Last updated: June 2026
Premiums went up 6 percent in 2025. Projections for 2026 are worse. Most of the increase is locked in already, which means the smartest move for small and mid-size employers is to model the numbers before renewal season, not after.
The 2026 Cost Picture
The KFF 2025 Employer Health Benefits Survey set the average family premium at $26,993 in 2025, a 6 percent jump. The single-coverage premium hit $9,325, up 5 percent. Workers contributed $6,850 toward family coverage on average, the highest worker share on record per KFF reporting on the 2025 figures. Wage growth and general inflation came in lower, at roughly 4 percent and 2.7 percent, so the gap between paycheck growth and premium growth widened again.
For 2026, organizations are projecting a 10 percent jump in health care costs, according to the International Foundation of Employee Benefit Plans. SHRM described the projected increase as a 15-year high in benefit cost growth. That comes after roughly a decade of moderate increases that averaged around 3 percent annually.
What Is Driving the Increase
Three pressure points show up in nearly every renewal conversation right now. Specialty pharmacy spend keeps climbing, fueled by oncology, autoimmune, and other high-cost therapies. GLP-1 medications, used for diabetes and weight management, sit on top of that. And catastrophic claims, often a handful of multi-million-dollar cases, can swing a single small employer renewal by double digits all on their own.
Hospital pricing also moved up, and labor costs inside provider systems are still adjusting after the pandemic-era wage resets. Insurers are baking those higher provider costs into 2026 renewals, particularly in the small-group market, where carriers have already filed double-digit rate requests across multiple states. Employers should expect the renewal letter to show those drivers in the rate justification narrative, even if the carrier does not break the numbers out line by line.
How Employers Are Responding
Nearly 6 in 10 companies plan to change their plans for 2026, and the most common move is shifting more cost to employees, according to SHRM coverage of recent Mercer data. That looks like higher deductibles, raised copays, lifted out-of-pocket maximums, and steeper premium contributions for dependent coverage. Roughly half of large employers said they expect to make those changes despite tight labor markets that normally push the other direction.
Plan design tactics are also back in fashion. Dependent eligibility audits, narrow networks, telemedicine expansion, centers of excellence for orthopedic and cardiac care, and stricter prior authorization for specialty drugs are showing up across renewal strategy meetings. None of these are silver bullets. Each one trims one or two percentage points off projected cost growth, and combined they can keep an increase in the high single digits instead of the low teens.
Small Employers Feel It Most
The deductible gap between small and large employers is wider than the premium gap. According to KFF, the average single deductible at firms with 10 to 199 employees is $2,631, compared to $1,670 at larger firms. Fifty-three percent of small-firm workers carry a deductible of $2,000 or more, against 28 percent at large firms. Employees at small businesses are absorbing more of the cost increase through deductibles even when the headline premium looks similar.
Small businesses also have less negotiating room at renewal. A 50-person employer cannot self-insure the way a 5,000-person employer can, and rate filings in the small-group market often carry baked-in increases of 10 to 15 percent. Carriers know small employers have fewer alternatives. That is part of why benefits administration outsourcing has grown, including PEO arrangements that pool risk and aggregate buying power across thousands of small clients. NAPEO data shows PEO clients save an average of $654 per FTE on health benefits alone, separate from administrative savings. Three practical steps deserve attention by mid-summer. First, request an early renewal preview from the carrier or broker so there is room to actually shop. Second, model two or three plan-design changes side by side. A small deductible bump combined with a copay change often outperforms a single big move on either lever. Third, plan the employee communication early, because a 10 percent premium increase delivered without context burns trust fast.
The carrier letter for 2026 is going to be ugly. The strategic question is what the employer chooses to do with it. Small businesses in Georgia and across the Southeast that work with OneSource PEO get a benefits team that brings carrier alternatives, renewal modeling, and employee communication tools to the same table, so a 10 percent rate increase becomes a problem with options instead of a problem with one outcome.
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