducted from your paycheck before it reaches your bank account.
Several forces are driving the increase.
Expensive New Prescription Drugs
One major factor is the growing use of specialty medications.
Drugs used to treat diabetes, obesity, autoimmune disorders, and other chronic conditions have become some of the fastest-growing expenses for health insurers.
Particular attention has focused on GLP-1 medications used for weight loss and diabetes management. While many patients benefit from these drugs, their high costs are creating financial pressure throughout the healthcare system.
Employers ultimately help pay for these benefits through health plans, and those costs are increasingly being reflected in employee contributions.
More People Are Using Healthcare Services
Healthcare utilization has increased significantly since the pandemic.
Many patients delayed procedures, screenings, and treatments during COVID-19. As a result, healthcare systems are now seeing increased demand for surgeries, specialist visits, diagnostic testing, and chronic disease management.
Hospitals and healthcare providers are also facing higher labor and operating expenses, which contribute to rising insurance costs.
Medical Inflation Continues
Healthcare inflation remains higher than many employers anticipated.
New technologies, advanced treatments, prescription drugs, and workforce shortages continue pushing costs upward.
Unlike many consumer products, healthcare costs rarely decline once prices increase.
What Could This Mean for Your Paycheck?
The effects may not always be obvious.
Many workers focus on salary increases during annual reviews. However, health insurance deductions can quietly offset part of those gains.
Consider a worker currently paying $300 per month toward employer-sponsored health coverage.
A 7% increase would raise that contribution to approximately $321 per month.
That may not sound dramatic, but over a year it adds up to roughly $252 in additional payroll deductions.
For families paying substantially higher premiums, the increase could be much larger.
The impact becomes even greater when higher deductibles and copays are added to the equation.
A family that experiences:
- Higher monthly premiums
- Increased doctor visit copays
- More expensive prescription costs
- Larger deductibles before coverage begins
could see healthcare expenses rise by hundreds or even thousands of dollars annually.
California already ranks among the nation’s most expensive states for housing and overall living costs.
Additional healthcare costs can place even greater strain on family budgets.
For Latino households, which are disproportionately represented in many essential industries including hospitality, construction, transportation, healthcare support, food services, and retail, increased payroll deductions can have immediate consequences.
Many working families operate with little financial cushion. Even relatively small increases in monthly expenses can affect savings, emergency funds, debt payments, and household stability.
The greatest pressure may fall on workers covering spouses and children.
According to recent Kaiser Family Foundation data, average annual worker contributions toward family coverage have already climbed to approximately $6,850 per year.
That means many families are already paying hundreds of dollars each month for coverage before accounting for deductibles and out-of-pocket medical expenses.
As healthcare costs continue rising, benefit experts expect many employers to shift additional expenses onto family plans.
Families with ongoing medical needs may feel the effects most acutely.
Many businesses are not raising employee costs simply because they want to.
Employers themselves are facing substantial increases in healthcare spending.
For many small and medium-sized businesses, health insurance remains one of the fastest-growing operating expenses.
Companies generally have three options:
- Absorb higher costs themselves.
- Reduce benefits.
- Share more costs with employees.
Many organizations are choosing a combination of all three approaches.
Some employers are also investing in wellness programs, preventive care initiatives, telehealth services, and pharmacy management programs in an effort to reduce long-term healthcare spending.
What Workers Can Do Now
Although employees cannot control healthcare inflation, they can take steps to prepare.
Review Benefits During Open Enrollment
Many workers automatically renew existing plans.
This year, it may be worth carefully comparing:
- Premium costs
- Deductibles
- Copays
- Prescription coverage
- Provider networks
A lower-premium plan is not always the least expensive option overall.
Build a Healthcare Budget
Workers should anticipate the possibility of higher healthcare expenses in 2027.
Creating a budget that accounts for increased payroll deductions can help avoid surprises.
Use Preventive Care
Preventive services often cost less than delayed treatment.
Annual checkups, screenings, vaccinations, and routine care can help identify problems before they become more expensive health issues.
Explore Tax-Advantaged Accounts
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) may help reduce taxable income while setting aside money for medical expenses.
Workers should review whether these options are available through their employer.
Healthcare experts do not expect the underlying cost pressures to disappear soon.
Specialty drug spending continues to grow. Healthcare utilization remains elevated. Hospital operating expenses continue rising.
As a result, many analysts believe employer-sponsored health plans will remain under pressure throughout the next several years.
The key question is not whether healthcare costs will rise.
The question is how much of those costs employers will absorb and how much workers will ultimately be asked to pay. Can’t Afford Health Insurance? Here’s What Californians Should Know Before Skipping Medical Care
For millions of Americans, the answer could show up in the most personal place possible: their paycheck.
