Rising Cost of Group Healthcare in 2026: Key Drivers
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Rising Group Healthcare Costs: What Employers Face in 2026

By Katie Herrera on Sep 09, 2025
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The nationwide trend of rising group healthcare costs shows no signs of slowing, and small businesses should brace for another year of steep premium increases in 2026. Experts warn that employers could see double-digit jumps — anywhere from 10% to 20% — as catastrophic claims, costly specialty drugs, including GLP-1, and lingering post-pandemic health issues continue to drive expenses higher.

For many organizations, these increases are pushing benefits budgets to the breaking point and forcing difficult choices about plan design, employee cost-sharing and whether to continue offering coverage at all.

 

Why Are Healthcare Costs Rising? 

Numerous factors, including inflation, higher prices for specialty drugs and increased demand for care, all contribute to the steady climb in medical insurance premium increases.

More advanced and expensive technology in diagnostics and treatment also drives small business group health insurance premium increases, as do the long-term effects of delayed care during the pandemic that are spiking more complex, costly claims as untreated conditions resurface. 

Other factors include a continuing shortage of healthcare workers, increasing disease prevalence, particularly among younger workers, and the higher treatment and medication needs of an aging workforce. 

how to prepare your small business for annual benefits renewal

GLP-1 Drugs and Rising Employer Health Insurance Costs

A major factor accelerating premium increases is the surge in prescriptions for GLP-1 drugs like Ozempic, Mounjaro, Wegovy and Zepbound. While developed for diabetes, much of today’s demand comes from employees seeking them for weight loss. CFO recently reported that more employers are expanding coverage for weight-loss use — and the costs are significant.

Employees on GLP-1 therapy can generate nearly double the medical and pharmacy expenses of non-users, often reaching tens of thousands of dollars per person each year. As these costs are spread across the entire group plan, premiums and cost-sharing rise for all employees, not just those taking the drugs.

This growing reliance on GLP-1s highlights why many employers are bracing for sharper cost increases in 2026 and beyond. Some organizations are considering prior authorization requirements, coverage limits or other controls to help keep spending in check, but each approach carries trade-offs in employee satisfaction and retention.

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The Impact on Small Businesses  

For small businesses, which face higher per-employee costs and, on their own, limited negotiating power with insurers, the rising cost of group healthcare is forcing tough decisions about plan design, cost-sharing and, in some cases, even whether to continue offering coverage at all. 

A small business medical insurance premium increase of even a few percentage points can have a significant impact on operating budgets. At the same time, traditional cost-containment strategies – like increasing deductibles, raising required employee contributions and narrowing provider networks – can jeopardize employee satisfaction and retention if taken too far.

Small Business Strategies to Manage Rising Group Healthcare Costs 

Understanding the forces behind premium increases helps business owners navigate the challenges of rising group healthcare costs. The following strategies are worth considering as your small business works to manage expenses while continuing to offer benefits that aid in retaining talented and productive workers: 

Shop the Market for Better Rates

Working with an experienced broker or your PEO can help uncover more affordable plan options. By shopping the market and exploring different carriers, employers may find plans that better fit their budget.

Considering structures like high-deductible health plans paired with Health Savings Accounts can also reduce premiums and spread costs more effectively. 

RELATED: Small Business Health Insurance Broker vs PEO >>

Implement Wellness Programs 

Investing in preventive health initiatives like fitness challenges, gym subsidies and mental health support can improve employee well-being, reduce future claims and demonstrate a commitment to workforce health. 

Adjust Employee Contributions Carefully

While increasing employee cost-sharing can help manage premium costs to your company, the decision to ask employees to pay more should be approached thoughtfully to avoid damaging morale or retention.

Transparent communication and gradual implementation are key. 

Offer Health Reimbursement Arrangements (HRAs)

HRAs, including Qualified Small Employer HRAs (QSEHRAs) and Individual Coverage HRAs (ICHRAs), allow employers to reimburse employees tax-free for individual insurance premiums and medical expenses. This approach offers flexibility, cost control and greater personalization compared to traditional group plans, making it an appealing alternative. 

Partnering with experts at a certified professional employer organization (CPEO) can help small businesses design benefits strategies that balance cost and employee satisfaction.  

As a CPEO with long-standing expertise in health benefits consulting, Axcet HR Solutions can leverage its buying power to give small businesses access to competitive pricing that otherwise would be out of reach. Axcet can also handle benefits administration, compliance and employee communication, relieving small business owners of those burdens and freeing them to focus on growth. 

RELATED: Avoid Making the Nine Most Common Employee Benefits Mistakes >>

Looking Ahead 

In today’s market, small businesses that take a proactive approach to benefits planning are better positioned to manage the rising cost of group healthcare. As a trusted certified PEO, Axcet provides the expertise, scale and tools that help smaller organizations ensure that quality employee healthcare remains a sustainable part of their business plan.

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