By Andrew Miller
Health insurers want to charge small businesses 14 percent more next year.
That’s the median increase proposed in rate filings submitted to state regulators this month. Most carriers asked for somewhere between 10 and 20 percent.
The stated reasons are the ones you’d expect. Insurers put the combined effect of rising prices and rising utilization at a median of 10.8 percent.
Hospitalizations and physician care cost more, and patients are using more of both.
Drug spending is the other pressure. The widespread use of GLP-1s for weight loss and diabetes is straining insurer budgets. Emerging specialty drugs without generic alternatives can account for more than half of a carrier’s total drug spend.
That accounts for most of the increase. But there’s another factor at play, and it has nothing to do with medicine.
More small businesses are leaving the fully insured market.
In 2013, about 17 million people were covered through fully insured small group plans. By 2024 that figure was closer to 10 million.
Owners who keep their coverage are switching to level-funded arrangements. It’s a form of self-insurance where the employer pays a fixed monthly amount. If claims come in low, they receive some money back.
These arrangements sit outside state insurance regulations and the Affordable Care Act’s small-group rating and benefit requirements. That lets employers lower up-front premiums, avoid some premium taxes, and choose what they offer.
It also means they’re medically underwritten. The carrier looks at the health of your workforce before deciding whether to offer you a plan and what to charge for it.
So healthy workforces qualify and save money. Everyone else stays in the regulated pool. Carriers price that pool to whoever remains in it.
But what remains is sicker and costlier per person than it used to be. Insurers said so in their own filings.
Mass General Brigham Health Plan told Massachusetts regulators that level-funded products grew from 2 percent of the market in 2021 to over 11 percent in 2025. This pulled favorable risk out and worsened affordability for everyone left behind.
The 14 percent proposed increase applies to plans sold to employers with roughly 50 or fewer full-time equivalent employees, across 295 carriers in all 50 states and Washington, D.C. If you offer coverage and you’re under that line, this is the increase headed for your renewal quote.
Level-funded plans are not guaranteed renewable. One expensive claims year can leave an employer facing a renewal it can’t absorb, or no renewal offer at all.
That’s the risk for businesses healthy enough to be offered one. The businesses that aren’t don’t get the choice. They stay in the fully insured pool, and the pool costs more every time a healthier company walks out of it.
P.S. A 14 percent increase is a cost you can plan for. Signet can help you get the funding in place. Let’s talk.