Cambridge residents and employers are heading into 2027 facing another year of steep health insurance increases, with state regulators approving a double-digit base premium increase for individual and small-group plans and national projections showing similarly sharp hikes in employer health benefit costs.
The Massachusetts Division of Insurance approved an average 10.8% base premium increase for the state’s merged insurance market, which covers individuals and businesses with 50 or fewer employees. The figure is an average across plans purchased directly from insurers or through the Massachusetts Health Connector; the change in any individual’s premium will vary.
Meanwhile, preliminary results from Marsh’s 2026 National Survey of Employer-Sponsored Health Plans, released in September, project that employer health benefit costs will rise an average of 8.2% per employee in 2027, the largest increase since 2003. Officials at the Massachusetts Health Policy Commission confirmed that the agency is using a similar estimate of roughly 9% from a June report by consulting firm PricewaterhouseCoopers in its own analysis.
“If that’s higher than your wages are going up, that means you’re getting less of a raise than you otherwise would,” said David Auerbach, senior director of research and cost trends at the Massachusetts Health Policy Commission. “A lot of what would be your salary is just going to health care.”
The pressure is evident in Cambridge’s own budget. The city set aside $87.7 million for employee health insurance in fiscal 2027, up $7.2 million, or 8.9%, from the previous year, according to city spokesperson Jeremy Warnick.
Why rates are rising
Before insurers can raise premiums in Massachusetts’ merged market, they must submit proposed rates to the Division of Insurance for approval.
“The DOI this time and for the last couple years [has] been more active in saying no. That’s too much. You got to shave a couple of points off of that,” Auerbach said. Insurers initially sought an average increase of about 13.5%, he said, before regulators reduced it to 10.8%, down slightly from the 11.5% increase approved for 2026.
Auerbach said the increase signals that insurers expect medical spending to continue rising rapidly. He explained that roughly 85% to 90% of premium revenue pays for medical care, including doctor visits, hospital stays and prescription drugs. The remainder covers insurers’ administrative expenses and other operations.
Auerbach said insurers negotiate payment rates directly with hospitals, but those negotiations are not always between equal parties. A large hospital that patients expect to find in their insurance network can demand higher payments because an insurer risks losing customers if it refuses to cover care there.
“If I am a famous hospital that everybody wants in their network,” Auerbach said, “those hospitals, you know, for all kinds of reasons, they are able to demand higher prices from the insurers.”
That dynamic is particularly relevant in Greater Boston, where two large health systems, Mass General Brigham and Beth Israel Lahey Health, operate extensive networks of hospitals and other medical facilities. Auerbach said hospital consolidation can strengthen providers’ negotiating power by leaving insurers with fewer alternatives.
Medical progress itself can also drive up costs. New drugs can treat conditions that once had few effective options, but their high prices can push up overall spending as more patients gain access to them.
Auerbach pointed to GLP-1 medications used to treat diabetes and obesity, as well as Humira, used to treat autoimmune conditions, and the cancer drug Keytruda, as examples of expensive treatments that have contributed to rising health care spending in recent years. He said drug patents can further exacerbate this effect by preventing other companies from making competing versions for years, allowing manufacturers to keep prices high as more patients begin using their products.
Auerbach said higher hospital payments do not necessarily translate into better patient care. Hospitals use their revenue to pay clinical staff, but also to cover administrative costs, maintain facilities, purchase equipment and invest in new technology.
Asked about recent nursing strikes in Boston, Auerbach declined to comment on the labor disputes themselves but said direct patient care workers, including nurses and doctors, account for about 28% of a typical hospital’s expenses. Another 15% goes toward administrative and other nonclinical staff, he said.
“They’re choosing how to allocate that money,” Auerbach said. “If it’s just going to higher prices for stuff, some of it is really not coming back to the patient at all.”
The impact on residents and employers
Tina Alu, executive director of the Cambridge Economic Opportunity Committee, a nonprofit that helps residents enroll in health insurance and navigate coverage options, said she has seen increasing numbers of people put off medical appointments, skip prescriptions and accumulate medical debt in recent years because they cannot afford the out-of-pocket costs of their plans.
“You can have insurance, but if you can’t afford, you know, copays and deductibles and prescriptions and all of that, it’s really the same as not having insurance at all,” Alu said.
For residents already struggling to cover rent, groceries and other necessities, Alu said, a medical bill can force a choice between getting care and paying for basic living expenses. Delaying treatment may help someone get through an immediate financial crisis, but it can also leave health problems unaddressed until they become more serious and expensive to treat.
Employers face their own decisions about how much of the rising cost to absorb and how much to pass on to workers. Loretta Ho Sherblom, president of LHS Benefits, which advises Massachusetts biotechnology companies on employee benefits, said health insurance costs for those companies rose an average of 9% in 2026, and her firm expects a similar increase in 2027.
Despite those increases, Sherblom said, biotech companies paid an average of 86% of their workers’ health insurance premiums in 2026, up from 82% a decade earlier. She said rising insurance costs have not been a major factor in the industry’s recent employment decline.
“Biotech employment is strongly linked to the availability of capital,” Sherblom said in an emailed statement. She pointed instead to reduced investment following an influx of capital during the pandemic, instability in federal research funding and companies hiring fewer in-house scientists in favor of outside research firms.
Nyx Quispe-Demetriou, a Central Square resident, said the monthly health insurance premiums for them and their husband rose from about $650 in 2025 to $1,100 in 2026. The increase has left the couple with less money to save and has contributed to their worries about whether they can afford to remain in Cambridge.
Quispe-Demetriou, who works part time as a phlebotomist at Beth Israel Lahey Health, had hoped to find more affordable coverage through their new employer. Instead, the plan that would allow them to continue seeing their doctors would cost roughly $1,000 every two weeks for the couple, nearly quadrupling what they paid for insurance in 2025. They decided to stay on their existing plan through the Massachusetts Health Connector.
“We thought we were gonna get some relief,” Quispe-Demetriou said. “That $2,000 would have eaten my entire paycheck. I only work part time, so it’s like I would have had literally no take-home pay.”
Quispe-Demetriou has Ehlers-Danlos syndrome and needs physical therapy twice a week, making it difficult to switch to a cheaper plan that might not cover their existing care. The couple have considered leaving Cambridge, though Quispe-Demetriou said their accessible apartment, proximity to work and reliance on public transit make moving difficult.
“We love living here in Central Square,” they said. “The idea of being priced out is terrible. But I’d be lying to you if I said that it wasn’t in the backs of our minds.”
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