A KFF analysis of preliminary rate filings across all 50 states and Washington, D.C. found that insurers are requesting a median 14% premium increase on small group health plans for 2027. That is bigger than the 11% increase insurers requested heading into 2026, and it will show up somewhere in your benefits package: higher paycheck deductions, a steeper deductible, or a plan that looks different than the one you enrolled in last year. If you work at a small business, now is the time to understand what is coming before open enrollment arrives.

Employer-sponsored coverage reaches about 165 million working-age adults in the United States, and small businesses carry the most exposure when premium pressure builds. Only 51% of firms with fewer than 25 workers offered health insurance last year, compared with 97% of companies with at least 200 employees. If you are on the smaller end of that spectrum, the odds that your 2027 coverage changes shape are real enough to plan around now.

What the 2027 rate filings actually show

KFF reviewed preliminary rate filings from nearly 300 insurers selling small group coverage, which is the market that serves employers with fewer than 50 workers. Most insurers are requesting increases between 10% and 20%, but six want to raise rates above 30%. In the 82 filings KFF reviewed in detail, insurers pointed to two consistent cost drivers: rising medical care costs and prescription drug spending.

Blue Cross and Blue Shield of Massachusetts stated in its rate request that costs for medical care and medications for its members have escalated rapidly and that spending is now growing at the fastest rate in more than a decade. The insurer added that the surge in spending is putting a heavy burden on employer customers and members who are struggling to keep up with rising costs. GLP-1 drugs, originally developed to manage diabetes but now widely prescribed for weight loss, appear repeatedly in the filings as a significant driver of pharmacy spending.

Two New York-based plans, Oxford Health Insurance of New York and UnitedHealthcare Insurance Company of New York (both subsidiaries of UnitedHealthcare), also added 0.8% to their 2027 rate requests specifically because of the No Surprises Act, the federal consumer protection law passed in 2020 that limits surprise out-of-network billing. UnitedHealthcare executives have publicly attributed unexpectedly high spending in its commercial business to that same law.

What your employer is likely to do with a 14% quote

A small employer staring at a 14% renewal quote has a short list of responses, and each one lands on your paycheck or your coverage differently. The most common paths include absorbing the increase (rare in the current environment and unlikely for budget-constrained small firms), passing part of the cost to you through higher monthly deductions or a higher deductible, switching to a level-funded plan, or, least likely, dropping coverage altogether. Coverage rates at small firms have held roughly steady, so an outright drop is not the base case, but the other moves are all in play.

• Absorb the cost. Your premium contribution stays close to what it was. Uncommon when a renewal comes in at 14%.
• Shift part of the increase to you. Your monthly deduction rises, your deductible and co-pays climb, or both happen at once.
• Move to a level-funded plan. A growing option for small employers that operates differently from a standard fully-insured plan in ways that matter to you.
• Drop coverage entirely. Statistically unlikely given current small-business coverage trends, but worth knowing your options if it happens.

The shift toward level-funded arrangements is already well underway. KFF data shows the fully-insured small group market shrank from 17 million people in 2013 to 10 million in 2024, even as small-business employee coverage rates stayed roughly flat. That gap is largely accounted for by employers moving to self-funded or level-funded structures rather than cutting coverage.

Level-funded plans: what actually changes for you

If your HR team mentions a level-funded plan during open enrollment, read the details carefully. From your vantage point, the insurance card can look the same, the network can be similar, and your monthly deduction may even be lower. The difference is in the legal framework. Level-funded arrangements are generally not subject to the Affordable Care Act's (ACA) benefit requirements, and that gap creates two real consequences that fully-insured plans do not carry.

• The plan can price premiums or decline to cover an employer group based on the health profile of that group when it is being underwritten. The rating applies to the group, not to you individually, but a group with sicker members can be priced out or turned away.
• The mandatory benefits list is not the same as a fully-insured ACA-compliant plan. Mental health parity protections in practice, coverage for specific conditions, and other ACA-standard requirements may differ or be absent.

KFF researchers flagged a structural knock-on effect: as healthier small groups exit the fully-insured pool for level-funded plans, the remaining pool carries a higher average health risk, which pushes future premiums up further. As KFF researchers put it, continued growth in the popularity of alternative coverage options for small businesses like level-funded plans has the potential to further erode the fully-insured small group risk pool and could contribute to future premium increases for small businesses, particularly those with sicker employees who may not qualify for or are priced out of a level-funded arrangement. If you or a dependent manages an ongoing condition, this dynamic directly affects your options.

Questions to ask before you sign the renewal paperwork

When your employer sends the 2027 benefits summary, do not just check whether the monthly deduction went up. The plan structure matters as much as the headline number. Before you confirm your election, get clear answers on the following points.

• Is this a fully-insured plan or a level-funded plan? If HR is not certain, ask them to confirm in writing with the broker before open enrollment closes.
• What is the total annual out-of-pocket maximum? A lower premium paired with a higher deductible can end up costing significantly more if you actually use care during the year.
• Are your current doctors and prescriptions still in-network and on formulary? Formularies shift year to year, and GLP-1s in particular are under active review by many plans.
• If the plan is level-funded, what protections apply if you have a pre-existing condition? Get the answer from the specific plan document, not from the general sales summary.
• Are mental health and preventive services covered at the same level as last year? This is where level-funded designs most commonly diverge from ACA-compliant fully-insured plans.

Comparing offers from small employers: run the full benefits math

If you are currently weighing job offers from small employers, the health benefit component is going to carry more weight than it has in past years. A $5,000 higher base salary can be partially or fully offset by a plan with a $3,000 higher deductible and a narrower network. When you compare two offers, ask each employer for the full plan summary: the premium contribution split, the deductible, the out-of-pocket maximum, whether the plan is fully-insured or level-funded, and the drug formulary. Then run the actual numbers against the care you use.

This is also a reasonable moment to push on salary if the benefits side is getting weaker. If an employer is asking you to absorb a higher premium share or to accept a plan with fewer ACA protections, that is a reduction in your total compensation in real dollar terms. It is a legitimate anchor for a pay conversation. Bring the numbers to that conversation, not a general sense of frustration.

Your rights if your employer drops coverage or switches to a worse plan

An outright coverage drop is not the likely outcome, given that small-business coverage rates have held steady. But it is worth knowing the mechanics in case it happens to you in 2027.

• Losing employer-sponsored coverage is a qualifying life event under the ACA marketplace rules. You get a special enrollment window, typically 60 days, to purchase an individual plan on the exchange, and you may qualify for premium subsidies based on your household income.
• Medicaid eligibility may apply for lower-income workers depending on your state, particularly in states that expanded Medicaid under the ACA. Eligibility thresholds and coverage scope vary significantly by state.
• If a spouse has employer coverage available, that becomes a comparison worth running. Ask for their plan's summary of benefits and coverage and out-of-pocket maximum the same way you would for your own plan.

If you end up on a level-funded plan that raises your group's premium sharply or limits your coverage because of a health condition, that sits in a gray area of federal law. The ACA's full consumer protections do not automatically apply to level-funded arrangements, but state insurance departments retain authority over some aspects of these products, and those protections vary materially. Contact your state's insurance department if you believe your plan is treating your group unfairly based on health status. In states like California and New York, state-level rules add meaningful floors that federal law alone does not provide.

The broader trend: this is not a one-cycle story

The 2027 rate requests are not an isolated event. The cost drivers that insurers are citing in their filings, including hospital price inflation, rising prescription drug demand, and growing GLP-1 uptake, are structural pressures that are unlikely to reverse by the next renewal cycle. The direction the small-group market is moving is toward more cost-sharing for employees and more small employers exploring level-funded arrangements outside the ACA-compliant pool.

The practical implication for workers at small businesses is that your health benefit will require more active scrutiny at renewal than it did five years ago. That is not cause for panic, but it is a real change in how much attention this decision deserves. Rate filings are public documents. Plan summaries are legally required disclosures. The questions listed above apply whether your employer keeps the current plan, switches to a level-funded product, or asks you to cover more of the tab. Use them every open enrollment season, not just this one.