Health plans expect patient care costs to rise in 2027, with commercial health care costs expected to rise 9%, the highest health care cost trend in nearly 20 years, according to a new analysis from PwC.
Payers point to several inflationary factors, including the increased use of artificial intelligence tools by health systems, hospitals, and practices. According to the PwC report, AI-powered documentation and coding tools enable healthcare providers to capture greater specificity and reimbursable severity without proportionally increasing the intensity of care. As a result, payers are paid more on each claim.
70% of health plans rank provider AI tools as a top three cost driver. For example, our analysis shows that more detailed note-taking results in more detailed reimbursement claims and inflates the cost of the plan.
The health plan also cited increased reimbursement pressure on providers, increased pharmacy spending, particularly specialty drugs and high-cost GLP-1 therapies, and continued growth in behavioral health utilization (utilization jumped 62% from 2018 to 2024).
Health plans also blame continued regulatory pressures, including escalating out-of-network payment disputes under the No-Surprises Act.
To predict next year’s employer health care spending growth, PwC health researchers surveyed and interviewed 27 U.S. health plan actuaries from April to May 2026 to generate estimates of next year’s health care spending trends. These plans cover more than 103 million employer-sponsored members and more than 8 million individual Affordable Care Act (ACA) Marketplace members.
As health care costs continue to rise, the cost of doing business for health insurance also increases. And PwC analysts note that historical cost trend deflators such as biosimilars, generics, and practice optimization are not enough to materially impact rising cost trends, but many health plans already incorporate them into their baseline cost assumptions.
Health actuaries surveyed by PwC expect health spending trends to continue rising in the group and individual markets into the fifth year. The group health spending trend in 2027 is projected to be 9%, while the individual market trend is projected to be 8.5%. The study also confirms that group and individual trends will rise from 8.5% and 7.5% to 9.0% and 8.5%, respectively, in 2026.
PwC analysts note that this trend is unaffected by the expiration of enhanced subsidies in the ACA individual market.
What’s behind the key cost drivers and recommended actions?
To address these cost trends, health plans must prioritize the cost of care, according to PwC health researchers.
Introducing AI: Providers are rapidly adopting AI-enabled documentation and coding tools. PwC analysts say that for payers, more complete and detailed documentation can improve understanding of billing complexity, support higher severity coding, and increase reimbursement per encounter or admission under current payment models.
In the outpatient setting, more complete documentation supports more advanced evaluation and management (E/M) coding and higher amounts paid per visit. In the inpatient setting, a more complete picture of complications and comorbidities can help move admissions to more costly tiers of severity.
A recent study on the implementation of ambient AI scribes in University of California, San Francisco (UCSF) Health Sciences found that the use of AI technology was associated with increased relative value units (RVUs) per visit, increased RVUs per week, and a modest increase in walking encounters, with no measurable increase in claim denials. These findings indicate that AI-enabled documentation can increase claims intensity and provider revenue without a corresponding offset from denial activities.
Given the current environment, health plans need to focus on addressing upstream payment integrity, the report says. “Payment integrity will be less about post-payment recovery and more about verifying the legitimacy of high-risk claims before payments are released,” PwC health researchers wrote.
During prepayment reviews, health plans must prioritize high-value inpatient claims, diagnosis-related group (DRG) changes, duplicate claims, splits, modifiers, genetic testing, durable medical equipment (DME), implant/device fees, and rapidly growing gray zone services. “The goal is not to increase denials, but to more accurately disburse funds before they fall off the plan,” the PwC researchers wrote.
Provider reimbursement pressure: The report says provider pricing pressures are being fueled by underlying inflationary forces that are amplified by provider market consolidation that weakens payers’ bargaining power. Rising hospital and medical costs, provider market concentration, and provider-driven revenue optimization are driving reimbursement expectations across health systems.
“For health insurance, a permanent price assumption will require disciplined contracting, stronger visibility into contract performance, and targeted protection against reimbursement drift after contract signing,” the medical researchers wrote. “In some markets, this may mean aggressive use of out-of-network pressures, narrow network exclusions, or less favorable benefit designs and incentives for providers who fail to meet negotiated expectations.”
Increasing trends in pharmacies: Pharmaceutical costs remain one of the most obvious sources of health care cost pressure, with trends increasingly concentrated in a small number of high-impact categories. More than 85% of PwC survey participants cited 2027 pharmacy cost trends as outpacing overall healthcare trends.
Managing pharmacy trends will likely require more than traditional prescription management, the report recommends, especially as more high-cost treatments enter broader categories of eligible populations with limited alternatives. “Increased uncertainty surrounding PBM transformation, transparency, and pricing reform adds further complexity. While some of these changes may improve visibility into pharmacy economics, their impact on underlying health care cost trends is likely to depend on whether they substantively change net drug costs, formulation incentives, and specialty drug management, rather than simply redistributing savings within the supply chain,” the researchers wrote.
Behavioral health demands: According to data from Trilliant Health, the use of behavioral health services will increase by 10% from 2023 to 2024 and jump 62% since 2018.
Trilliant found that between 2018 and 2024, behavioral health visit rates increased from 828 to 1,346 visits per 1,000 people. As visits increased, so did demand for prescriptions, with stimulant use increasing by 53.3% and antipsychotic use increasing by 45.4% over the same period.
For payers, access to behavioral health services and effective management can influence healthcare trends and affordability. “For large, self-financed employers, similar dynamics extend beyond just claims spending, impacting absenteeism, productivity, disability, and overall employee health, reinforcing the need to evaluate behavioral health vendors and point to solutions not only for engagement but also for their ability to improve access, direct care to more efficient environments, and have a measurable impact on the total cost of care,” the researchers wrote.
Regulatory pressure: The No Surprise Act’s independent dispute resolution (IDR) arbitration process has been a reimbursement inflation factor, with providers winning in 88% of the 2.6 million payer disputes filed in 2025, according to the report.
PwC health researchers recommend that payers seek more direct control over out-of-network spending through sophisticated reimbursement policies, targeted contract clauses, and network strategies designed to reduce reliance on nonparticipating providers in high-friction specialty and facility-based settings.
