Rising Trends in Small Group Health Insurance Premiums and GLP-1 Drug Costs
Small group health insurance premiums are expected to rise significantly in the coming years, influenced by increasing medical expenses, heightened service utilization, and the cost of specialized drugs, such as GLP-1 medications. Insurers are gearing up for an intense renewal period in 2027, with benefits advisors set to discuss substantial plan design changes with their clients.
Nationwide, insurers have proposed a 14% median premium increase for the small group market, according to data from the Peterson-KFF Health System Tracker covering approximately 300 insurers. These proposals exceed the 11% median increase suggested for 2026, although final figures will depend on regulatory compliance approvals.
The upward trend in premiums is largely driven by a 10.8% median medical trend, indicating rising prices for hospital and physician services and accelerating prescription drug costs. The increased use of GLP-1 medications, primarily for diabetes management, has notably impacted costs. However, some insurers continue to exclude these medications for weight loss purposes.
GLP-1 drugs have become a significant financial burden for small group accounts, now making up 20.3% of total prescription expenditures, up from 17.5% the previous year, as reported by Benefitfocus. The annual cost per member for these medications is approaching $7,400.
Behavioral health spending also contributes to financial pressures on insurers. For example, Boston Medical Center Health Plan reported over 20% annual growth in behavioral health expenditures due to increased utilization and provider rates. Blue Cross and Blue Shield of Massachusetts stated that medical care and pharmaceutical spending are escalating at the fastest pace in over a decade.
Enrollment trends are impacting the small group market, with a 41% decrease in fully-insured small group enrollment from 2013 to 2024. Healthier groups transitioning to level-funded arrangements leave a higher-risk pool in fully-insured plans. Massachusetts observed a rise in level-funded adoption from 2% in 2021 to over 11% in 2025.
The shift towards level-funded options poses risks to the fully-insured market by potentially increasing premiums for small businesses with employees requiring more comprehensive care. Benefits advisors, facing the 2027 renewal period, must engage employers in discussions about cost-driving trends and evaluate plan design alternatives. Options like level-funded or self-funded plans might offer lower initial costs for healthier groups but come with significant downsides, including reduced consumer protections and increased risk exposure.