Open Enrollment Is Coming. Brace Yourself.
If you run a startup or small business and sponsor health insurance for your employees, you already know open enrollment season is the most stressful part of the benefits process. This year it's worse than usual.
Employer-sponsored health insurance premiums rose between 8% and 10% in 2026, and 2027 looks even worse. Insurance costs are projected to increase another 11% next year, which is the steepest increase since 2003. From 2018 to 2027, health care costs will have risen 76%, roughly twice the rate of general inflation. In 2025, family coverage already averaged nearly $27,000 annually, with employees contributing $6,850 of that out of their paychecks.
For employees, all of this means higher paycheck deductions, higher co-pays, and higher deductibles, all at the same time.
I have a client I've been working with since 2021. They made a commitment from the start: every employee, many of them hourly and non-exempt workers, would have access to at least one health plan at no cost to them. Five years later, we're paying significantly more for a meaningfully worse plan. And we can't shop around for a better carrier because we negotiated a large group rate years ago, and walking away from it as a small group would mean starting over at the bottom of the market with zero leverage. That's the trap a lot of small employers find themselves in. You do the right thing early, and it feels like the system punishes you for it.
Why this is happening
A couple of reasons why this has hit a crisis point:
An aging workforce using more medical services.
The rapid adoption of weight loss drugs like Wegovy for weight management, which 36% of large employers say have already increased their plan costs.
Tariffs on medical imports driving up the cost of equipment and supplies.
On top of that, the medical safety net has fallen out the bottom. The enhanced ACA subsidies that helped millions of lower and middle income Americans afford marketplace coverage were allowed to expire at the end of 2025. Medicaid rolls have been cut, and as a result, 4.8 million Americans became uninsured in 2026. When more people are uninsured, hospitals absorb more uncompensated care and pass those costs on to the insured. Premiums go up for everyone to cover the gap. The people most affected are workers who earn too much to qualify for Medicaid but too little to comfortably pay full premiums, which are often the exact employees small businesses are trying to take care of.
For context: most of Europe solved this problem by taking the burden off individual employers entirely. In France, Germany, and the UK, healthcare is funded through taxes or mandatory payroll contributions and covers everyone. Employers contribute, but they're not the last line of defense between an employee and a medical bill they can't pay. In the US, you are.
It's a huge structural problem, and small employers are absorbing the most pain.
What startups and small employers can actually do
If you're a true small group (less than 50 people), your options are limited as you don't have the volume to negotiate with carriers. But there are a few paths worth knowing about.
Work with a broker. A good health insurance broker is genuinely useful. They know the market, they know the plans, and they can surface options you wouldn't find on your own. If you don't have one, get in touch.
Look seriously at a PEO. A Professional Employer Organization co-employs your workforce alongside you, which means your employees get pooled with thousands of workers across many companies. That gives the PEO real negotiating power with carriers, which usually translates to better plans at lower rates than a small employer could access on their own. A lot of small businesses have moved in this direction specifically for the health insurance benefit. There are a lot of PEOs out there, so make sure that you do your due diligence before committing.
Watch out for skinny plans. Some carriers will offer you a plan that looks affordable because it technically meets the minimum requirements under the ACA. What it doesn't tell you upfront is that the coverage is so thin that employees face enormous out-of-pocket costs the moment they actually need care. If a plan looks cheap, find out exactly what it covers before you sign on.
Be careful with level-funded plans. These are sometimes pitched as a middle ground between fully insured and self-insured plans. You pay a fixed monthly amount and the insurer covers costs up to a certain threshold, after which stop-loss insurance kicks in. The catch: if one employee has a serious medical event in a given year, your costs can spike in ways that are hard to absorb for a small business.
Be transparent with your employees. If you're reducing coverage or increasing employee contributions, say so directly and explain why. Your employees are navigating the same economy you are. Being open and honest builds more trust than pretending nothing changed.
The bottom line
There's no clean solution here for small employers. You're operating in a system that wasn't designed with you in mind, and the current policy environment is making it harder. What you can do is make intentional decisions, get good advice, and be transparent with your team about the tradeoffs you're navigating.
Happy to talk through what the right structure looks like for your company. Get in touch.
