# Why did our health insurance renewal go up so much?

Source: https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-20
Updated: 2026-10-20

A larger renewal bill can reflect higher rates, age factors, benefit changes, enrollment changes or a different employer contribution. I separate those components before deciding whether to accept, adjust or switch coverage. Your pricing arrangement matters: an ACA small-group insurer cannot raise your group's rate because of its own health status or claims.

- **2027 group medical trend:** 9.0% (PwC)
- **2025 family premium growth:** 6% (KFF)
- **Start with:** Same census, benefits and contribution formula
- **Prescience pricing:** Fixed in each quote

## Use market forecasts as context

Before you decide whether your renewal is high, compare it with the market. These are the benchmarks I use:

**Market benchmarks for renewal increases**

| Measure | Figure | Source |
| --- | --- | --- |
| Average premium growth, 2025 | +5% single, +6% family | KFF Employer Health Benefits Survey |
| Family premium growth over 5 years | +26% (2020–2025) | KFF |
| Employer cost per employee, 2026 | +6.7% (projected) | Mercer |
| Employer cost per employee, 2027 | +8.2% after plan changes, +11% with no changes | Mercer, September 2026 |
| Group medical cost trend | 9.0% for 2026 (restated) and 2027 (projected) | PwC Health Research Institute |

These measures describe different things: survey premiums, employer benefit spending and medical cost trend. None creates a normal renewal range for every small group. PwC's 2027 report revised its earlier 2026 group estimate from 8.5% to 9.0%. Use the forecasts to frame questions, then request the rate and census calculation for your policy.

## The six usual causes

1. **Medical trend.** Higher provider prices, specialty drugs like GLP-1s, more behavioral health care and more aggressive billing push the carrier's base rate up. PwC projects 9.0% for group plans in 2027; Mercer attributes a full percentage point of 2027 cost growth to GLP-1 use alone.
2. **Age factors.** Where age rating applies, compare the current and renewal census under the actual curve. The federal default is flat at ages 21–24, then varies by age; it reaches 1.786 at 50 and 2.230 at 55. The group effect must be calculated, not assumed.
3. **Expiring discounts or contract terms.** If the provider used introductory pricing, ask when it ends and what replaces it. Do not infer a discount or its size just because a PEO renewal is higher.
4. **Market classification.** Group-size rules and counting periods can affect available products. Most states use a 50-employee small-group ceiling, while some use 100. Colorado changed to 50 for 2026 with transition provisions for qualifying existing groups.
5. **Underwriting and experience.** Large-group and level-funded arrangements may reflect group experience, broader assumptions and stop-loss terms. Ask which component changed; a health condition alone does not explain a particular rate increase.
6. **Product changes.** Compare plan identifiers, benefits, networks and formulary before and after renewal. A replacement product may differ from the one used in the original quote. Ask the PEO or insurer to explain its own pricing basis.

Two causes that look like rate increases but aren't: **enrollment changes** (an employee adds a spouse and two children, which can triple that person's premium) and **contribution changes** (if you pay a fixed percentage, your cost rises in step with premium). Separate them before you negotiate.

## Worked example: breaking a 16% renewal into its parts

**A 14-person ACA small group renewal**

Fictional sensitivity calculation, not a carrier filing or customer renewal. Start with $10,500 monthly. Assume a 9% underlying rate change, then a 2.4% age-factor effect, then a 4% coverage-tier effect. Hold other benefits constant and round displayed dollars only after calculation.

- Current monthly premium: $10,500
- Base rate trend, +9.0% ($10,500 × 1.090): $11,445
- Aging on the age curve, +2.4% ($11,445 × 1.024): $11,720
- Coverage tier changes, +4.0% on $11,719.68: $12,188.47
- Total increase: About $1,688.47 monthly (16.08%)
- Like-for-like increase (trend and aging only): +11.6%

The rate-and-aging component is 11.616%; with the assumed enrollment effect, the bill rises 16.081%. Those components compound. This arithmetic does not establish that either assumed increase is justified. In an ACA small-group policy, examine the filed rate and possible census errors rather than assuming the filed rate is individually negotiable.

**A PEO renewal after the first year**

Fictional stress case, not observed PEO pricing. Ten enrollees at an assumed $575 monthly premium in year one and $1,000 in year two. Enrollment and other fees stay constant solely for this illustration.

- Year one, 10 × $575 × 12: $69,000
- Year two, 10 × $1,000 × 12: $120,000
- Increase: +$51,000 a year (+74%)

The assumed increase is $51,000 annually, or 73.91%. The calculation cannot identify its cause. Ask for the actual rate basis, changed benefits, census and expiring terms before attributing any portion to claims or introductory pricing.

## How to read your renewal

Ask for information appropriate to the policy and your lawful plan role. Reports differ by arrangement and are not always available to a small employer. Request a written pricing explanation without asking managers to collect individual diagnoses.

**What to ask for, by type of plan**

| Plan type | Ask for |
| --- | --- |
| ACA small group | Base rate change for your plan and area; aging effect; any plan mapping or benefit changes; census changes. Check the carrier's filing at ratereview.healthcare.gov. |
| Level-funded | Appropriate aggregate experience, stop-loss and other payment changes, surplus conditions and termination terms |
| Large group | Claims experience for the last 24 months; trend assumption; credibility weight; pooling point for large claims; administrative fees and commissions. |
| PEO | Medical rate change separate from admin fees; how your rate relates to the pool; whether first-year pricing was introductory; termination notice terms. |

For experience-rated coverage, ask the authorized adviser how the projection treats claim timing, unusual claims, trend and credibility. The employer should not decide that someone's treatment is finished or challenge individual care. Aggregate reporting can still identify people in a tiny group, so request appropriate suppression and access controls. A national trend estimate is a benchmark, not proof that the insurer's different assumption is wrong.

> **Know your deadlines first:** Write down the actual cancellation, renewal and application deadlines in the contracts. Allow time for insurer approval, payroll and enrollment. Do not terminate the existing coverage until replacement coverage and its start date are confirmed.

## A renewal negotiation checklist

1. **90–120 days before renewal: gather the data** Export your current census (dates of birth, ZIP codes, coverage tiers), your plan's summary of benefits and coverage, and your current monthly invoice. For level-funded or large group, request the claims report now; it can take weeks.
2. **When the renewal arrives: break it down** Separate rates, aging, benefits, enrollment and employer contributions. Compare the same people and coverage tiers. Use national forecasts as context, not a permitted renewal ceiling.
3. **Ask for the justification in writing** Request the rate explanation and alternatives within the current network. Check whether a lower quoted premium changes deductibles, drugs or providers before treating it as the same coverage.
4. **Price two or three alternatives** At least one should be a different arrangement (small group vs. level-funded vs. PEO vs. something else), because they price on different inputs. Share competing quotes with your current carrier or broker.
5. **Model plan design changes honestly** Calculate the actual quoted saving from each design change alongside employee cost sharing. A change in the contribution formula reallocates premium cost rather than lowering the total premium.
6. **Check your broker's incentives** Ask how your broker is paid and whether the alternative quotes change their compensation. See [do I need a health insurance broker](https://www.getprescience.com/guides/do-i-need-a-health-insurance-broker).
7. **Decide 30–45 days out** Leave time for applications, payroll deduction changes and open enrollment. Tell employees early if their contributions or networks will change.

## Levers that lower a renewal, and what each one costs you

**Common renewal levers and their trade-offs**

| Lever | How it lowers cost | The trade-off |
| --- | --- | --- |
| Higher deductible or coinsurance | May lower the quoted premium; compare actual alternatives | Changes member exposure; KFF's deductible averages exclude workers without a general deductible |
| Narrower or regional network | Lower negotiated prices or fewer high-cost hospitals | Some employees may have to change doctors; check remote staff in other states |
| Change contribution formula | Fixes the employer contribution per enrollee, subject to legal requirements | Employees absorb more of future increases, which they notice |
| Offer a second, lower-cost plan | Cost-conscious employees can choose a cheaper option | More administration; can split a small pool |
| Change arrangement | A different pricing basis: ACA pooled rates, medical underwriting or a PEO pool | New carrier, network and paperwork; underwritten options can re-rate after a bad year |
| Drop dependent or spouse subsidies | Family tiers cost far more than single | Hurts the employees with families most; affects retention |

## Common renewal mistakes

- **Comparing the headline to last year's bill.** Enrollment changes aren't rate changes. Always compare like for like.
- **Starting too late.** Short timelines can limit quoting and enrollment choices. Use contractual deadlines to build the schedule.
- **Raising the deductible without telling people what it means.** An employee who learns about a $3,000 deductible at the pharmacy counter is a retention problem.
- **Ignoring remote employees.** A network that works in your headquarters city may be thin where your remote staff live.
- **Assuming identical rating rules mean identical prices.** Carriers can have different networks, permitted product factors and pooled costs. Compare actual offers.

## Accept, adjust or switch?

- **Accept** when the written renewal, benefits and employee access remain the best available fit after a fair comparison. A number close to a market forecast is not enough by itself.
- **Adjust** (same carrier, different plan or contribution) if the increase is driven by plan mapping, a richer plan than you need, or a fixed-percentage contribution formula.
- **Switch** when another approved offer provides better total value after fees, transition costs, employee exposure and contract obligations are counted.
- **Be careful switching away from ACA small group** if someone on the team has a serious condition. Underwritten options may price that in at the next renewal.

You don't have to wait for your renewal date to switch from every arrangement. Some contracts allow a mid-year move; see [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year). For the mechanics behind each number, see [how carriers price health insurance](https://www.getprescience.com/guides/how-carriers-price-health-insurance).

## Compare the next written quote

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Bring your renewal. We'll quote the same census and show one monthly cost for the plan year, set before the plan starts.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Make the comparison usable before the deadline

I would keep a decision sheet with the current offer, renewal and each alternative on the same enrollment basis. Add a column for one-time transition costs and another for unresolved questions. A missing formulary answer is not a zero cost. Assign an owner and due date to each missing item, especially ongoing authorizations, deductible credit requests and the handling of claims incurred before termination.

The timeline above is my planning recommendation, not a statutory notice schedule. Ask the administrator which notices and election deadlines actually apply. Before announcing a switch, confirm the effective date, employee eligibility and payroll deductions in writing. Then explain the changed network, prescription rules and covered cost sharing to employees. A lower employer invoice is not a complete decision if a family discovers after enrollment that its routine care is outside the network.

## Frequently asked questions

**What is a normal health insurance renewal increase?**

There is no universal normal range. PwC projects 9.0% group medical trend for 2027, while the Marsh survey reports expected employer cost growth of 8.2% after changes. Neither is a quote for your group.

**Why did my PEO raise our rates so much?**

Ask for the rate basis, benefit and census changes, service fees and any expiring terms. The PEO label alone does not prove why an increase occurred.

**Can we switch plans instead of accepting a renewal?**

Yes. Prescience plans can start mid-year, so you can switch at renewal or when your current contract allows.

**Does aging really raise our premium every year?**

It can where age rating applies, but some ages share a factor and some states prohibit or restrict age rating. Calculate the change for your actual census rather than assuming a fixed annual percentage.

**Can a carrier raise our small group rate because someone got sick?**

Not in ACA small group plans: rates can't use claims or health status. Level-funded, large group and many PEO plans can and do reflect claims at renewal.

**Can we negotiate a small group renewal?**

You can't negotiate the filed base rate, but you can change plan, network, contribution strategy or arrangement, and competing quotes often surface a lower plan with the same carrier.

**How early should we start looking at alternatives?**

About 90–120 days before renewal. Claims reports, quotes and applications take time, and PEO contracts usually require written notice to leave.

**Why did our renewal go up when nobody used the plan much?**

ACA-compliant small-group pricing uses the insurer's applicable pooled rates and permitted factors, not your group's health status or claims. Benefits and enrollment can also change the invoice.

## Sources

- [PwC, Medical cost trend 2027 (including restated 2026 trend)](https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2027.pdf)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [Mercer, Employers expect health benefit costs to jump in 2027 (September 2026)](https://www.mercer.com/en-us/about/newsroom/employers-expect-health-benefit-costs-to-jump-in-2027/)
- [HealthCare.gov, How insurance companies set health premiums](https://www.healthcare.gov/how-plans-set-your-premiums/)
- [CMS, State-specific age curve variations (federal default age curve)](https://www.cms.gov/files/document/statespecagecrv042517pdf)
- [HealthCare.gov, Rate review (proposed and final rate filings)](https://ratereview.healthcare.gov/)
- [Colorado DOI, 2026 small-employer change](https://content.govdelivery.com/accounts/CODORA/bulletins/3ebe767)
- [CMS, Market rating reforms](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)