Why Your Group Health Insurance Premiums Keep Going Up — And What You Can Do About It

If your group health insurance renewal came with a rate increase this year, you're in very good company. According to an analysis by the Peterson-KFF Health System Tracker, the median proposed premium increase among small group insurers for the 2026 plan year is 11%. That follows a 6% increase the year before, and similar hikes stretching back nearly a decade.

For a business with 20 employees, an 11% increase on a $170,000 annual benefits spend is $18,700 more per year — money that could have gone to salaries, equipment, or growth. Understanding why this keeps happening is the first step toward doing something about it.

Why Premiums Keep Rising

Insurance carriers cite several factors in their rate filings year after year:

• Rising cost of care. Hospitalizations, physician services, and prescription drugs all cost more than they did the year before. Carriers estimate the underlying medical trend at around 9% annually.
• Prescription drug spending. Specialty drugs, including newer GLP-1 weight-loss medications, are driving a disproportionate share of cost increases in many plans.
• Provider consolidation. As hospitals and health systems merge, they gain pricing power. Fewer competitors means higher reimbursement rates — which flow directly into your premiums.
• The small group risk pool problem. Healthier small groups are increasingly moving off traditional ACA-compliant plans and into level-funded or self-funded arrangements. That leaves a sicker, more expensive population in the traditional pool — which drives rates higher for everyone who stays.

The Smallest Businesses Pay the Most

The cost burden isn't shared equally. Research found that for companies with just 2 to 5 employees, premiums have increased 18% faster than inflation since 2022. Annual premiums for this group reached nearly $8,500 per employee in 2025 — the highest cost of any employer size segment.

The reason is structural. Carriers need large pools of people to spread risk. With a small group, a single employee with a serious diagnosis can dramatically affect the group's cost profile. Carriers know this, and they price accordingly — charging small businesses a premium for having fewer employees.

What Doesn't Work

Many business owners respond to rising premiums by shifting costs to employees — higher deductibles, higher employee contributions, narrower networks. This can reduce the employer's line-item cost, but it creates a different problem: employees feel the squeeze, recruitment suffers, and your benefits package stops being a competitive advantage.

Shopping for a different traditional carrier usually produces a one-time bump in savings at most. A year later, you're back on the same treadmill.

What Actually Works

Moving to level-funded or self-funded ERISA plans. Rather than paying a carrier to assume all the risk and keep all the profit when claims are low, these employers fund their own claims with stop-loss insurance as a backstop. For healthy groups, this can produce 20–30% savings versus traditional premiums — plus refunds in low-claims years. Employees access the same networks they've always used.

Using claims data to drive decisions. Traditional plans give employers almost no insight into what's driving costs. Level-funded and self-funded plans provide detailed monthly reporting. Employers who look at that data — identifying high-cost diagnoses, overused services, or gaps in preventive care — can make plan design changes that reduce future claims.

Investing in preventive care and wellness. The math is straightforward: a $300 wellness program that prevents a $30,000 hospitalization pays for itself many times over. Employers on self-funded or level-funded plans benefit directly from these investments, because their claims fund reflects the results.

Working with an independent consultant, not a captive broker. Brokers who work with a single carrier or narrow panel have limited options to offer. An independent consultant can shop the full market — traditional, level-funded, and self-funded — and give you an honest comparison of what each path would cost your specific group.

The Good News

Employers with healthy workforces have never had more options. The same strategies Fortune 500 companies have used for decades to control benefits costs are now accessible to businesses with as few as two employees. The critical difference is knowing those options exist — and working with someone who can run the numbers honestly.

If your last renewal came with a double-digit increase and your broker's only solution was to raise employee deductibles, it may be time to get a second opinion.