Short answer for a company with 20 to 500 employees: budget roughly $10,600 to $10,900 per enrolled employee for single coverage and $30,000 to $31,000 for family coverage in 2027, of which you will pay most but not all. That range takes KFF’s 2025 small firm premiums, adds Mercer’s 6.7% for 2026, then adds Mercer’s 8.2% to 11% for 2027. Your own number can sit well outside it. Below is where each piece comes from and what moves it.
The per employee average everyone quotes describes somebody else
You have probably seen the headline that employer health costs will pass $19,000 per employee in 2027. Aon published that on August 20, 2026, and it is a real number. It is drawn from Aon’s Health Value Initiative database covering more than 1,100 US employers, 7.9 million employees and $135 billion of 2026 spending. Mercer’s comparable figure put average cost above $18,500 per employee for 2026, weighted to employers with 50 or more employees.
Both skew large. Large employers buy richer plans, cover more dependents and self fund more often. If you have 60 people, that per employee average is a directional signal and nothing more.
The numbers that actually describe you come from KFF’s 2025 Employer Health Benefits Survey, published October 22, 2025 from 1,862 employer interviews, because KFF reports firm size splits.
| Firms with 10 to 199 workers | Firms with 200 or more | |
|---|---|---|
| Annual premium, single coverage | $9,211 | $9,361 |
| Annual premium, family coverage | $26,054 | $27,280 |
| Worker share of family premium | 36%, or $8,889 | 23%, or $6,227 |
| Average single deductible | $2,631 | $1,670 |
Look at the first row before the last one. Smaller employers do not pay a materially higher premium. They buy a thinner plan and push far more of the cost onto staff. That is the actual small employer penalty, and it shows up in retention long before it shows up in the budget.
What the five 2027 projections say, and where they disagree
| Source | Published | 2027 projection |
|---|---|---|
| Mercer, from more than 1,800 employer responses | August 31, 2026 | 8.2% per employee after planned cost reduction measures, about 11% with no changes. Highest since 2003. |
| Aon | August 20, 2026 | 9.5% before employers act, pushing cost past $19,000 per employee. Fourth straight year near double digits. |
| Business Group on Health, 2027 Employer Healthcare Strategy Survey | August 25, 2026 | 9.2% median, offset to 8% with plan design changes. |
| WTW, Best Practices in Healthcare Survey | August 2026 | 11.1% before plan changes. 9.7% after, as reported by CFO Dive from a preview of the survey. |
| IFEBP, Health Care Costs Pulse Survey | August 13, 2026 | 10% median. Catastrophic claims named as the top driver. |
Five methodologies, one answer. Now the uncomfortable part. Business Group on Health reports that actual costs have come in above employer predictions three years running, and that each miss was bigger than the one before. Treat these projections as a floor.
The more useful detail is the gap inside each row. Most of these surveys report two numbers: what happens if you do nothing, and what happens after employers make changes. Mercer found 59% of employers plan cost cutting changes for 2027. That gap is the only part of the trend you control.
The drivers are unusually specific this year. Mercer attributes a full percentage point of 2027 growth to rising GLP-1 use. Two more factors each add as much as another point: greater use of AI enabled physician software producing more claims and higher level claims, and the cost of the No Surprises Act independent dispute resolution process, where the volume of disputes and the amounts awarded to providers have run past expectations.
A number carriers ask for is not a number you pay
This is the part that gets reported badly every single year, and it matters to your budget.
On September 4, 2026 the New York Department of Financial Services announced 2027 rates. Small group carriers had requested an average increase of 23.7%. DFS approved 8.0%, cutting about $1.25 billion from what insurers sought. In the individual market carriers requested 20.6% and received 6.0%, another $324 million. Roughly 860,000 New Yorkers are covered by those two markets.
So a headline saying carriers want 25% is describing a filing, not an invoice. New York reviews and approves small group rates before they take effect, and it is not alone. Before you panic at a trade press number, check whether your state has prior approval authority over small group rates and what the approved figure was. Then check what your own renewal letter actually says, which is a separate question covered in our renewal benchmark.
The full cost stack, not just the premium line
- Employer share of medical premium. The largest line by far. At firms with 10 to 199 workers, employers fund about 84% of single premium and about 64% of family premium on average.
- Ancillary lines. Dental, vision, group life, short and long term disability. Small next to medical, rarely marketed, often stale.
- Account funding. HSA or HRA contributions if you offer a high deductible plan. KFF found 33% of covered workers in an HDHP with an HRA get an employer contribution at least equal to the deductible.
- Administration and compliance. Form 5500, generally where you have 100 or more participants, ACA reporting, COBRA administration, the annual gag clause attestation to CMS, nondiscrimination testing.
- Penalty exposure. For applicable large employers, which means 50 or more full time equivalents.
That last line has real 2027 numbers. Under Rev. Proc. 2026-26 the ACA affordability threshold for 2027 is 10.22% of household income. For plan years beginning after December 31, 2026 the section 4980H(a) penalty for failing to offer coverage rises to $3,780 per full time employee per year after the first 30, and the 4980H(b) penalty for coverage that is unaffordable or inadequate rises to $5,670 per affected employee. Set your employee contribution one dollar wrong on the affordability test and you are exposed at $472.50 a month per person who goes to the exchange and gets a subsidy.
A worked example at 75 employees
Assume 60 enrolled: 40 single and 20 family, and assume today’s bill matches KFF’s 2025 small firm averages. Total premium runs about $889,500 a year. At small firm contribution rates the employer funds roughly $643,000 of that and employees absorb about $247,000 through payroll.
Now apply one renewal of 2027 trend. At Mercer’s 8.2%, your share grows by about $52,700. At the roughly 11% that Mercer projects for employers who change nothing, it grows by about $70,700. The difference between those two outcomes, close to $18,000, is what plan design work and a marketed renewal are worth on a group this size.
This is an illustration built from national averages. It is not a quote, and a single large claimant can make it irrelevant, unless you are fully insured in a state that counts 75 employees as small group.
What actually moves your number
- Claims. One serious claim in a group of 60 moves a renewal more than every other factor combined, unless your state counts a group of 60 as small group, where a fully insured carrier cannot rate on your own claims.
- Census age. Age is one of the few factors carriers may rate on in the small group market.
- Funding structure. Fully insured, level funded, self funded or a PEO master plan are four different pricing engines. KFF found 37% of covered workers at firms with 10 to 199 workers are already in a level funded plan and 27% are in a self funded one. The two overlap: KFF puts 51% in one or the other.
- Contribution strategy. Moving cost to employees lowers your line and raises your turnover risk. Both are real costs.
- Whether the renewal was marketed at all. This is the cheapest lever and the most commonly skipped one.
What to budget
Put 9% to 11% in the plan for 2027 if you intend to change nothing. Put 8% in if you intend to work the renewal properly, which means starting 90 to 120 days out, pulling claims experience and pricing more than one funding structure. In our experience anything above 15% deserves a written explanation from the carrier. Above 20% it is usually one identifiable claimant (except in a fully insured small group plan, which cannot be rated on your own claims), or a renewal that never went to market.
Frequently asked questions
How much does group health insurance cost an employer per employee in 2027?
Aon projects average employer health cost passing $19,000 per employee in 2027, though that database skews toward large employers. For companies with 10 to 199 workers, KFF’s 2025 survey puts annual premium at $9,211 for single coverage and $26,054 for family coverage, with the employer funding about 84% and 64% of those respectively. Add 2026 trend and then 8% to 11% for 2027 to reach a 2027 budget.
How much of the premium does an employer have to pay?
No federal law sets a minimum employer share, though carriers set their own contribution and participation minimums. For applicable large employers with 50 or more full time equivalents, the employee’s share of self only coverage must stay within 10.22% of household income in 2027 to satisfy the ACA affordability test under Rev. Proc. 2026-26.
What is the ACA penalty for not offering coverage in 2027?
For plan years beginning after December 31, 2026, the section 4980H(a) penalty is $3,780 per full time employee per year after the first 30 and the 4980H(b) penalty for unaffordable or inadequate coverage is $5,670 per affected employee. Both apply only to employers averaging 50 or more full time equivalents.
Why do small employers pay more per person for worse coverage?
The premium itself is close. KFF’s 2025 figures show $9,211 single coverage at firms with 10 to 199 workers against $9,361 at firms with 200 or more. The difference lands in employee cost. Workers at smaller firms pay $8,889 toward family coverage against $6,227 at large firms, and carry an average single deductible of $2,631 against $1,670.
Are the 2027 rate increases in the news the ones we will actually pay?
Often no. Filed requests and approved rates are different things in states with prior approval authority. New York’s Department of Financial Services announced on September 4, 2026 that small group carriers had requested an average 23.7% for 2027 and were approved at 8.0%.
Can we reduce the increase without cutting benefits?
Sometimes. Marketing the renewal to competing carriers, testing level funded pricing against your claims experience, checking the PEO market and correcting an out of date contribution model all move the number without touching plan design. Whether those work depends on your claims history and your states.
Get your 2027 number priced properly before you budget it
Send one census and your current plan summary. You will get the open insurance market and the PEO market priced on the same model, with your current plan alongside them. No fee to your business.