Small group insurers are proposing a median 14% increase in premiums for 2027, according to a recent analysis from KFF and the Peterson Center on Healthcare.
The report analyzed 295 small group insurers’ rate filings to state regulators across all 50 states and the District of Columbia. Insurers submit these filings each year to justify their rate increases for the next year. Small group plans are typically offered to small businesses with 50 or fewer employees.
It found that 59% of small group insurers are proposing rate increases of 10% to 20%, while about 15% are proposing increases of more than 20%, and 26% are proposing increases of less than 10%.
The analysis also examines the factors driving these premium increases, based on a review of 82 insurer filings from the 14 states and District of Columbia with unredacted filings. These states include Connecticut, Hawaii, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, New York, Oregon, Rhode Island, Vermont and Washington. Many cited rising healthcare costs as a major contributor. The median insurer expects healthcare costs to rise 10.8% in 2027, driven by higher prices and increased utilization.
“Costs for medical care and medications for our members have escalated rapidly and spending is now growing at the fastest rate in more than a decade. The surge in spending is putting a heavy burden on our employer customers and members who are struggling to keep up with rising costs,” said Blue Cross and Blue Shield of Massachusetts HMO Blue in its filing.
Employers also cited the increasing cost, prevalence and utilization of specialty drugs. Many of these drugs are new and don’t have generic or lower-cost alternatives. GLP-1 medications are a driver for premium increases, as well as rising spending on mental health and substance use disorder treatment.
Some small group insurers also cited the No Surprises Act as a driver of rising premiums. The law created protections against surprise out-of-network bills and established an independent dispute resolution process for payment disputes. However, providers have initiated most disputes and won the vast majority of cases at significantly inflated award levels.
In addition, many insurers say declining small group enrollment is increasing per-enrollee costs because healthier groups are leaving for lower-cost options, leaving the fully insured market with a sicker, more expensive pool.
“The overall enrollment decreasing may signify lower cost small groups finding more favorable rates elsewhere, resulting in a higher cost enrollment pool remaining,” said Moda Health Plan in Oregon.
Photo: PM Images, Getty Images
