If your group health renewal landed this month with a number that made you wince, you have plenty of company. An analysis of preliminary rate filings from 295 small group insurers across all 50 states and DC found a median proposed premium increase of 14% for 2027, and most of those insurers (59%) are raising rates somewhere between 10% and 20%. A separate survey of small and mid-sized employers conducted in late August found that 54% are facing double-digit increases, and more than one in five are looking at 15% or more.
The most important thing to know is that a renewal is an opening offer, not a final bill. Most employers receive it 30 to 60 days before the effective date, and that window is enough time to understand what is driving the number, test alternatives, and make a decision on purpose rather than by default. Here is how to use it.
Why Rates Are Climbing This Year
Insurers point to a familiar set of pressures: higher prices for hospital care, physician services, and prescription drugs, plus people using more care. Filings specifically call out new high-cost specialty drugs, growing use of GLP-1 medications, and increased behavioral health utilization. The underlying medical cost trend in the filings KFF reviewed in detail came in at a median of 10.8%.
There is also a structural issue in the small group market itself. Enrollment has been declining as some businesses move to self-insured arrangements like level-funding and others stop offering coverage altogether. Some insurers note that the groups leaving tend to be healthier, which leaves a costlier pool behind and pushes rates up for everyone who stays in a traditional fully-insured plan.
California employers can review the carrier rate filings submitted to the Department of Managed Health Care, which is a useful way to see whether your carrier’s increase is in line with what it filed for the market as a whole.
Step 1: Break the Renewal Into Its Pieces
A single percentage hides several different things. Part of your increase is the carrier’s base rate change for your region, which applies to every group and which you cannot negotiate away. Part of it may come from changes in your census: in most small group plans, premiums are based on each employee’s age, so an older workforce, new hires, or added dependents can move the number on their own. And for larger small groups or level-funded plans, your own claims experience may play a role.
Ask your broker to separate these components. Useful questions include how much of the increase is market-wide versus specific to your group, whether the census the carrier used is current, and whether the rate is final or still subject to change. If your increase is well above the carrier’s filed average and your census has not changed much, that is a signal worth investigating.
Step 2: Model Plan Design Changes Before You Shop
Before switching carriers, see what you can accomplish with the carrier you already have. Adjusting deductibles, copays, or coinsurance is the most common lever, but network design often matters more. Moving from a broad PPO to an HMO or EPO, or adding a narrower network option, can lower premiums meaningfully if your employees’ doctors are included.
Offering two plans side by side is another option. Pairing your current plan with a high-deductible health plan that qualifies for a Health Savings Account lets cost-conscious employees choose lower premiums. For 2027, the IRS has set HSA contribution limits at $4,500 for self-only coverage and $9,000 for family coverage, with a minimum HDHP deductible of $1,750 and $3,500 respectively. An employer HSA contribution can offset much of the higher deductible while still costing less than the premium difference.
Finally, look at your contribution strategy. Many small employers cover a fixed percentage of employee-only premiums and a smaller share for dependents. Shifting from a percentage to a flat-dollar contribution, or adjusting the dependent share, can control your costs without changing the plan itself. Model at least three scenarios so you can compare employer cost and employee cost for each.
Step 3: Know When Shopping Other Carriers Makes Sense
Marketing your plan to other carriers makes the most sense when your increase is well above market, when your carrier’s network no longer fits where your employees live and work, or when your workforce has changed significantly. It is less likely to pay off if your increase is in line with the market and your employees are happy with their doctors.
When you do compare quotes, look beyond premium. A lower-cost plan that forces employees to change doctors, or that comes with a weaker prescription formulary, can create frustration that costs you more in retention than it saves in premium.
Step 4: Decide Whether Level-Funding Is Worth a Look
Level-funding is a form of self-insurance built for smaller employers. You pay a fixed monthly amount that covers expected claims, administration, and stop-loss insurance that protects you against large claims. If claims come in lower than expected, some plans return a portion of the surplus at year-end.
It can work well for groups that are relatively young and healthy, typically with at least 10 to 15 enrolled employees, and with the financial stability to handle a less predictable renewal. The tradeoffs are real, though. Level-funded plans usually require health questionnaires, a difficult claims year can lead to a sharp increase at renewal, and stop-loss contract terms deserve a careful read. It is a strategy to evaluate thoughtfully, not a guaranteed discount.
Don’t Let Employees Be Surprised
Whatever you decide, communicate it clearly at open enrollment. Employees generally understand that health care costs are rising. What damages trust is discovering a higher deductible or a smaller network only when they visit the doctor. A short explanation of what changed, why, and how the company is still investing in their coverage goes a long way.
A Simple Timeline to Follow
Ideally, request your census and any available claims data about 90 days before your renewal date. When the renewal arrives, have your broker break down the increase, then model plan design and contribution alternatives. If the numbers justify it, request competing quotes and a level-funded option. Aim to make a decision with enough time left to prepare clear employee communication before open enrollment begins.
If you’d like a second set of eyes on your 2027 renewal, Maxwell Agency is happy to walk through the numbers with you.
Sources
- KFF – How Much and Why Premiums Are Going Up for Small Businesses in 2027
- HR Dive – Insurers want to hike small businesses’ premiums by 14% next year
- eHealth – Survey: 54% of Small- to Mid-Sized Businesses Report Double-Digit Health Plan Premium Increases for 2027
- SHRM – IRS Unveils 2027 HSA, HDHP Limits
- California DMHC – Individual and Small Group Product Filings
This post is general information only and is not legal, tax, or insurance advice. It is not a substitute for reviewing your actual plan documents or speaking with a licensed insurance agent or advisor about your specific situation.