Last year's renewal came back up "9%." That isn't an explanation. If your plan ends in 2026, your 2027 renewal season is already here. Take the number apart before it takes apart your plan.

Aon expects employer healthcare costs to rise another 9.5% in 2027 before cost mitigation. [1]

Last cycle, 59% of employers in Mercer's survey planned cost-cutting changes for 2026, up from 44% in 2024. Many expected higher deductibles or other cost sharing; others were looking for savings without shifting more cost to employees. [2]

Now the 2027 planning cycle is underway, and the early projections rhyme with last year's. The carrier presents an increase. Everyone winces. Someone suggests raising the deductible.

This newsletter exists to break that cycle.

The problem isn't the increase itself. It is the fact that the increase arrives as one undifferentiated number. One number makes the bluntest lever look like the only lever: make the plan worse. That's how cost control becomes a benefit cut before anyone has decided what is driving the cost.

Aon explains healthcare trend through price, utilization, and care mix. For a renewal meeting, this model carves pharmacy out of those forces, then adds your group's own experience and the loads wrapped around it. That gives you five useful operating buckets. Keep them mutually exclusive; their weight varies by market and funding arrangement. [1]

Treating it as a single verdict is like getting a restaurant bill that just says $340, no line items, and nodding politely. You'd never do that at dinner.

1. Baseline medical trend

Providers charge more this year than last for the same care. Wages, supplies, contracting pressure, and provider market power live here. Across Aon's data, price accounts for 40% of current trend growth. Utilization and care mix, including drug effects embedded in those categories, account for the other 60%. [1]

File the broad market piece under weather. You do not negotiate away a national trend. You decide how much of it your plan actually has to absorb.

2. Pharmacy, specialty, and the GLP-1 of it all

Here's where one drug class can move the whole line. [5] Pharmacy and specialty spending are not smooth. Effective July 1, Cigna ended coverage of GLP-1s used for weight loss in its own employee health plan. The change did not apply to plans it administers for other employers, and coverage for type 2 diabetes stayed. [3]

That is one plan's choice, not a market rule. It is a signal worth studying, not a template.

The point isn't cover or don't. The point is that this bucket is lumpy and strategic. Specific drugs. Specific utilization. Specific decisions.

Cover it. Use clinically grounded criteria. Negotiate it. Pair it with a program. The plan document and applicable rules control, but unlike baseline trend, you have choices here.

3. Non-pharmacy utilization and care mix

Some of your non-pharmacy increase isn't a higher price. It is more care, more frequent care, or a shift toward more expensive settings and treatments.

The moves are different here: navigation, site-of-care steerage, and condition management. Before accepting the number, ask the carrier or administrator to separate higher prices from higher use and care mix to the extent the data supports. [1]

4. Your group's own experience

For large-group fully insured, self-funded, and level-funded employers, the relevant inputs differ, but the group's own experience can materially shape the renewal or budget: claims, population changes, pooling, and how much weight the underwriter gives the data. That last part is credibility.

ACA-compliant fully insured small-group rates use community rating and the market risk pool. That employer's claims history is not a permitted direct rating factor. [5]

Ask for the most receipts here. One-time events, credibility weighting, and future trend are easy to blend together.

5. The loads

Stop-loss, administration, pooling, and margin sit here. In Segal's 2026 national dataset of 225 plans, groups that kept similar stop-loss benefit levels saw an average premium increase of 12.7%. [4]

That average does not predict every group. It does show why a blended renewal can hide a hotter financing component. If you're self-funded or level-funded, isolate the stop-loss line before trading away benefits.

For 2027, the median proposed premium increase among 295 ACA-compliant small-group insurers is 14%. That median is not enrollment-weighted, and the rates are proposed, not final. It does not predict any one employer's renewal. [5]

The more interesting number is underneath it. Fully insured small-group enrollment fell 41% from 2013 to 2024 while coverage through small employers was statistically similar. KFF says that pattern suggests many groups moved into self-funded or level-funded arrangements. Healthier groups leaving can make the remaining pool more expensive. [5]

That is the sixth bucket: the pool changed around you.

For a small employer, the right question is not just what it costs to stay. It is what risk, renewal protection, and ACA or state protections you give up if you leave. Level funding can lower the upfront price for a healthier group. It can also reprice sharply after a bad year or offer fewer protections. [5]

If your renewal came in flat, ask what offset, plan change, or concession produced it. Flat is an outcome, not an explanation.

Six buckets, one number.

The useful question isn't "is 9% good?" It is this: which of these buckets is my 9% actually made of?

Synthetic example, not a benchmark: A 9.0% renewal might be 3.2 points of market price, 1.8 of non-pharmacy utilization and care mix, 1.4 of pharmacy, 1.6 of group experience, and 1.0 of loads. If the underwriter now treats 0.8 point as nonrecurring, the revised total is 8.2% before changing benefits.

9.0% - 0.8 percentage points = 8.2%

The assumption changed. The deductible didn't.

The buckets tell you what's in the number. These questions decide whether next year looks like last year.

1. Did the carrier show its work?

Not "did we push back." Did we force the unbundling?

How much is market trend versus our experience? What is in the large-claim and pooling detail? What is driving the pharmacy line? If you're in the ACA-compliant fully insured small-group market, which market-wide trend, pool, and adjustment assumptions drove the filed rate? That employer's own claims history is not a permitted direct rating factor. [5]

You'd be amazed how often nobody asked. If the permitted inputs cannot be explained, the number is still a black box.

2. Does the health plan have a business job?

Most companies have precise goals for revenue, hiring, retention, and margin. A major employee-related expense is often managed with no mandate beyond "smaller increase, please."

If the business goal is retention, does the plan design say that? If it is cost control, is the plan built for it or simply cut to fit?

A plan with no stated job will always default to the blunt lever.

3. Is everyone around the table aligned with that job?

Broker, carrier, PBM, wellness vendor, TPA. Each gets paid somehow, and each party's economics either point at your goals or at its own.

Renewal season is the time to ask who gets paid more when the number goes up. The answer may be nobody. The point is to ask and document it.

That is governance, not an accusation.

In KFF's detailed review of 82 insurer filings, recurring pressures included medical prices and utilization, specialty drugs, GLP-1 use, behavioral health, and, in some filings, risk-pool deterioration. [5] The repetition does not make the pressures fake. It makes the black box less excusable.

Your renewal is where the system sends you the bill. Read it before you pay it.

Got a renewal that doesn't add up? Describe where the number stops making sense through Submit a case.

Do not send PHI, claimant details, identifying information, or confidential employer files. Submissions are considered for possible analysis and publication. Nothing is published without permission.

The cases that teach something are worth breaking down in the open. The names and private details are not.

Know an employee benefits stakeholder staring at one of these problems right now? Forward this issue. It is the kind of thing worth arguing about.

See you in two weeks.

Scott

P.S. Next issue: the GLP-1 decision. Open coverage is hard to budget. A blanket exclusion is hard to defend. There is a lane in between. We'll show the pathway and the math.

General information, not insurance, legal, or tax advice.

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