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.
— Small Business Trends
How a PEO’s Buying Power Changes the Math
This is the exact problem a PEO partnership is built to solve, and it works two different ways depending on what fits your business best. Through a Master Medical Plan, your employees are grouped 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.
Not every business is positioned for a Master Medical Plan right away, and that is exactly what Open Market Plans are built for. Rather than a fallback option, an Open Market Plan draws from a wide range of national and regional carriers with flexible plan designs, giving your business quality coverage tailored to your specific workforce and risk profile. If you partnered with a PEO like HRDelivered, our benefits team handling the comparison and negotiation work you would otherwise be doing alone. As your workforce stabilizes and you build a claims history, that same team can help you evaluate when the timing is right to move into a Master Medical Plan and capture additional savings.
Either path gets you out of negotiating alone as a standalone small group, which is where most of the cost pressure actually comes from. This is where a PEO partnership earns its keep. HRDelivered does that work on your behalf, comparing carriers, negotiating terms, and pushing for the lowest cost your business qualifies for, rather than leaving you to sort through renewal options on your own.
| Standalone Small Group | PEO Open Market Plan | PEO Master Medical Plan | |
|---|---|---|---|
| Risk pool size | Your company only | Your company, matched to the right carrier for your profile | Thousands of employees across many businesses |
| Impact of one high cost claim | Can swing your entire renewal | Reduced through carrier and plan matching | Absorbed across the larger pool |
| Carrier and network options | Often limited, sometimes only one quote returned | Wide range of national and regional carriers | Multiple carriers and plan tiers typically available |
| Year over year predictability | Volatile, tied to your own claims history | More stable than going it alone | Most 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.
- Compare both paths, not just one carrier quote. Have your current renewal compared against both a Master Medical Plan and an Open Market Plan. The right fit depends on your workforce and claims history, and the dollar difference either way 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 Master Medical or Open Market 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 Master Medical 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.
What if our business isn’t ready for a Master Medical Plan?
An Open Market Plan is a genuinely strong option on its own, not a placeholder until you qualify for something better. It gives you access to a wide range of national and regional carriers with plan designs matched to your specific business, along with a team handling the comparison work for you. Many businesses stay on an Open Market Plan long term simply because it’s the right fit for their workforce.
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 plans mid year?
Typically a plan change 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.
Will my employees lose their current doctors if we switch?
Not necessarily. Both Master Medical and Open Market 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 offers both Master Medical Plans and Open Market Plans, so your business gets the right coverage structure for where you are today rather than being pushed toward one option. Our benefits team can run a side by side comparison of both paths 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 which plan structure fits your specific group.