Insurers are proposing a median premium increase of about 14% for small group plans in 2027, driven by rising medical costs, specialty drug spending and a deteriorating risk pool, according to a Peterson-KFF Health System Tracker analysis.
The analysis, published Aug. 6, reviewed rate filings from 295 insurers across all 50 states and D.C.
Seven key findings:
- Most small group insurers (59%) are proposing rate increases between 10% and 20% for 2027 coverage.
- The median insurer estimate of underlying medical cost growth next year is 10.8%, reflecting rising prices for hospitalizations, physician care and prescription drugs, alongside increased utilization.
- Enrollment in the fully insured small group market has declined roughly 41% since 2013, from about 17 million people to about 10 million in 2024. Insurers attributed much of the drop to healthier groups migrating to level-funded arrangements. Insurers say the shift is worsening the fully insured risk pool, as groups with lower-cost members exit and drive per-enrollee spending higher for those remaining.
- High-cost specialty drugs were a frequently cited cost driver in insurers’ filings. Excellus BCBS noted that specialty medications are used by roughly 2% of its members but account for more than 50% of total drug spending.
- Several insurers reported rising GLP-1 costs even after discontinuing coverage for weight loss indications, as utilization for diabetes and other conditions continues to climb. UnitedHealthcare’s New York filing included a 2.4% rate increase specifically for medically necessary anti-obesity medications.
- Many insurers reported increased utilization of mental health and substance use services leading to higher premiums. For example, WellSense Health Plan said in its filing that behavioral health spending has grown more than 20% annually over the past two years.
- The No Surprises Act’s independent dispute resolution process was also cited as a contributor to rising costs, with UnitedHealthcare’s New York filings attributing a 0.8% rate increase to IDR-related expenses.
At the Becker's 5th Annual Fall Payer Issues Roundtable, taking place November 2–3 in Chicago, payer executives and healthcare leaders will come together to discuss value-based care, regulatory changes, cost management strategies and innovations shaping the future of payer-provider collaboration. Apply for complimentary registration now.
