If your health plan renewal notice already landed, you may have noticed the number is bigger than usual. That is not your broker being alarmist. Employer health care costs are on track for their steepest increase in over 15 years, and open enrollment season is exactly the wrong time to be caught flat footed by it.
Why Costs Are Jumping Faster Than Usual This Year
A 2026 survey from consulting firm Mercer found employers expect health plan costs to rise around 9 percent this year, the sharpest increase in more than a decade and a half. A few forces are converging at once: rising medical and specialty drug costs, continued provider consolidation driving up negotiated rates, and a ripple effect from the individual insurance market, where the expiration of enhanced ACA subsidies is pushing some people who previously bought Marketplace coverage back toward employer sponsored plans, adding pressure to group plan enrollment and claims.
The Small Group Penalty You’re Already Paying
Here’s the part that hits small and mid-size employers hardest. Insurance carriers price small group plans differently than large group plans. With a small workforce, one employee with a high cost medical claim can swing your entire group’s renewal by a significant percentage the following year. Carriers know this, so small groups get priced for that volatility whether or not it ever happens. A business with 15 or 20 employees is often quoted premiums 20 to 30 percent higher than a company offering functionally identical coverage to a workforce in the thousands, simply because of how the risk pool is sized.
79 percent of small business owners say
they worry about the cost of health care coverage.
How a PEO’s Buying Power Changes the Math
This is the exact problem a PEO partnership is built to solve. Instead of your business negotiating alone as a small group, a PEO groups your employees together with employees from many other client businesses into one large, combined risk pool. Insurers underwrite that combined group the way they would underwrite a large corporation, which means a single high cost claim at your business does not single handedly drive up your renewal the way it would if you were negotiating alone.
The practical result is access to plan designs, carrier networks, and pricing that are typically reserved for companies far larger than yours, along with more predictable renewals year over year since the pool absorbs volatility that a standalone small group cannot.
| Standalone Small Group | PEO Large Group | |
|---|---|---|
| Risk pool size | Your company only | Thousands of employees across many businesses |
| Impact of one high cost claim | Can swing your entire renewal | Absorbed across the larger pool |
| Carrier and network options | Often limited, sometimes only one quote returned | Multiple carriers and plan tiers typically available |
| Year over year predictability | Volatile, tied to your own claims history | More stable, smoothed across the pool |
What to Do Before Your Renewal Locks In
A few steps make a real difference heading into this year’s open enrollment:
- Get your current plan’s performance data. Ask your broker or carrier for your group’s claims history and loss ratio. You cannot evaluate whether a new option is actually better without knowing your baseline.
- Shop more than one structure, not just one carrier. Compare your current small group renewal against a PEO master plan quote and, if relevant, a level funded option. The dollar difference is often larger than owners expect.
- Communicate with employees early. If costs are rising regardless of what you choose, employees appreciate hearing that directly from leadership before open enrollment opens, not finding out when they log in to select a plan.
- Model the cost of doing nothing. Staying on your current small group plan is itself a decision. Run the numbers on what a 9 percent or higher increase actually costs your business before assuming a change is riskier than standing still.
A Quick Gut Check
- Do you know your group’s claims history and loss ratio for the past renewal cycle?
- Have you compared your current plan against a large group or master plan alternative in the past two years?
- If costs rise 9 percent or more again, does your current budget absorb that without cutting elsewhere?
- Have employees been told anything yet about what to expect this open enrollment?
If you answered no to more than one of these, it is worth getting a second set of numbers before your renewal date locks you in.
Frequently Asked Questions
Is a PEO master health plan always cheaper than what we have now?
Not automatically. Savings depend on your current plan, group size, and workforce demographics. Businesses currently on individual market coverage or a small group plan with a rough claims history tend to see the largest difference. The only way to know is to compare an actual quote against your current renewal.
Why did health costs jump so much this specific year?
A combination of rising medical and specialty drug trend, provider rate increases, and a shift of some individual market enrollees back toward employer coverage as enhanced ACA subsidies expired, adding pressure across group plans broadly.
Can we switch to a PEO plan mid year?
Typically a PEO health plan enrollment aligns with your existing renewal date, though timing varies by carrier and plan year. The earlier you start the comparison process before your renewal, the more options stay available to you.
Does a PEO plan mean my employees lose their current doctors?
Not necessarily. Master plans typically offer multiple carrier and network options, and many include the same major national networks small group plans already use. Network overlap should be confirmed as part of any quote comparison.
How HRDelivered Helps
HRDelivered’s health plan groups your employees together with employees from other client businesses, giving your team access to large group rates, broader carrier and network choices, and more predictable renewals than a standalone small group plan typically allows. Our benefits team can run a side by side comparison against your current plan before your renewal date, so you know exactly what the numbers look like before you commit to anything.
If open enrollment is coming up and you have not compared your options yet, now is the time.
Request Your Free Benefits Comparison
Not ready for a full comparison yet? Talk to a benefits specialist about what a master health plan could mean for your specific group.