By Swekcha Tiwari
Employers have spent four straight years raising deductibles, narrowing networks, and shifting a larger share of the premium onto employees, and health care costs have kept climbing anyway. Aon’s newest projection puts the 2027 increase at 9.5%, pushing average total cost per employee above $19,000. That is not a bad year. It is the fourth consecutive year of near double-digit growth, and it is time to say plainly that the standard playbook for containing health benefits costs has stopped working.
The numbers say the strategy is failing on its own terms
Aon’s Health Value Initiative database, drawn from more than 1,100 U.S. employers covering 7.9 million employees and $135 billion in 2026 health spending, shows employer costs rose 8.8% in 2026 to $14,432 per employee, while employees’ own out of pocket costs rose faster still, up 10.2% to $2,167. The annual increase has climbed steadily from 3.7% in 2022 to 8.8% in 2026. Employers still absorb about 82% of total plan cost, meaning the cost-shifting employers have leaned on has not meaningfully slowed the overall trend, it has just moved more of a still-rising number onto workers.
The obvious counter-argument is that none of this is really within an employer’s control. Utilization is up, chronic disease prevalence is up, and specialty drugs, especially GLP-1 therapies, are genuinely expensive. On that view, a 9.5% projection is not a strategy failure, it is just what health care inflation looks like right now, and no amount of plan design tinkering was going to change the trajectory.
I do not buy it, and neither, it turns out, does Aon’s own actuarial team. “Health care costs are becoming increasingly difficult to manage through traditional approaches alone,” said Debbie Ashford, Aon’s North America chief actuary for health solutions, who called for better data and analytics rather than more of the same cost-shifting. When the firm whose entire business is measuring and managing these costs says the traditional toolkit is running out of road, that is not an excuse for employers, it is a diagnosis. Mike Pasterick, Aon’s North America health solutions leader, put it more bluntly: “Employers have now experienced several consecutive years of health care cost increases that are approaching double digits.” Four consecutive years is not bad luck. It is a pattern, and pattern requires a different response than the one employers have been running.
What it means for the HR leader
The plan design lever, higher deductibles, narrower networks, bigger employee contributions, was never designed to bend a structural cost curve. It was designed to redistribute cost, and the data shows it is doing exactly that: out of pocket costs are rising faster than employer costs, which means employees are absorbing more of the pain for a trend that keeps accelerating regardless. That is a strategy that erodes retention and trust for a shrinking return, since total plan cost still climbed 8.3% even after all that redistribution.
Aon names one driver that should worry HR leaders specifically, because it did not exist in the cost equation a few years ago: providers adopting AI-enhanced coding and documentation tools, which the firm lists alongside GLP-1 drugs and chronic disease prevalence as a factor pushing spend higher. That is a useful reminder that AI in health care does not automatically mean lower cost for the employer footing the bill. The same automation that is supposed to make claims processing more efficient can just as easily make coding more thorough, and more thorough coding tends to mean more billable detail, not less. Any benefits leader evaluating a vendor’s AI pitch on cost grounds alone should ask what the technology does to the provider side of the transaction, not just the employer’s own administrative overhead.
The alternative Aon is gesturing at, and the one HR leaders should actually pursue, is treating benefits spend the way a finance team treats any other major cost center: with real vendor-level data, direct contracting where volume allows it, and analytics that identify where dollars are actually going rather than applying an across-the-board deductible increase and hoping the trend line cooperates. A handful of self-insured employers have already moved this direction by demanding claims-level transparency from their carriers and pharmacy benefit managers rather than accepting aggregate trend numbers at face value. That is harder work than raising a deductible, and it will not fully offset genuine medical inflation. But it targets the part of the cost curve that traditional plan design cannot touch, and after four years of proof that the old lever has stopped working, that is the only honest place left to look.
See also: Cash-for-Coverage Health Plans Cross 500,000 Workers and WTW: Employers Can’t Prove Retirement Plans Work.
Source: Aon, via PR Newswire
