AI Billing, GLP-1s Among Forces Driving 9% Health Cost Spike

Rising AI-enabled billing, surging pharmacy spend, and No Surprises Act (NSA) arbitration outcomes consistently favoring providers are among 5 structural inflators driving the commercial medical cost trend to a projected 9% for group plans and 8.5% for individual market plans in 2027, according to PwC's annual Medical Cost Trend: Behind the Numbers 2027 report.¹

The report, based on surveys and interviews with actuaries at 27 US health plans covering more than 103 million employer-sponsored members and 8 million Affordable Care Act marketplace members, also restated 2026 group and individual trends upward—from 8.5% and 7.5%, respectively, to 9.0% and 8.5%—reflecting higher-than-anticipated utilization, provider contract rates, coding intensity, and pharmacy costs.

AI Is Now the Top-Ranked Cost Driver

The leading inflator for 2027 is artificial intelligence (AI)-enabled revenue optimization, which the report described as distinct from simple billing efficiency gains. Providers and their vendors are deploying AI-powered ambient documentation and coding tools that capture greater billing complexity and support higher-severity coding, raising reimbursement per encounter or admission without a proportionate change in care intensity.

Nearly 70% of plan actuaries surveyed by PwC ranked AI-enabled documentation as one of the top 3 inflators for 2027, and about 20% identified it as the single largest driver. A survey of 43 health systems found that ambient notes for clinical documentation was the only AI use case with adoption reported across all respondents, with 53% describing a high degree of success. A study of AI scribe adoption at University of California, San Francisco Health found use of the technology was associated with increased relative value units per encounter and higher ambulatory encounter volume, with no corresponding increase in claims denials.²

Commercial claims data underscore the scale of the shift. A review covering April 2022 through March 2025 found that 10% of hospitals drove a 13.1% increase in the share of inpatient admissions coded as complex. In one illustrative case involving maternity care, diagnosis rates of postpartum anemia climbed from 4% to 12.3% over the study period while transfusion rates changed only modestly. Meanwhile, coding intensity was estimated to have contributed $22 million in additional maternity spending.

Provider Consolidation and Pharmacy Pressure Add to the Burden

Provider reimbursement pressure remains the second-highest inflator, with nearly 65% of health plan actuaries surveying it as one of the top 3 concerns. Hospital and related services inflation reached 7.6% year over year in early 2026, driven by elevated labor costs and higher drug and supply expenses that did not recede to prepandemic norms. Hospital drug expenses alone grew 13.6% in 2025.

At least 47% of physicians were employed by or affiliated with hospital systems in 2024, up from less than 30% in 2012. Among independent physicians who sold their practices in the last decade, 70.8% cited inadequate payment rates as an important or very important reason, and hospital-physician consolidation was associated with a 17% increase in commercial office visit prices and 3% to 5% increases in inpatient prices.

Pharmacy remains the third-ranked inflator, with more than 85% of surveyed actuaries projecting the 2027 pharmacy cost trend to outpace the overall medical trend. US spending on cancer medicines reached $143 billion in 2025, which was roughly a 50% increase since 2020 and driven by targeted therapies like antibody-drug conjugates, bispecific antibodies, and radioligand therapies. The glucagon-like peptide-1 (GLP-1) category continues to expand beyond obesity, with the FDA having approved these agents for cardiovascular disease, metabolic dysfunction-associated steatohepatitis, chronic kidney disease, and obstructive sleep apnea. GLP-1 prescriptions reached 3.5 million fills in December 2025, double the volume from December 2024.

GLP-1 affordability and employer coverage decisions remain a central tension in commercial health benefits. A 2026 survey found 65% of employed adults said they would be more likely to use a GLP-1 if their employer covered part of the cost, yet access remains inconsistent across plan types.³ Meanwhile, rising costs have led some insurers to drop or restrict weight-loss drug coverage for certain member populations.⁴

Behavioral Health and NSA Arbitration Round Out the 5 Inflators

Behavioral health utilization has increased 62.6% from 2018 to 2024 and now accounts for 65.6% of all telehealth volume. Unlike other cost categories, behavioral health trends are driven primarily by utilization growth rather than price increases and span anxiety disorders, mood disorders, substance use disorders, and autism spectrum disorders. PwC noted that timely behavioral health access can reduce downstream medical costs: a 2025 study published in The American Journal of Managed Care^® found that commercially insured members connected to timely outpatient behavioral health care were 35% less likely to have a behavioral health–related emergency department visit and 43% less likely to require an inpatient admission, with total medical cost savings of $27.63 per member per month.⁵

The fifth inflator is the NSA independent dispute resolution (IDR) process, which was designed to protect members from surprise out-of-network bills but has become a durable reimbursement pressure point for payers. Providers prevailed in approximately 88% of payment determinations in the first half of 2025, with nearly 1.1 million determinations rendered during that period.¹ Nearly 4.8 million total disputes were filed through the end of 2025—far exceeding initial Congressional Budget Office projections of roughly 17,000 annually.

What Plans and Employers Can Do

PwC describes the available deflators, including biosimilars, generic drugs, and site-of-care optimization, as already embedded in the cost baseline rather than sources of new improvement. The report identifies 5 actionable levers for bending the commercial trend: payment integrity, such as moving review upstream before claims are paid; targeted utilization management that shifts focus from broad prior authorization to high-cost, high-variation services; pharmacy governance by drug class; network redesign informed by price transparency data; and event-triggered care management tied to measurable outcomes.

Health plans that voluntarily streamlined prior authorization in 2025, per a joint update from AHIP and the Blue Cross Blue Shield Association, eliminated 11% of prior authorization requirements—representing 6.5 million fewer requests.⁶ PwC's report also highlighted that CMS updates to hospital price transparency requirements for 2026 are expected to make machine-readable rate data more comparable, giving plans and employers stronger data to anchor network and contracting decisions.¹

The report closed with a warning for stakeholders across coverage types: as affordability erodes, the result is likely to be greater churn across coverage types and growing risk that individuals may be priced out of coverage altogether.

“Whenever possible, in the interest of patient care, industry leaders should seek collaboration,” the report concluded. “Transparency, consumer education, and clarity on benefits and policy could improve patients’ health and reduce the administrative burden across the health economy.”

References

1. PwC Health Research Institute. Medical Cost Trend: Behind the Numbers 2027. PwC. June 2026. https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html
2. Holmgren AJ, Fenton CL, Thombley R, et al. Ambient artificial intelligence scribes and physician financial productivity. JAMA Netw Open. 2026;9(1):e2553233. doi:10.1001/jamanetworkopen.2025.53233
3. Hohmann E. Employer benefits and social stigma drive GLP-1 use among US workers, survey finds. AJMC^®. April 8, 2026. Accessed June 15, 2026. https://www.ajmc.com/view/employer-benefits-and-social-stigma-drive-glp-1-use-among-us-workers-survey-finds
4. Klein HE. Rising costs lead insurers to drop weight loss drug coverage, further increasing patient burden. AJMC. August 6, 2024. Accessed June 15, 2026. https://www.ajmc.com/view/rising-costs-lead-insurers-to-drop-weight-loss-drug-coverage-further-increasing-patient-burden
5. Zhu Y, Saynisch P, David G, et al. Linking insured adults to behavioral health care: a cost-saving solution. Am J Manag Care. 2025;31(12):752-759. doi:10.37765/ajmc.2025.89834
6. Health plans reduce prior authorization, support continuity of care and enhanced consumer communications. News release. AHIP. April 7, 2026. Accessed June 15, 2026. https://www.ahip.org/news/articles/health-plans-reduce-prior-authorization-support-continuity-of-care-and-enhanced-consumer-communications