A Renewal Notice Is Not a Final Answer
The Kaiser Family Foundation is now projecting an 11 percent median premium increase for small businesses with ACA-compliant health plans in 2026. That figure lands well above the 6.5 to 9 percent range that earlier estimates from PwC and other industry analysts had forecast, and it reflects a market where the underlying cost drivers, rising healthcare utilization, higher prescription drug spending, increasing labor costs across the provider network, and worsening risk pools in the small group market, are all moving in the same direction at once.
Among the 318 small group market insurers KFF analyzed, premium changes for 2026 range from a decrease of negative 5 percent to an increase of 32 percent. The majority of insurers, about 68 percent, are requesting increases in the 5 to 15 percent range. But roughly 10 percent are proposing increases of 20 percent or more. Only three insurers in the entire study requested a rate decrease.
For business owners in Seguin and across Guadalupe County, this is not an abstract number. It is the cost line that determines whether you can keep offering coverage to your employees, and on what terms.
Why Premiums Are Rising This Steeply
The short answer is that everything on the claims side costs more. A more detailed review of filings from 16 states shows that insurers cite rising healthcare costs as the primary driver. Prescription drug costs and utilization are a close second, driven in part by the growing use of GLP-1 medications and specialty biologics that can cost tens of thousands of dollars per patient per year. Labor expenses across hospitals and clinics continue to climb. And in some markets, declining enrollment in the small group risk pool is concentrating costs among fewer employers, which pushes per-member costs even higher.
The compounding effect is what makes this particularly difficult. A 7 percent increase one year followed by an 11 percent increase the next does not feel like two separate events. It feels like a cost trajectory that is pulling away from what a small business can absorb. Over the past five years, fully insured small group premiums have increased by an average of 6 to 7 percent annually. That means an employer paying $8,000 per employee in 2020 is now paying closer to $11,000 for the same coverage, and the 2026 renewal is about to push that higher still.
The Mistake Most Employers Make at Renewal
The most common response to a renewal increase is also the least productive one: treating the renewal notice as a final number and deciding whether to absorb the increase, pass it to employees, or drop coverage entirely. A growing share of small business owners are offering health coverage at the lowest rate on record, not because they want to, but because the math has stopped working at renewal time.
But those three options, absorb, shift, or drop, are not the only paths forward. They are the options that exist when an employer looks at only one carrier and one plan structure. The renewal notice from your current carrier is a starting point for a conversation, not the final word on what you will pay.
Alternatives That Are Working for Small Employers
Level-Funded Plans
Level-funded health plans combine the predictability of fully insured premiums with the cost-containment mechanics that large employers have used for decades. The employer pays a fixed monthly amount that covers expected claims, administrative fees, and stop-loss insurance that caps the downside risk. If actual claims come in under the expected amount, the employer receives a surplus refund. If claims exceed expectations, the stop-loss coverage absorbs the overage.
The adoption of level-funded arrangements among small and mid-size employers has grown from approximately 13 percent in 2020 to over 40 percent by 2023, and the trend has continued through 2025 and into 2026. For employers with 10 to 75 employees and a reasonably healthy workforce, level-funded plans can produce savings of 10 to 30 percent compared to a fully insured renewal, particularly for businesses that have been penalized by the broad risk pool of the small group market despite their own clean claims history.
Higher Deductible Plans Paired with an HSA
A high-deductible health plan paired with a health savings account is not a new idea, but it remains one of the most effective tools for controlling premium costs while preserving meaningful coverage. The employer contribution to the HSA offsets some of the employee’s out-of-pocket exposure, while the lower premium frees up budget on the employer side. For employees, the HSA funds roll over year to year and grow tax-free, creating a long-term benefit that a traditional copay plan does not offer.
Professional Employer Organizations
A PEO pools employees from multiple small businesses into a larger group for purposes of benefits purchasing, which can produce access to rates and plan options that a 15-person company could never get on its own. The trade-off is that the employer gives up some control over plan selection and HR administration, but for many small businesses, the savings and the access to better benefits make it a reasonable exchange.
Individual Coverage Health Reimbursement Arrangements
An ICHRA allows employers to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses. Instead of offering a group plan, the employer sets a monthly allowance and employees purchase their own coverage on the individual market. This shifts the shopping to the employee but gives the employer a fixed, predictable cost and eliminates the annual renewal cycle entirely.
What Seguin Business Owners Should Do Before Signing
The window between receiving a renewal notice and the effective date of the new policy term is the most important period in your benefits calendar. That is when the shopping happens, and shopping means more than calling one other carrier for a comparison quote.
A thorough benefits review should include a comparison of your current fully insured renewal against at least two or three alternative carriers, an analysis of whether a level-funded or self-funded arrangement makes sense given your group’s size and claims history, a review of plan design options including deductible levels, copay structures, and network configurations, and an assessment of whether an ICHRA or PEO model might produce better results for your specific situation.
This is the work an independent insurance agency does. At Donegan Insurance, we represent multiple carriers and have access to both fully insured and alternative funding arrangements. We do not have a financial incentive to keep you with any single carrier. Our job is to bring you real options and help you make a decision based on the full picture, not just the one number sitting on your desk.
The Cost of Not Shopping
The compounding math on fully insured renewals is unforgiving. An employer who accepts a 10 percent annual increase without shopping alternatives will see total health benefit costs increase by more than 60 percent over five years. That is not a projection. It is arithmetic. And for many small businesses, the cumulative weight of those renewals is the difference between being able to hire, being able to retain talent, and being able to stay competitive in a market where larger employers are offering richer benefits at a lower per-employee cost.
If your renewal is coming up and you have not looked at alternatives, now is the time. Contact Donegan Insurance for a benefits review. We will shop your group health renewal against multiple carriers and plan structures so the decision you make is based on real options, not a single number on a renewal notice.
Call 830-303-8300 or request a consultation online.
