Article
Before You Approve Your 2027 U.S. Healthcare Renewal, Ask What You Are Paying For
U.S. employers are preparing for another significant increase in healthcare costs.
Mercer's preliminary 2026 National Survey of Employer-Sponsored Health Plans, based on responses from more than 1,800 U.S. employers, projects that total health benefit cost per employee will increase 8.2% in 2027 — the largest increase since 2003. Employers estimate that, without cost-reduction measures, their existing plans would increase approximately 11%.
For European companies operating in the United States, the natural reaction may be to treat this as another unavoidable feature of the American healthcare system.
It should not be.
An increase in healthcare cost does not, by itself, tell management whether the company is paying an appropriate amount for healthcare. Before approving another increase, leadership should understand what is being purchased, who is being paid, how those parties are compensated, and whether the plan is being managed in the interests of the employees and the plan.
Rising healthcare costs and rising healthcare prices are not the same thing
There are legitimate pressures on U.S. healthcare spending. New cancer therapies and other advanced treatments can be extraordinarily expensive. Provider consolidation has increased the negotiating leverage of large hospital systems. Prescription drug costs continue to create significant exposure.
But those factors do not explain every dollar of an employer's healthcare expenditure.
The cost of an employer-sponsored health plan may also include administrative fees, brokerage compensation, network access charges, pharmacy benefit arrangements, commissions, revenue-sharing arrangements, percentage-of-savings fees and other vendor compensation.
The question therefore should not simply be:
“How much is our renewal increasing?”
It should be:
“Can we independently verify where our healthcare money is going?”
U.S. employers have a fiduciary obligation to know
For plans governed by ERISA, healthcare is not merely an HR expense.
Plan fiduciaries are required to act prudently and in the interests of plan participants and beneficiaries, follow governing plan documents and ensure that plan expenses are reasonable.
The U.S. Department of Labor specifically advises employers to understand the fees being charged to their plans, determine what services those fees purchase, ask about compensation received from third parties, and periodically monitor service providers and their actual fees.
That means an employer cannot prudently manage what it cannot see.
A report showing aggregate claims, a renewal spreadsheet, or a presentation describing a vendor's “savings” is not necessarily the same thing as having the underlying information required to independently evaluate the expenditure.
Five questions leadership should ask before renewal
Before approving a 2027 health plan renewal, European leadership should be able to obtain clear answers to five questions:
Where does every dollar go?
Identify insurance premiums, claims payments, administrative charges, brokerage compensation, pharmacy costs, network fees and ancillary vendor expenses.
How is every service provider compensated?
Direct fees are only part of the picture. Determine whether any party receives commissions, revenue sharing, referral payments, percentage-of-savings compensation or other third-party remuneration.
Can the company independently review its claims?
A self-funded employer should have meaningful access to the claims information necessary to understand what its plan is purchasing.
Do the contracts restrict the company's ability to manage cost?
Network, administrator and pharmacy agreements should be reviewed for restrictions on data access, alternative providers, steerage, audits and other cost-management strategies.
Who is independently monitoring the people being paid to manage the plan?
The Department of Labor advises employers to establish a formal process for reviewing service-provider performance, actual fees and contractual obligations.
If leadership cannot answer those questions, the first priority should not be negotiating the percentage increase.
It should be obtaining the information.
Self-funding creates an opportunity — if the employer actually manages it
A properly structured self-funded health plan gives an employer considerably more visibility and control than simply purchasing an insurance product.
But self-funding alone does not create transparency.
An employer can still purchase an expensive network, retain unnecessary intermediaries, pay percentage-based fees, accept opaque pharmacy arrangements or allow vendors to make decisions without meaningful independent oversight.
Changing the funding mechanism without changing the governance accomplishes very little.
The objective should be straightforward:
Pay reasonable amounts for necessary healthcare. Pay reasonable fees for services that provide measurable value. Know the difference between the two.
The 2027 increase should be a reason to investigate — not simply a reason to budget more
Mercer reports that 59% of employers plan cost-cutting benefit changes for 2027, and many employers expect to increase what employees themselves pay.
That is one option.
Another is to examine the underlying expenditure before transferring more of the cost to the company or its employees.
For European leadership overseeing a U.S. subsidiary, the American healthcare system may be unfamiliar, complicated and remarkably opaque.
None of those characteristics removes management's responsibility to understand it.
Before approving another U.S. healthcare renewal, know what you are paying for.
CMI Health Plan Advisory
Independent advisory to European leadership on the healthcare expenditure of U.S. operations.
Sources
- Mercer/Marsh, 2026 National Survey of Employer-Sponsored Health Plans — preliminary 2027 projections.
- U.S. Department of Labor, Employee Benefits Security Administration — Understanding Your Fiduciary Responsibilities Under a Group Health Plan.