2027 Health Insurance Premium Trends: What Small Business Decision-Makers Need to Know Now

Open your renewal letter this fall and there's a good chance the number staring back at you will be bigger than last year. A lot bigger. 

According to a new analysis from the Peterson-KFF Health System Tracker, insurers are proposing a median 14% premium increase for small group plans in 2027, based on filings from 295 insurers across all 50 states. That's up from the 11% median we covered last year, and it's the steepest proposed increase the small group market has seen in over a decade. 

If you're leading a business with under 50 employees, this lands differently than it does for a large corporation. There's no cushion of a massive risk pool. No benefits team to figure it out. And absorbing $20,000–$30,000 more per year in coverage costs isn't easy. 

So let's talk about what's actually driving these increases, and what you can do about it before your renewal hits. 

5 Trends Driving the 2027 Premium Increases 

These aren't arbitrary increases. Insurers file detailed justifications with state regulators every year, and the 2027 filings point to five trends that have been building for a while.

1. Healthcare costs keep outpacing inflation

The underlying medical cost trend, what care actually costs, is estimated at a median of 10.8% for 2027. That's not just price. It's volume too. More people are using more healthcare, and the cost per service keeps climbing. Hospitalizations, physician visits, and prescription drugs are all up. Those two forces, price and utilization, compound inside the same premium math.

2. GLP-1 medications are reshaping drug costs

GLP-1 drugs, best known as treatments for diabetes and weight loss, are showing up in nearly every insurer's 2027 filing. Some plans have dropped weight-loss coverage to cut costs. It's not working. Diabetes patients are using these medications in higher volumes, and the spend keeps rising regardless. Plans that still cover GLP-1s for obesity are seeing even steeper pressure. This is a trend that's not going away.

3. Behavioral healthutilizationis up significantly 

Mental health and substance use treatment spending has grown more than 20% annually over the past two years, according to insurer rate filings. Higher demand, rising provider rates, and the ripple effects of the No Surprises Act (which governs out-of-network billing) are all contributing. This is good news for employees who need care, but it's a real cost driver for plans.

4. The small group risk pool is shrinking

This is the trend most small business decision-makers don't hear about, and it's one of the most important. Fully insured small group enrollment dropped 41% between 2013 and 2024, from 17 million to about 10 million covered lives. Healthier employee groups have been quietly migrating to level-funded arrangements, which can underwrite based on health status. What's left in the traditional fully insured pool skews sicker and more expensive, and that raises costs for everyone who stays.

5. Market consolidation is reducing competition

Healthcare mergers have reduced competition in many markets. Fewer hospital systems and provider groups means less pricing leverage for insurers, and those higher contract rates get passed through to premiums. It's structural, it's been building for years, and it shows no signs of reversing. 

---

Why This Hits Small Businesses Harder 

A 14% increase looks different depending on who you are. A Fortune 500 company with 10,000 employees has actuaries, a benefits team, and enough covered lives to absorb a rough year. You probably have a spreadsheet and a broker you trust. 

Here's what that actually means in practice: 

• One bad claims year can move your rate. A cancer diagnosis, a complex pregnancy, or a serious injury in a 15-person company can dramatically impact what your carrier charges you at renewal. In a large group, that same event barely registers.
• Most small businesses have limited negotiating power on network rates. Large employers negotiate directly with hospital systems. Small businesses take the rates they're given.
• Benefits changes fall on you. There's no HR team to absorb this. It's usually the business leader, the office manager, or whoever got volunteered, on top of everything else they're doing.
• You're caught in the retention bind. You want to reduce costs, but health insurance is still one of the top reasons employees stay. Cutting coverage to save money can cost you more in turnover than it saves in premiums. 

---

What You Can Do Before Your Renewal Arrives 

Here's the most important thing to understand: the number in your renewal letter is a starting point, not a final answer. You have more options than most small business decision-makers realize, but only if you start the conversation early. 

• Start talking to your broker 90 days before renewal, not 30: The earlier you start, the more leverage you have. Ask: Is this plan still the right structure for where our business is now? What does our utilization data show? What alternatives are worth modeling? A broker who can't answer those questions may be worth re-evaluating before renewal.
• Understanding why your rate is going up: There's a big difference between being penalized for your own group's claims experience versus absorbing costs from the broader market risk pool. If it's the latter, that's crucial context when you're evaluating whether switching carriers or structures would actually help.
• Get familiar with the alternatives before you need them: Level-funded plans have grown from 2% to over 11% of small group arrangements in some markets since 2021. ICHRA (Individual Coverage HRA) lets you set a fixed monthly reimbursement and let employees choose their own plans, giving you budget predictability and employees real flexibility. These aren't right for every business, but knowing your options is the first step to making the right call.
• Consider adjusting plan design before cutting coverage: There's often more room here than people expect. Shifting deductibles, adding an HSA-compatible option, adjusting your contribution strategy, or narrowing a network can create meaningful savings without eliminating the benefit entirely. A 5–8% cost reduction that keeps your team happy beats a switch that shakes people up.
• Any big move is worth modeling first: Some small businesses drop group coverage and redirect premium dollars to compensation. It's a legitimate option in some cases, but it changes your talent story in ways that are hard to reverse, and the math is more complicated than it looks. It’s worth asking your broker to run an actual comparison before deciding anything.
• It may be worth exploring whether a PEO changes your math: This one often surprises people: PEOs pool you with other small businesses to negotiate benefits as one large group, which means lower rates, better plan options, and less administrative chaos on your end. If the small group market is where your costs are getting hit hardest, a PEO could be worth a closer look. 

---

Your Benefits, Your Call – Let’s Make Sure You’re Set Up Right 

Premium increases this size feel personal, even when they're driven by industry-wide forces outside your control. But 2027 doesn't have to mean paying 14% more for the exact same plan. 

The businesses that come out of this renewal season in the best shape won't be the ones who waited for the letter. They'll be the ones who started early, asked the right questions, and treated renewal as a strategic decision, not a bill to pay. 

If you want help thinking through your options, connect with a OneDigital Small Business Essentials advisor. You shouldn't have to figure out healthcare costs alone, and with the right partner, you won't have to. 

---

Frequently Asked Employer Questions 

1. Why are small business health insurance premiums going up so much in 2027? 

Several trends are converging at once: underlying healthcare costs are rising at a median of 10.8%, specialty drug spending (especially GLP-1 medications) is accelerating, behavioral health utilization has grown over 20% annually for two years, and the fully insured small group risk pool has shrunk by 41% since 2013 as healthier groups exit for alternative arrangements. The result is a proposed median increase of 14% nationally, the steepest in over a decade for the small group market. 

2. What can a small business decision-maker do to lower health insurance costs at renewal? 

Start by connecting with your broker at least 90 days before your renewal date, not two weeks before. Ask for your utilization data, request quotes on alternative plan structures (including level-funded and ICHRA options), and explore plan design changes like adjusted deductibles or HSA-compatible offerings before making any decisions about cutting or dropping coverage. Understanding what's specifically driving your rate increase is essential before choosing a path forward. 

3. Is a level-funded health plan a good option for small businesses in 2027? 

It depends on your workforce. Level-funded plans can offer real cost savings for groups with relatively healthy employees, and the potential for a rebate if claims come in lower than projected. But they come with tradeoffs: no guaranteed renewal, reduced ACA consumer protections, and exposure if claims spike unexpectedly. They've grown significantly in recent years and are worth modeling with your broker, but they're not the right fit for every group.