UBS Group AG Health Benefits Survey: Elevance Health (ELV.US) Leads as U.S. Employers Brace for Rising Healthcare Costs

In UBS Group AG's annual survey of employee benefits administrators, Elevance Health (ELV.US) emerged as the highest-rated U.S. health insurer, while the three major pharmacy benefit managers (PBMs) appear well-positioned to withstand a surge in contract reviews in 2027. UBS Group AG analyst A.J. Rice's team surveyed 166 benefits managers from companies with more than 100 employees. The survey covered insurers' competitive positioning, expected medical and prescription drug costs, benefits priorities, and procurement plans for the coming year. Elevance Health, which operates Blue Cross Blue Shield plans in 14 U.S. states, received the highest overall score of 4.34 out of 5. UnitedHealth Group Incorporated (UNH.US) ranked second with 4.23, followed closely by Kaiser Permanente at 4.20. Elevance led in two categories: customer service and provider network. CVS Health Corporation's (CVS.US) Aetna scored highest in care and disease management, while Kaiser Permanente ranked first in plan support and digital tools. Cigna (CI.US), which ranked first overall last year, slipped slightly in this year's overall rankings but maintained its leading position among employers with 501 to 5,000 employees. The survey sends positive signals for Elevance and UnitedHealth Group Incorporated as employers prepare to reconsider an unusually large number of health plan contracts. Elevance's No. 1 ranking could help it win new business, while UnitedHealth Group Incorporated benefits from both improved customer satisfaction and the lowest risk of client re-tendering. CVS Health Corporation and Cigna face greater pressure in their insurance businesses, but their pharmacy benefit operations remain competitive. At the industry level, rapidly rising medical costs could push premiums higher, but also pose risks if insurers misprice or fail to control claims effectively. **More employers to put contracts out to bid** About 77% of respondents said they plan to seek new proposals for all or most of their core medical benefits in 2027. That's up sharply from 53% last year and 41% the year before. Aetna and Blue Cross Blue Shield plans not affiliated with Elevance face the highest re-tendering risk at 90%, followed by Cigna and Elevance. UnitedHealth Group Incorporated has the lowest re-tendering risk among major insurers. Procurement criteria are also shifting. Cost and discounts remain the top consideration, but only 36% of respondents ranked it first, down sharply from 89% last year. Network coverage ranked second, followed by customer service and care management. Telehealth and flexibility have become more important in the selection process. **Medical costs accelerating** Employers expect total medical costs for self-insured health plans to rise 7.9% by 2027, up from an estimated 7% this year. Benefit plan adjustments sometimes called benefit "buy-downs" are expected to reduce the increase by about 0.3 percentage points, bringing the net cost increase to approximately 7.5%. Employees of self-insured employers are expected to pay 5.8% more in premiums and out-of-pocket costs next year. Fully insured employers expect employee premiums to rise an average of 5.5%, below the 8.3% increase predicted in the previous survey. GLP-1 obesity treatments were cited as the largest contributor to medical cost growth, followed by rising medical service prices. Specialty drugs and very high-cost patients remain significant cost pressures. **Large PBMs retain their advantage** Competition among pharmacy benefit managers (PBMs) is intensifying, with 92% of respondents saying their PBM contracts will expire in 2027. About 65% of respondents plan to issue requests for proposals, more than double last year's 30%. Nevertheless, the three major PBMs maintain favorable competitive positions. CVS Caremark, Cigna's Express Scripts, and UnitedHealth Group Incorporated's Optum Rx face relatively low competitive bidding risk and are the three companies most likely to improve their market positions in 2027. In selecting a PBM, cost management remains the most important factor. Transparency rose to second place, tied with specialty drug management, while the importance of rebates declined sharply. Only 11% of respondents listed rebates as a primary consideration, down from 37% last year. Employers expect prescription drug costs to rise 5.6% in 2027, compared with an estimated 5.4% this year. **GLP-1 coverage expands significantly** The survey found that 91% of employers now offer health insurance coverage for new obesity drugs, up from 52% last year. However, most employers impose restrictions on coverage, including prior authorization requirements and minimum body mass index thresholds. UBS Group AG estimates that 19.1% of enrolled employees and their dependents use GLP-1 drugs to treat obesity. Respondents expect that figure to rise to 20.6% next year. Weight management and mental health care are emerging as the largest areas of increased employee benefits spending. About 55% of employers expect to increase budgets in both categories, reflecting the growing economic and clinical importance of obesity treatment and behavioral health services.