Group Health Insurance Rates in 2026: What Small Businesses Actually Pay

Every small business owner who asks us about group health insurance rates wants one number, and every honest broker has to give two answers: the national average, which is real and worth knowing, and your number, which depends on who works for you and where. This article gives you the first answer with sources, then shows you exactly what separates it from the second.

The 2025 national benchmark

The most reliable public figure comes from the KFF Employer Health Benefits Survey, which polls more than two thousand employers every year. The 2025 edition, released in October 2025, is the current benchmark until the 2026 survey arrives this fall.

Two things stand out. The employer share of single coverage is far above the 50% minimum most carriers require, because that is what it takes to keep employees enrolled. And premiums have outrun both inflation and paychecks: family premiums rose 26% over five years while wages rose 28.6% and general inflation 23.5%, and the 2025 increase alone ran more than double the inflation rate.

Small business versus large employer

The surprise in the data is that small firms do not pay dramatically higher premiums. In 2025 the average family premium was $26,054 at firms with fewer than 200 workers and $27,280 at larger ones. The gap shows up in three other places:

• Who pays for family coverage. Workers at small firms covered 36% of the family premium on average, versus 23% at large firms. Many small employers fund the employee and let the employee fund the dependents.
• Deductibles. The average single deductible was $2,631 at small firms against $1,670 at large firms. More than half of small-firm workers face a deductible of $2,000 or more, and more than a third face $3,000 or more.
• Plan funding. Small firms lean on level-funded arrangements to hold rates down. In 2025, 37% of covered workers at firms with 10 to 199 employees were in a level-funded plan.

So the honest comparison is not "small businesses pay more." It is "small businesses buy a leaner plan and ask employees to carry more of the family cost," which is a design choice you control.

Where 2026 rates are heading

Three large benefits consultancies survey employers about the year ahead, and for 2026 they agree on the direction and disagree only on the size. Mercer projects total health benefit cost per employee rising 6.5% in 2026 even after the plan changes employers intend to make, the largest increase since 2010, and close to 9% if employers changed nothing. Aon projects 9.5% before employer action, and WTW projects 9.1%. Mercer puts the 2026 cost above $18,500 per employee. For a small group renewal that typically means a mid to high single-digit increase on a healthy group and something steeper on a group with claims, which is why the funding decision below matters more this year than it has in a while.

Six things that move your rate

1. The ages on the census. Small-group premiums are age-rated in most states, and the ACA allows the oldest adult to be charged up to three times the youngest. A team that averages 32 and a team that averages 52 get very different quotes for the same plan.
2. Where the business is. Carriers price by rating area, and the same plan design can vary by a third between a rural county and a major metro. Hospital pricing, competition among carriers, and state rules all sit inside that number. That is why we keep a cost guide for each state, linked below.
3. The plan design. Deductible, out-of-pocket maximum, copays, and metal tier drive the premium more than anything except age. Moving a group from a $1,500 deductible to a $3,500 deductible with an HSA is the single most common way to hold a renewal flat.
4. The network. A narrow HMO is cheaper than a broad PPO with the same benefits. Whether that saving is worth it depends on where your employees actually get care.
5. The funding model. A fully insured plan buys price certainty from the carrier. A level-funded plan keeps part of that margin for a healthy group. An ICHRA replaces the group plan entirely with a fixed reimbursement. The next section walks through each.
6. Contribution and participation. Carriers require a minimum share of eligible employees to enroll, and the more the employer contributes, the more enroll. A richer contribution can lower the per-employee rate by improving the risk mix and unlocking carriers that require higher participation.

Fully insured, level-funded, or ICHRA: the rate is not the whole cost

Fully insured is the classic group plan. The carrier sets a monthly rate per employee tier, takes the claims risk, and keeps whatever is left. It is the simplest to run and the right answer for a group with high or unpredictable claims, because the rate is the rate.

Level-funded charges a fixed monthly amount that bundles administration, stop-loss insurance, and a claims fund. If the group's claims come in under the fund at the end of the year, a portion of the surplus is returned to the employer. If claims run high, stop-loss coverage caps the exposure. The catch is medical underwriting: a healthy group can beat the fully insured rate, and a group with serious conditions may not qualify or may be quoted higher. Our level-funded guide covers who it rewards.

ICHRA, the Individual Coverage Health Reimbursement Arrangement, drops the group plan altogether. The employer sets a monthly tax-free allowance, employees buy their own individual plans, and the business reimburses them. The "rate" becomes whatever budget the owner sets, which is why adoption keeps climbing: the HRA Council counted roughly 450,000 employees and dependents offered an ICHRA or QSEHRA for 2025, with small-employer adoption up about 20% in a year, and 83% of the businesses offering one had never offered coverage before. It fits best where individual-market premiums in your state are reasonable relative to group rates. The ICHRA guide explains the classes and the affordability rules.

The two tax levers that change the net rate

The sticker rate and the after-tax cost are different numbers, and for a small business the difference is large.

• Deductibility and payroll tax. Employer premium contributions are an ordinary business expense, and employee contributions run through a Section 125 plan are excluded from income and from FICA for both sides. A $700 monthly contribution can cost the business meaningfully less than $700 once the deduction and the avoided payroll tax are counted.
• The Small Business Health Care Tax Credit. Businesses with fewer than 25 full-time-equivalent employees and average wages at or below $68,200 for 2026 ($66,600 for 2025) can claim a credit worth up to 50% of employer-paid premiums (35% for tax-exempt employers). The plan has to be bought through the SHOP Marketplace, the employer has to pay at least 50% of the employee-only premium, and the credit lasts two consecutive years. It phases down as headcount and wages rise, so it favors the smallest, lowest-wage groups. Our tax benefits guide works through the rest.

How to read a group quote

A small-group quote arrives as a monthly rate for each coverage tier: employee only, employee plus spouse, employee plus children, and family. In most states each tier is built from the ages on your census, so two businesses with identical plans and different rosters get different sheets. Three things to check before you compare carriers:

• Compare the same plan design. A $2,000-deductible PPO from one carrier and a $4,000-deductible HMO from another are not a rate comparison. Line up deductible, out-of-pocket maximum, and network first.
• Read the contribution line. The quote assumes an employer contribution. Change it and both participation and the rate can change.
• Ask what the renewal history looks like. A low first-year rate from a carrier that renews at 20% is not a low rate.

When we quote a business we pull every carrier writing small group in your rating area, price level-funded alongside fully insured, and run the ICHRA budget for the same census so the three numbers sit on one page. Start on our business page and we will build it from your census.

Rates by state

National averages tell you the shape of the market. Your rate is set by your state's rating areas, carriers, and rules. We keep a cost guide for each state we are licensed in:

Alabama · Arkansas · Colorado · Delaware · Florida · Georgia · Illinois · Indiana · Iowa · Kansas · Kentucky · Louisiana · Maryland · Michigan · Mississippi · Missouri · Montana · Nebraska · Nevada · North Carolina · Ohio · Oklahoma · South Carolina · South Dakota · Tennessee · Texas · Utah · Virginia · West Virginia · Wisconsin · Wyoming

Questions business owners ask about group rates