For many employers, the affordability conversation has historically been centered around overall trend.
Trend still matters. But increasingly, understanding the components of this overall trend to address affordability for the plan and its members matters.
Recent surveys point to another year of elevated healthcare cost increases, with projected 2026 trends commonly landing near 9% before plan changes. Simultaneously, you’re seeing pressure from pharmacy costs, high-cost claimants, chronic conditions, provider pricing and emerging regulatory expenses. The result is a harder but more important set of questions: What is driving cost? Are we paying the right price? Are our programs delivering value? And how do we keep coverage affordable for both the organization and employees?
Through recent work across medical carrier evaluations, healthcare transparency, pharmacy strategy, cost management and the No Surprises Act, one theme has become increasingly clear:
The affordability conversation is moving beyond trend
Managing trend will always be important. But when projected healthcare cost increases are running near decade-high levels, the headline numbers don't explain it enough. Organizations making the most progress are the ones digging deeper into the underlying drivers of cost and using that insight to make better decisions about risk, vendors, pricing and plan design.
Cost drivers are getting harder to manage
In the past, you could often explain higher costs through familiar factors like utilization, inflation or changes in plan enrollment. Today, the story is more complicated.
Specialty pharmacy, high-cost claimants, new therapies and concentrated risk are all putting pressure on budgets. Our recent survey data points to pharmacy costs, high-cost claimants and chronic conditions as leading cost drivers. These costs can be very helpful when they improve health outcomes. But they also create volatility that's difficult to manage through traditional renewal strategies alone.
Transparency is changing the questions you can ask
Simultaneously, greater healthcare transparency gives you a better view into what you’re paying for care. Public and employer-led pricing studies continue to show wide variation in commercial prices, even for similar services and settings.
For example, RAND’s price transparency study found that private health plans paid, on average, about 254% of Medicare prices for hospital inpatient and outpatient services in 2022. There was substantial variation by state and facility. That kind of visibility changes the conversation. Instead of focusing only on aggregate trend, you can start asking whether prices are reasonable, whether carrier arrangements are performing as expected and whether the plan is getting proper value for the dollars being spent. The question shifts from “What is our trend?” to “Are we paying the right price in the first place?”
Affordability is also a governance issue
With greater visibility comes a higher expectation for oversight.
Scrutiny over provider pricing, carrier performance, reimbursement arrangements, pharmacy contracting and administrative fees is intensifying. This is driven in part by increasingly visible fiduciary expectations under ERISA and federal transparency requirements. The U.S. Department of Labor says that fiduciary status depends on the functions performed for the plan. This includes discretion over plan administration or control over plan assets. Self-funded plan sponsors are increasingly expected to understand whether plan assets are being spent prudently, whether fees are reasonable and whether vendors are delivering proper value. This is no longer just a finance conversation. Affordability is becoming part of broader plan governance and fiduciary oversight.
Hidden costs can surface outside the renewal cycle
Some of the most important affordability pressures aren't always visible.
The No Surprises Act is one example. The legislation plays an important role in protecting plan members from surprise medical bills. Meanwhile, the federal Independent Dispute Resolution (IDR) process has generated far more activity than originally expected. CMS reporting shows more than 5 million disputes have been filed since the portal launched in April 2022. The new rules are meant to reduce administrative friction and improve transparency. Even so, IDR can still create pressure for employer-sponsored plans through reimbursement determinations, administrative expenses and related fees. These impacts can be harder to see than medical trend, but they still matter.
Employee affordability needs to be considered
Your perspective is only one side of the affordability equation.
Employees are also facing higher payroll contributions, deductibles and out-of-pocket costs. Shifting more cost to employees may help you manage the budget in the short term, but it doesn't solve the underlying affordability problem. In many cases, it simply moves the pressure from the organization to the individual and can affect how, when and whether employees access care. That is why plan design modernization needs to balance financial sustainability with meaningful access to care.
As you start planning for 2027 and beyond, you have the opportunity to treat affordability as a multiyear strategy, not just an annual renewal challenge. That means looking across price, utilization, risk, governance, plan design and employee experience to understand where action can have the greatest impact.
Practical next steps
The next step isn't to abandon the trend discussion. It is to expand it.
- Look beyond trend: Identify the specific drivers of cost, including specialty pharmacy, high-cost claimants, provider pricing, administrative fees and emerging regulatory impacts
- Use transparency data with purpose: Evaluate whether prices paid for care are reasonable, competitive and aligned with the value employees receive
- Strengthen governance: Create a regular process for reviewing carrier performance, vendor arrangements, reimbursement practices and plan fees
- Balance cost and access: Assess whether plan design changes improve financial sustainability without creating unnecessary barriers to care
- Start the 2027 conversation earlier: Build affordability into multiyear strategy discussions rather than addressing it only during renewal negotiations
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