Low layoffs give employers no relief as health benefit costs hit a 23-year high
US employers heading into 2027 plan renewals are facing a combination that leaves little room to manage: layoffs remain subdued, workforce populations are stable, and medical cost growth is accelerating at a pace not seen since 2003.
Initial claims for unemployment benefits fell by 10,000 to 196,000 in the week ended September 12, 2026, the lowest reading since mid-July, according to Department of Labor (DOL) figures. The four-week moving average stood at 203,250, down 2,750 from the previous week. Continuing claims fell by 39,000 to 1.73 million in the week ended September 5.
The reading was below economist expectations, though the Labor Day holiday may have distorted weekly figures. US employers added 162,000 jobs in August, with the unemployment rate holding at 4.1 percent, according to the Bureau of Labor Statistics.
What stable employment means for benefits costs
In a normal cost-reduction cycle, falling headcount gives HR teams some structural relief heading into renewal: fewer covered employees, smaller benefits spend, all else being equal. That lever is not available in the current labor market.
Low layoffs mean most employers are carrying health plan costs across a large and persistent base of covered employees — precisely as medical inflation accelerates. Preliminary results from Marsh's 2026 National Survey of Employer-Sponsored Health Plans project total health benefit cost per employee will rise by an average 8.2 percent in 2027, the largest increase since 2003, even after employers make planned changes to control costs. Without those measures, employers estimated their current plans would cost 11 percent more.
As HRD has reported, health benefit costs are on track to hit a 23-year high in 2027, with prescription drug costs projected to climb 11.5 percent according to the 2027 Segal Health Plan Cost Trend Survey.
The employer response: plan design changes and harder conversations
Marsh found that 59 percent of employers expect to make cost-cutting changes to their health benefits for 2027, including changes that could increase members' out-of-pocket costs. Nearly half of large employers expect to make medical plan design changes such as higher deductibles or copays, while 31 percent already offer or plan to offer a non-traditional medical plan in 2027.
Those are decisions with retention implications. A labor market where layoffs remain low — where employers are not making significant headcount reductions and competition for experienced workers continues — gives employees more negotiating power on total compensation than they had in tighter conditions. Shifting healthcare costs significantly onto employees in that environment carries real flight risk, particularly for specialized roles where replacement costs are high.
Abiel Reinhart, economist at JPMorgan, noted that continuing claims are running at similar levels to May 2023, when the unemployment rate was only 3.6 percent, and warned that continuing claims could edge higher again starting in late September.
What HR leaders can act on before renewals close
The combination of stable headcount and accelerating medical costs puts HR leaders in a position where the renewal conversation needs to move beyond premium negotiation. Three areas are worth prioritizing now.
The first is plan design specificity. The gap between managed and unmanaged cost growth — 8.2 percent versus 11 percent — is almost entirely determined by the plan design changes employers are willing to make. HR leaders who have not run that analysis for their own population are heading into renewal without the data to defend a position.
The second is vendor performance scrutiny. As HRD has reported, employers are tightening their grip on benefits spending and scrutinizing vendor relationships more closely, particularly with pharmacy benefit managers (PBMs). With 58 percent of employers cutting underperforming vendors ahead of 2027, the tolerance for programs that cannot show value is falling.
The third is workforce communication. Cost changes employees do not understand produce more retention risk than cost changes that are clearly explained and contextualized. HR teams that frame plan design changes in terms of what the organization is absorbing — and what the alternative would look like — are in a better position than those presenting changes as a cost-shift exercise.
As the PwC 2026 Employee Financial Wellness Survey found, employees who have access to employer-provided financial wellness resources are significantly more likely to use them — and that engagement reduces the out-of-pocket cost shock that often follows plan design changes.
