UBS Health Benefit Survey: Elevance Health (ELV.US) Leads, U.S. Employers Prepare for Rising Medical Costs

According to Odaily, Elevance Health (ELV.US) was the highest-rated U.S. health insurer in the annual benefits manager survey conducted by UBS, while the three major pharmacy benefit managers (PBMs) appear well positioned to withstand the surge in contract reviews expected in 2027.

The UBS analyst team led by A.J. Rice surveyed 166 benefits managers from companies with over 100 employees. The survey covered topics such as the competitive standing of insurers, 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 at 4.34 out of a possible 5. UnitedHealth (UNH.US) ranked second at 4.23, followed closely by Kaiser Permanente at 4.20.

Elevance led in the categories of customer service and medical service networks. Aetna, part of CVS Health (CVS.US), scored highest in care and disease management, while Kaiser Permanente ranked first in plan support and digital tools.

Cigna (CI.US), which was ranked first overall last year, slipped slightly in the rankings, but remained the leader among employers with 501 to 5,000 employees.

The survey sends a positive signal to Elevance and UnitedHealth as employers prepare to reconsider an exceptionally large number of health plan contracts. Elevance’s top ranking may help it win new business, while UnitedHealth benefits from both improved customer satisfaction and the lowest risk of re-bidding among its clients.

CVS Health and Cigna face greater pressure in their insurance business, but their pharmacy benefit operations remain competitive. At the industry level, rapidly rising medical costs could drive up premiums, but pricing errors or poor claims management by insurers could pose risks.

More Employers Putting Contracts Out to Bid

About 77% of respondents said they plan to seek new proposals for all or most of their core medical benefits for 2027. This is a sharp rise from 53% last year and 41% the year before.

Aetna and Blue Cross Blue Shield plans not affiliated with Elevance face the highest re-bidding risk at 90%, followed by Cigna and Elevance. UnitedHealth faces the lowest re-bidding risk among leading insurers.

Procurement criteria are also changing. Cost and discount remain the top considerations, but only 36% of respondents ranked it first, sharply down from 89% last year. Network coverage placed second, followed by customer service and care management. Telemedicine and flexibility are becoming increasingly important in the selection process.

Medical Costs Accelerate Upward

Employers expect total medical costs for self-insured health plans to rise 7.9% by 2027, up from this year’s expected 7%. Adjustments to benefits (sometimes referred to as benefit “buy-downs”) are forecast to reduce growth by about 0.3 percentage points, bringing the final net increase to about 7.5%.

Employees at self-insured employers are expected to pay 5.8% more in premiums and out-of-pocket costs next year. Fully-insured employers expect average employee premiums to rise 5.5%, lower than the 8.3% increase forecast in the previous survey.

GLP-1 obesity treatments were cited as the largest contributors to medical cost growth, followed by rising prices for medical services. Specialty drugs and patients with extremely high costs remain major sources of cost pressure.

Large PBMs Maintain Their Advantage

Competition among pharmacy benefit managers (PBMs) is intensifying, with 92% of respondents saying their PBM contracts expire in 2027. About 65% plan to issue a request for proposal, more than double last year’s 30%.

Nonetheless, the three leading PBMs still hold strong competitive positions. CVS Caremark, Express Scripts (owned by Cigna), and Optum Rx (owned by UnitedHealth) face relatively low competitive bidding risk and are the most likely to increase their market share in 2027.

When 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, compared to 37% last year.

Employers expect prescription drug costs to rise 5.6% in 2027, compared to this year’s estimate of 5.4%.

GLP-1 Coverage Expands Sharply

The survey found that 91% of employers now offer insurance coverage for new obesity drugs for employees, up from 52% last year. However, most employers set restrictions on coverage, including prior authorization requirements and minimum BMI thresholds.

UBS estimates that 19.1% of insured employees and their dependents are using GLP-1 drugs to treat obesity. Respondents expect this to rise to 20.6% next year.

Weight management and mental health care are becoming the largest areas of growth in employee benefits spending. About 55% of employers anticipate expanding budgets in these two categories, reflecting the growing economic and clinical importance of obesity treatments and behavioral health services.