Is Your Health Insurance Renewal Increase Normal?
For 2027, the answer is that single digit increases are normal and low double digits are common. Five national surveys published in August 2026 project employer health costs rising 8.2% to 11.1% in 2027, the steepest run in more than twenty years. If your renewal came back at 8% to 12%, you are in the market. If it came back above 20%, something specific is driving it, and that something is usually identifiable.
What the 2027 surveys actually say
| Source | Published | 2027 projection |
|---|---|---|
| Mercer | August 2026 | 8.2% per employee after planned cost reduction measures, about 11% if the employer makes no changes. Highest since 2003. |
| Aon | August 2026 | 9.5% before employer mitigation efforts, taking cost past $19,000 per employee. Fourth straight year near double digits. |
| Business Group on Health | August 2026 | 9.2% median before plan design changes, 8% after |
| WTW (survey preview, as reported by CFO Dive) | August 2026 | 11.1% before plan changes, 9.7% after |
| IFEBP | August 2026 | 10% median |
Two things are worth noticing. First, the surveys point the same way, which means the trend is real rather than an artifact of one methodology, even though they do not all measure the same thing: Mercer's 8.2% is after planned changes, while the Aon, Business Group on Health and WTW headline figures are before them. Second, several of them report two figures: what happens if you do nothing, and what happens after employers make changes. The gap between those two numbers is the part you control.
Why your increase might be higher than the survey number
National projections describe the average. Yours is priced off your group. The usual drivers, roughly in order of how often they explain a large increase:
- A large claimant. One serious claim in a group of 60 can move a renewal more than every other factor combined. This is the single most common explanation for a renewal well above trend.
- Your claims ran above expectation. Loss ratio drives the renewal on level funded and self funded plans, and drives it indirectly on fully insured ones.
- Your census got older. Age is one of the few factors carriers are permitted to rate on in the small group market.
- Your group shrank. Fewer covered lives means less credibility and more volatility, which carriers price for.
- Specialty drug utilization. Mercer, Aon and IFEBP all name drug spending among the main 2027 drivers: GLP-1 drugs in all three, specialty medications in Aon's and IFEBP's. IFEBP's respondents ranked specialty drugs second, behind catastrophic claims.
- Your renewal was not marketed. If your broker did not take your group to other carriers, you received one carrier's number with nothing to test it against.
Only the last one is about your broker. The rest are about your group. But the last one is also the one you can fix in a single letter.
The question worth asking before anything else
Ask your broker for your claims experience report, and ask which carriers they marketed you to. If both answers come back quickly and specifically, your renewal was probably shopped and the number is probably real. If they do not, you cannot evaluate your own renewal, because without claims data nobody can price a level funded or self funded alternative for you.
What you can still do, by how much time is left
| Time to renewal | Realistically available |
|---|---|
| 90 days or more | Full market: carriers, level funded, self funded where your size supports it, and the PEO market. This is where the leverage is. |
| 60 to 90 days | Most of the market. Level funded underwriting is still possible. A broker of record change still leaves time to shop. |
| 30 to 60 days | Negotiate the renewal, adjust plan design and contributions, run a narrow market check. Alternative funding gets tight. |
| Under 30 days | Plan design and contribution changes, and a short extension if the carrier will grant one. Start the real work for next year immediately. |
The structural options, in plain terms
| Option | How it changes the math | Usually fits |
|---|---|---|
| Fully insured | The carrier holds the risk and keeps the surplus in a good year. Predictable, and in the small group market (generally 1 to 50 employees) you are rated mostly on permitted factors rather than your own results. Larger groups can be rated on their own claims. | Groups with unknown or poor claims history, or who want no variability |
| Level funded | Fixed monthly payment like fully insured, but your company can get a surplus refund if claims come in under projection instead of the carrier keeping it all (how much depends on the contract). Requires underwriting. | Healthier groups with reasonable claims history. Per KFF 2025, 37% of covered workers at firms with 10 to 199 employees are already on one. |
| Self funded | You pay actual claims plus stop loss. Most control, most cash flow variability, most data. | Larger and more stable groups, typically with real claims credibility |
| PEO | Your employees join the PEO's plan under a co employment arrangement, bundled with payroll, workers compensation and HR compliance. | Groups whose own risk profile prices worse than the pool, multi state teams, and companies with no HR function |
When a PEO helps and when it does not
Worth being direct about this, because most content on the subject is written by people who only sell one side.
Under ACA small group rules, a carrier can rate your plan on four things: age, geography, family size and tobacco use. It cannot rate on your actual claims. That rule covers small employers only (1 to 50 employees, or up to 100 where a state has chosen that); above that size a carrier can rate a fully insured group on its own claims. A PEO master plan is rated as part of a much larger group. So if your real risk is worse than those four permitted factors suggest, the pool is a discount. If your real risk is better, the pool is a tax.
That is the whole mechanism, and it is why the answer genuinely differs by company. It is also why the comparison has to be run on your actual census rather than argued in the abstract.
One more piece of context, from the PEO industry's own data. NAPEO's 2025 client distribution shows roughly 85% of PEO clients have fewer than 50 employees, with 9% at 50 to 99 and 6% at 100 to 499. The model is densest among very small employers. That does not make it wrong for a 120 person company, but it does mean the assumption should be tested rather than taken.
Frequently asked questions
What is the average health insurance renewal increase for 2027?
National surveys published in August 2026 project 8.2% to 11.1%. Mercer projects 8.2% after employers make plan changes and about 11% with no action. Aon projects 9.5%. Business Group on Health reports a 9.2% median, a WTW survey preview 11.1% before plan changes, and IFEBP a 10% median.
Why did our health insurance go up so much this year?
Most large increases trace to one of six causes: a large claimant, claims running above expectation, an aging census, a shrinking group, specialty drug costs, or a renewal that was never marketed to other carriers. The first five are about your group. The last is about how your renewal was handled.
Is a 20% increase normal?
It is above the national projections for 2027 but not rare, particularly for groups under 100 employees that are rated on their own claims, where a single large claim carries real weight. An increase that far above trend should come with a specific explanation from your carrier or broker.
Can I negotiate a health insurance renewal?
Yes, and competing quotes are what make it work. A renewal that has been marketed to other carriers is a negotiation. A renewal that has not been marketed is just a number.
How late can we switch?
Meaningful alternatives generally need 60 days or more. Inside 30 days most employers are limited to plan design changes, contribution changes, or a short extension if the carrier grants one.
Do we have a right to our claims data?
Larger groups generally receive claims experience reporting on request. Smaller fully insured groups often receive limited or no detail, which is itself useful information, because it tells you what a potential alternative carrier will be working with.
Have your renewal read by someone who does not work for the carrier
Send your renewal letter and a census. We will tell you where your increase sits against the market, what is driving it, and what is realistically available in the time you have left.