With healthcare costs continuing to rise, experts are already announcing even higher costs of health insurance’ premiums for small businesses in California into next year.
Early projections suggest that small-group premiums may increase by an average of 10–11% in 2026, with some carriers filing even higher rates depending on region and plan type.
For small companies, this is a bigger challenge because they have to manage with tight budgets the rising costs without sacrificing their team’s wellness. That’s why understanding what’s driving these price increases (and what can be done to offset them) will be key to planning ahead.
What is Causing the Premiums to Increase?
Insurers cite a combination of ongoing and emerging cost pressures:
- Higher medical utilization: More employees are seeking care that was delayed during the pandemic, increasing claims volume.
- Rising provider costs: Hospitals and physician groups continue to face staffing shortages and wage inflation, both of which drive up contracted rates.
- Prescription drug prices: Specialty medications, in particular, continue to outpace general inflation. Super expensive drugs that are getting more popular (for example, those that are used to treat diabetes and obesity, like Ozempic) are examples of that, according to a Fast Company article.
- General inflation: Broader economic trends also impact administrative and operating costs for insurers. Together, these factors are contributing to double-digit premium increases across much of California’s small-group market.
What Employers Can Do Now
While employers can’t control the cost of healthcare, they can take proactive steps to manage how these increases affect their organization and employees.
1.Start the renewal process early. This is crucial. Begin reviewing your plan at least three to four months before renewal. Early preparation allows more time to compare carriers, adjust plan designs, and model cost scenarios.
2. Evaluate plan utilization. Review claims data (if available) to identify patterns. Are employees using urgent care instead of primary care? Are prescription costs concentrated among a few high-cost drugs? Understanding utilization helps target changes that actually matter.
3.Compare plan designs strategically. Moving to slightly higher deductibles or adjusting copays can reduce premiums, but it’s important to balance cost savings with employee satisfaction and retention goals.
4.Encourage preventive care. Many cost drivers stem from unmanaged chronic conditions. Promoting annual exams, screenings, and wellness programs can reduce long-term claims and improve overall employee well-being. Some wellness options, like Lifestyle Spending Accounts, can even generate tax benefits for the employer, resulting in overall savings for the company.
5.Communicate clearly with employees. Transparency helps build trust. Explaining why changes are made and how employees can make the most of their coverage can reduce frustration and improve engagement.
Planning Ahead for a Sustainable Benefits Strategy
Employers don’t need to make sweeping changes every renewal cycle. Instead, small, consistent adjustments can make a big difference over time. Reviewing benefits annually through both a financial and cultural lens helps ensure that plans continue to align with the organization’s goals and workforce needs.
As healthcare costs continue to rise, understanding trends and exploring all available options will be essential for maintaining affordable, high-value coverage that supports both your business and your employees.
Since 2013 SSA Insurance Services has been helping organizations of all sizes to promote and protect the health and wellness of their most important asset: their employees. Stephanie San Antonio and her team do this by working with employers to design, implement, and maintain a company culture that is in line with their mission and values, and building a comprehensive benefit package that attracts and retains their top talent. Call SSA at (760) 203-4299 for a complimentary benefits package review, to make sure your group health plan is in compliance, and for help with establishing a wellness program for your employees to keep them healthy, happy and engaged.
