Health Costs To SURGE – Brace For 2027

Person in suit holding an insurance document and a pen — Photo: nito / Shutterstock

Millions of Americans are about to pay more for health coverage, and millions more on Medicaid could lose it entirely under a new work rule starting January 1, 2027.

Story Snapshot

Employer health benefit costs are set to jump 8.2% in 2027, the steepest rise since 2003.
A new federal Medicaid rule requires 80 hours a month of work, school, or volunteering for many adults to keep coverage.
Government estimates say the rule could cut Medicaid enrollment by millions over the next several years.
Marketplace premiums are also climbing as enhanced Affordable Care Act subsidies expire.

Employer Costs Set for Steepest Climb in Two Decades

A Mercer survey of 1,800 U.S. employers found total health benefit costs per worker will rise 8.2% on average in 2027. That marks the biggest jump since 2003 and the fifth straight year of elevated increases. Without any cuts to benefits, employers said their costs would climb 11% instead, showing how much belt-tightening is already baked into that lower number.

Out-of-pocket spending caps for workers are also set to hit $12,000 next year, adding pressure on families already managing tighter budgets. The increases hit employer plans, Medicare plans, and individual marketplace coverage at the same time, meaning there is no easy escape hatch for most consumers shopping for 2027 coverage.

Medicaid Work Rules Take Effect Nationwide in 2027

Starting January 1, 2027, certain Medicaid beneficiaries ages 19 to 64 must complete at least 80 hours a month of qualifying work, school, job training, or volunteer service to keep their coverage, under a Centers for Medicare and Medicaid Services interim final rule. The rule applies in 42 states and the District of Columbia, following a federal budget law passed in July.

Government estimates of the fallout vary but all point toward significant coverage losses. The federal agency itself projects the rule will cut Medicaid enrollment by about 2.3 million people in fiscal year 2027. A separate analysis from Manatt Health estimates average annual losses will climb from 6.4 million to 8.2 million people between 2027 and 2034, nearly one in ten Medicaid enrollees nationwide.

Research published in Health Affairs Scholar found 18.5 million Medicaid enrollees will likely fall under the new requirement. Of that group, 46% may qualify for an exclusion and 58% could meet the compliance threshold, leaving a sizable share at risk of losing coverage through paperwork problems rather than actual ineligibility.

Arkansas’s Experience Offers a Warning

This is not the first time a state has tried Medicaid work requirements. Arkansas rolled out its own version in June 2018, and within nine months more than 18,000 adults lost coverage, about a quarter of those subject to the rule. A study published in the New England Journal of Medicine found the policy reduced insurance coverage without producing any measurable increase in employment.

That history matters because it shows the mechanism at play is often administrative, not just economic. People lost coverage due to missed paperwork deadlines or confusion about reporting rules, not because they refused to work. Courts later struck down many state-level work requirement waivers, and the Supreme Court dismissed related challenges, clearing a path for the current federal rule.

Marketplace Premiums Rising as Subsidies Lapse

Enhanced Affordable Care Act subsidies that lowered monthly premiums for millions of marketplace shoppers have expired, pushing costs higher heading into 2027 open enrollment, which runs from November 1, 2026 to January 15, 2027. Premium help now reverts to the original income limits of 100% to 400% of the poverty line, a narrower band than recent years.

Last year’s median proposed marketplace rate change nationwide was 18%, with the median finalized change reaching 20%. Combined with rising employer costs and the new Medicaid work requirement, the pattern points to a broad, multi-front increase in what Americans pay for health coverage, regardless of whether they get insurance through a job, the government, or the individual market.