Small business owners work hard to take care of their teams, and offering health insurance is a big part of that commitment.

But here’s something important to keep in mind as you plan ahead: health insurance premiums for small group plans are projected to rise by a median of 11% in 2026. That’s a significant increase, and it could have a real impact on your budget and benefits strategy.

This insight comes from a recent report by KFF, a nonprofit that tracks health policy trends. They reviewed filings from 318 insurance companies across all 50 states and D.C., and the message is clear: costs are climbing, and small businesses may feel the squeeze. Let’s break down what’s driving these changes, why it matters, and what you can do to stay ahead.

What Are Small Group Health Plans?

These are health insurance plans designed for businesses with 50 or fewer employees. You can buy them through the Small Business Health Options Program (SHOP), through special programs, or directly from insurance providers.

They’re a popular option for small employers who want to offer coverage but don’t have the size or resources of a large corporation. But lately, fewer small businesses are choosing these plans – and that’s part of the problem.

Why Are Premiums Going Up?

KFF’s research uncovered several key reasons behind the proposed increases:

1. Healthcare Costs Are Rising

Doctors, hospitals, and treatments are getting more expensive. Insurers expect healthcare costs to rise by about 9% in 2026 alone.

2. Inflation & Labor Shortages

General inflation is affecting everything, including healthcare. Plus, there’s a shortage of healthcare workers, which means hospitals and clinics are paying more to attract and retain staff.

3. Industry Consolidation

Big healthcare companies are merging, which reduces competition. Less competition often leads to higher prices, and insurers are passing those costs on to employers.

4. Tariffs on Medical Supplies

Some insurers are worried that tariffs could drive up the cost of medications and medical equipment, adding more pressure to premiums.

5. High-Cost Medications

Specialty drugs, especially GLP-1 medications (used for diabetes and weight loss), are expensive and widely used. Insurers say this is a major factor in rising costs.

6. Market Instability

Fewer small businesses are buying group plans, and those that do often have employees with higher healthcare needs. This makes the small group market less stable and more expensive.

What Does This Mean for Your Small Business?

If you’re offering health insurance, or thinking about it, this could affect your bottom line. But don’t worry, you’re not powerless. Here are a few things you can do:

• Stay informed: Understanding what’s driving costs helps you make smarter decisions.
• Review your current plan: Are you getting the best value for your team? It might be time to shop around.
• Explore alternatives: Depending on your business size and structure, individual plans or self-insured models might be worth considering.
• Talk to a benefits advisor: They can help you navigate the changes and find a plan that fits your budget and your team’s needs.

Your Business, Your Benefits – Let’s Explore Options

Health insurance is more than just a budget line, it’s a key part of how small businesses attract and retain great employees. Rising premiums can be challenging, especially when you're already managing payroll, operations, and growth. But you don’t have to navigate it alone. Whether you're reviewing your current plan or exploring new options, we're here to help you make informed, strategic decisions.

One option worth considering? Partnering with a PEO. It can give your business access to more competitive health plans, plus support with HR, payroll, and compliance, all in one place. For many small businesses, it’s a cost-effective way to offer great benefits without stretching internal resources.

Our Small Business Essentials Resource Hub also offers practical solutions and resources to help you reduce costs, strengthen your team, and stay competitive. Contact us today to find the right path for your business!