When your renewal packet lands in the next few months, don't be surprised if the number at the bottom is a lot bigger than last year's. If you offer health insurance to your team — or you're thinking about starting — your 2026 premiums are likely heading up by double digits, and the math behind that increase explains a lot about what to do next.
A review of preliminary 2026 rate filings from 318 small-group insurers in every state and D.C. found a median proposed increase of 11% for ACA-compliant plans. That isn't a single carrier raising prices. It's the middle of the market. Most filings cluster between 5% and 15% higher, roughly one in ten seeks 20% or more, and only three insurers proposed cutting rates at all. In a deeper look at 96 filings across 16 states and D.C., the median was even a touch higher at 12%, with proposals ranging from a 5% decrease to a 32% increase.
These are preliminary filings, not yet final approved rates, but they set the range your broker will be quoting this fall. Final rates are typically locked in late summer to early fall, which means your budgeting window is right now. Understanding what's driving the increase — and why smaller employers feel it most — is the best way to make a renewal decision you can actually afford.
What the 11% Number Actually Means for Your Business
The median is not your increase, but it is your planning anchor.
If you spent $7,200 per employee last year on premiums for a small-group plan, an 11% increase adds about $792 per employee next year before any benefit changes. For a team of eight, that's more than $6,300 in additional annual cost. For a team of twenty, it's nearly $16,000 — without adding a single person or improving a single benefit.
Three things to keep in mind as you read your renewal:
It's a median, not a ceiling. Half of insurers proposed more than 11%, half less. Your actual quote depends on your state's market, your carrier's claims experience, your group's age and health mix, and your plan design. Younger, healthier groups with high-deductible designs may come in below median. Groups concentrated in high-cost hospital markets or with heavy specialty drug use may come in well above it.
The distribution matters. About 68% of filings — 216 insurers — landed in the 5% to 15% band. That is still two to three times normal inflation. The fact that so many carriers agree in the same range suggests the pressure is systemic, not carrier-specific. Shopping alone won't make it disappear, though it may trim it.
These are ACA small-group rates. If you buy a fully insured, ACA-compliant plan for 50 or fewer employees (in most states), this is your market. If you use a level-funded arrangement, self-funding with stop-loss, or an ICHRA that sends employees to individual coverage, you price in a different risk pool with different rules — which is part of why that market is shifting in the first place.
Why Your Premiums Are Climbing: 5 Drivers Behind the Increase
Insurers don't set next year's premium on a guess. They project next year's medical costs and build a margin on top. In their 2026 filings, five themes came up again and again.
1. Underlying Medical Trend Is Running Near 9%
Every carrier estimates "medical trend" — the year-over-year growth in what care costs, driven by both higher prices per service and higher use of services. For 2026, carriers pegged that at roughly 9%.
Hospital care and physician services are the largest pieces. Years of higher input costs — labor, supplies, facility overhead — have been passed through in negotiated rates with insurers, and those higher rates are now baked into the base. Utilization is up too. People deferred care during the pandemic years, then returned, and overall use of services has not come back down.
What this means for you: even a group with no big claims last year is paying for the market's overall cost growth. Your group's claims history still matters for experience rating at renewal, but the floor moved up for everyone.
2. Prescription Drugs — Especially Specialty and GLP-1s — Are a Major Pressure Point
Pharmacy was cited in 27 of the 96 detailed filings as a standalone driver. It's not just that more prescriptions are being filled. It's which ones.
Specialty drugs — many priced in the tens of thousands per year — continue to grow as a share of total pharmacy spend. The newest weight-loss GLP-1 therapies are the most visible example. High demand plus high list prices pushed several carriers to rethink coverage entirely. Some filings disclosed plans to exclude GLP-1s for weight loss in 2026, covering them only for diabetes, to limit the actuarial impact.
If your plan currently covers GLP-1s for weight loss, expect that benefit to be under review. If you add or keep it, expect it to be priced in. If your carrier removes it, your employees will see a real change in out-of-pocket exposure even if the premium is slightly lower.
Practical tip: ask your broker for a pharmacy cost breakdown at renewal — what share of next year's premium increase is attributed to pharmacy trend specifically. With many carriers it's a quarter or more of the total.
3. Economy-Wide Inflation and Workforce Shortages at Providers
Insurers pointed to broader inflation and persistent shortages of nurses, technicians, and other clinical staff as direct premium drivers. When hospitals and health systems pay more to recruit and retain staff, those higher wage costs flow into the commercial rates they negotiate.
Provider consolidation was also mentioned as compounding the effect. When health systems acquire physician practices and competing hospitals, they gain leverage in negotiations and administrative spending does not always fall with scale. Either way, the per-unit price of care rises.
This is the least visible driver on your renewal letter — often lumped into "medical trend" — but it explains why premiums are rising faster than general consumer inflation. Health care labor costs grew faster and have been slower to come back down.
4. Tariff Uncertainty on Drugs and Medical Supplies
Twenty-three of the 96 detailed filings flagged potential tariffs on prescription drugs and medical supplies as a source of pricing uncertainty. Carriers are split on what to do with it: some explicitly added a tariff load to their 2026 assumptions, others noted the risk but left it out pending clarity, pending final policy.
Uncertainty itself can be expensive. If carriers price conservatively to protect against a tariff spike that later doesn't materialize, groups pay higher premiums than necessary and only see relief at the following renewal. If carriers don't price for it and tariffs do arrive, the cost is absorbed in next year's loss ratio and the following year's increase is larger.
Ask whether your carrier included a tariff assumption. It's a legitimate budgeting question, not politics — you want to know how much of your quoted increase is hedging future policy versus paying for actual past claims.
5. A Shrinking, Sicker Risk Pool
Perhaps the most important structural driver is who's left in the small-group market.
Enrollment in traditional fully insured small-group ACA plans has been falling. Healthier small employers have been moving to alternatives: level-funded and self-funded arrangements paired with stop-loss insurance, or Individual Coverage Health Reimbursement Arrangements (ICHRAs) that reimburse employees for individual-market premiums instead.
When healthier groups leave, the average health risk of those who remain rises. That makes costs more volatile and less predictable for the carriers left covering them. Several filings reported outright losses in the segment and some carriers have exited small-group markets entirely, reducing competition further.
This is why the smallest employers get hit hardest, and we turn to that next.
Why the Smallest Employers Are Getting Hit Hardest
The 11% median applies across the small-group market, but its impact is regressive. A business with six employees and a business with forty-five both buy in the same rate band, yet the smaller business has fewer tools to absorb the increase.
You negotiate less volume. Large groups are community-rated into experience pools or self-insured entirely. A 10-person group is fully pooled with other small groups in the state; you cannot credibly promise a carrier lower risk by wellness programs alone in a single year.
Fixed costs don't scale down. Broker fees, compliance, and administration — handling open enrollment, COBRA notices where applicable, SPDs, Form 5500 prep if you cross the filing threshold — cost roughly the same whether you cover eight people or thirty. On a per-employee basis, small means expensive.
You have less ability to shift costs silently. A large employer can absorb a 10% increase by widening a network tier or adding a lower-premium alternative alongside the richer plan. A very small employer offering one plan has only blunt instruments: raise deductibles, cut contributions, or drop coverage. Each is visible to every employee.
Turnover hits harder. If one employee on a ten-person plan has a high-cost year — a premature birth, a cancer diagnosis, a specialty drug start — the group's loss ratio swings more than in a fifty-person pool. Carriers price that volatility into every small-group quote.
Alternatives require infrastructure you may not have. An ICHRA can be cheaper than a group plan, but it requires employees to shop individual coverage, understand subsidies, and handle their own enrollment. A level-funded plan can reward a healthy group with a year-end refund, but it requires underwriting, monthly claims reporting, and a stop-loss contract many owners find opaque. Without a benefits advisor who works with small groups specifically, those options stay out of reach.
The result is a widening gap. Surveys consistently show the smallest firms — under 20 employees — offer coverage at lower rates than firms with 20 to 50 employees, and when they do offer, they pay a higher share of the premium relative to payroll. An 11% increase on an already stretched budget pushes more of them toward that drop-coverage decision. Enrollment data suggests that is already happening.
How to Budget for Your 2026 Renewal Right Now
Treat your renewal as a financial planning event, not a form to sign. Work backward from the decision date.
1. Build Three Scenarios, Not One
Model your renewal at three levels: carrier quote as filed (expect roughly 10% to 12% if you haven't seen it yet), an optimistic scenario with plan-design savings (7% to 9%), and a risk-adjusted scenario that includes pharmacy and tariff load (13% to 15%). For each, calculate both total annual premium and per-pay-period cost per employee class (employee-only vs. family, if you contribute to both).
This takes an afternoon in a spreadsheet and prevents the most common founder mistake: budgeting the median and being surprised by your actual. Your broker can help you calibrate the spread using state filing data, but don't wait for the packet to start.
2. Decide Your Cost-Sharing Philosophy Early
Two levers control what the increase feels like to the household: the plan design employees experience (deductible, copay, network) and the contribution formula you set (percent of premium or fixed dollar per tier).
Increasing the deductible from $2,000 to $3,500 with a matching HSA seed may save 5% to 8% in premium and keep take-home pay more stable than raising the employee contribution rate. Conversely, holding design constant and asking employees to cover a point more of the increase preserves benefits but reduces paychecks directly.
Make the choice intentionally and communicate it. Employees resent surprises more than trade-offs. A one-page renewal memo that names the increase, what you changed to contain it, and what stays the same does more for retention than quietly holding employee-only contributions flat while moving family coverage 15%.
3. Shop the Whole Market, Not Just Your Carrier
The 68% of carriers clustered between 5% and 15% still leaves room to save by moving. Request quotes for:
- Two or three competing fully insured plans with similar actuarial value
- One level-funded option if your group is generally healthy and under 30 employees
- An ICHRA feasibility check if many employees could qualify for individual-market subsidies
Many owners skip the last two because they look complicated. Ask your broker to quote them anyway and explain the cash-flow difference over twelve months, not just month one. A level-funded plan that looks cheaper in January can cost more in March if early-year claims run high before stop-loss attaches. An ICHRA that looks chaotic in September may save you 15% annually if even a few employees qualify for premium tax credits you can't replicate in group coverage.
4. Check Your Small Business Health Care Tax Credit Eligibility
If you have fewer than 25 full-time equivalents, pay average wages under the inflation-adjusted threshold, and cover at least half the premium for employee-only coverage through the SHOP marketplace or a qualifying arrangement, you may still be eligible for the federal small business health care tax credit. It covers up to 50% of premiums (35% for tax-exempt employers) for two consecutive years.
State programs add another layer. Several states run supplemental small-business premium assistance or reinsurance programs that lower the community rate. They're often underclaimed because employers assume they earn too much. Have your CPA or benefits advisor run the test; the IRS worksheet takes less than an hour and the credit directly offsets the renewal increase if you qualify.
5. Lock Timing and Cash Flow
Most small-group plans renew on the first of a month with 30 to 45 days' notice. If your renewal lands in November through January, you have a second moving part: individual-market subsidy changes driven by legislation that may still be in flux. The KFF analysis noted that small-group pressures compound when individual-market subsidies shift — a federal policy change can push more people between markets in either direction. Don't assume your ICHRA math from August still holds in December.
On the accounting side, budget the gross premium first, then map the contribution flow: what the business pays, what it withholds from payroll, and when the carrier drafts. If you fund a Health Savings Account as part of a higher-deductible design, budget that seed — commonly $500 to $1,000 for employee-only — as part of total health cost, not as an unrelated benefit.
Smarter Ways to Control Costs Without Dropping Coverage
You can't control hospital trend or specialty drug launches. You can control how your plan absorbs them.
Right-size the network before you raise the deductible. Narrow-network and tiered-network options often shave 3% to 7% off premium without changing deductibles or out-of-pocket maximums. The savings come from steering to lower-cost, high-quality systems. If your employee base is clustered geographically, a narrower network may be invisible in practice.
Add a lower-premium companion option instead of replacing your only plan. Even groups as small as ten can dual-offer: keep the current PPO and add a high-deductible health plan with HSA. Healthy employees who want lower premiums and HSA tax benefits will sort themselves into it, improving the blended risk profile over time.
Treat pharmacy as a benefit you manage, not just a premium you pay. Ask whether your pharmacy benefit manager offers formulary alternatives for the costliest categories in your claims data — often weight-loss GLP-1s now, specialty autoimmune next year. A reference-based or transparent-PBM approach can reduce waste without touching medical coverage, though it requires a PBM willing to share rebate data. If your carrier can't answer how much of last year's trend was rebated, that's a signal to ask harder.
Make wellness dollars accountable. Free pizza Fridays don't lower trend. Targeted investments do: smoking cessation programs with measurable completion rates, diabetes prevention with referred enrollment, and navigation services that help employees find in-network imaging at half the hospital price. Demand utilization reports, not just participation counts.
Formalize your contribution strategy. Fixed-dollar contributions (for example, $400 per month toward employee-only, $700 toward family) are easier to budget than fixed-percentage and protect the business from percentage-on-percentage compounding when premiums jump 11%. They also make alternative offers comparable — a flat ICHRA allowance versus a flat group contribution is an apples-to-apples comparison.
Common Budgeting Mistakes to Avoid
Anchoring to last year's number. If you budget last year's premium plus 3% general inflation, you are 7 to 8 points light on a median small-group renewal. That gap shows up as an emergency re-forecast in October.
Budgeting premium only. Total health cost includes employer HSA/FSA contributions, HRA reimbursements, broker fees sometimes billed outside premium, COBRA administration after qualifying events, and the payroll tax on any after-tax employee contributions you failed to run through Section 125 pre-tax. Many small groups leak $2,000 to $5,000 a year in after-tax handling that should have been pre-tax and auditable.
Ignoring turnover timing. If you pro-rate new-hire eligibility wrong — say, first of the month following 30 days — you can have a one-month coverage gap that saves premium but costs a high-performing new hire's goodwill. Budget waiting periods correctly so the premium hit for new hires lands where you model it.
Dropping coverage without modeling the replacement. Employers who drop group coverage assuming employees will simply buy their own sometimes discover that only a few qualify for subsidies, the individual market network excludes their preferred hospital, or the payroll complexity of running ICHRAs erases the premium savings in advisor fees. Model before you drop, ideally with individual-market quotes for your actual census by age and zip.
How to Track Health Insurance Costs So Renewal Doesn't Surprise You
Renewal feels painful in part because many small businesses track health premiums as a single "insurance" expense. A cleaner structure makes decisions — and audits — easier.
Split premiums into separate ledger accounts: employer-paid health premium, employee withheld premium (a liability until you remit), HSA/HRA funding, and dental/vision/life if you bundle them. Post the carrier draft as a clearing transaction from the withheld-plus-employer amount so the bank feed reconciles to the carrier invoice, not just to payroll.
Reconcile monthly, not quarterly. Match the carrier invoice to the payroll withholding report and to the headcount on the invoice. Mid-month terminations, newborn additions under special enrollment, and COBRA electors are the classic sources of drift. A $300 monthly variance missed for six months is $1,800 of explanatory work at year-end — or an overpayment you never recover because you didn't dispute the invoice within the carrier's correction window.
Tag every health-related dollar with a class or project dimension if your chart of accounts supports it: department, location, or job. That tag is what lets you answer the question your broker will ask at renewal — "What is health cost per full-time equivalent by team?" — without rebuilding it from bank statements.
Finally, keep contribution strategy in the financial record, not just in the benefits file. When you change from percentage to fixed-dollar, or change HSA seed amounts, treat it as a policy change with an effective date. Your payroll system, your ledger, and your employee communications should agree on the same date.
Simplify Your Financial Management
Budgeting for an 11% increase is exactly the kind of cash-flow decision where clean books pay for themselves. When premiums, withholdings, HSA contributions, and reimbursements each have a clear home in your ledger, you can model renewal scenarios in an afternoon and explain the chosen trade-off to your team without rebuilding history from statements. Beancount.io gives you plain-text, version-controlled accounting that keeps that structure transparent and portable — no black boxes, no vendor lock-in — so your financial data works as hard as you do. Get started for free and keep your next renewal organized from the first draft to the last payment.