If you run a small business with group health insurance, you've probably gotten your 2026 renewal letter by now — or you will within the next 60 days. And it almost certainly hurts. Across the carriers I work with in Florida, fully-insured small-group renewals are landing in a tight band: 14% on the low end, 22% on the high end. A few outliers above 25%. Almost nothing under 12%.
This is not your team's fault. It's not your broker's fault either, technically. It's a structural feature of how fully-insured small-group insurance is priced — and most employers have no idea that there's a different structural option available that doesn't behave this way.
Let me walk you through what's actually happening, what the math looks like on a real practice, and what to do about it.
Why renewals are spiking this year specifically
Three forces are stacked on top of each other:
1. Community rating is recovering from 2020–2022 underutilization. Small-group insurance in most states is community-rated — your renewal isn't priced based on your individual group's claims, but on the entire risk pool's claims. During COVID, that pool used way less healthcare than usual. Carriers ended up with surplus claim reserves and had to either rebate them (MLR) or apply them to future premiums. That cushion is now gone.
2. The medical loss ratio (MLR) rebounded hard in 2024. Care utilization came back faster than carriers projected. Specialty drug spend (especially GLP-1 weight-loss medications) added 3–6% to per-member-per-month claim cost industry-wide. Carriers are rebuilding reserves into 2026 pricing.
3. Carriers are conservative on subsidy uncertainty. With ACA enhanced subsidies expiring on the individual market (we covered this in Issue 03), carriers expect some healthy individual-market enrollees to migrate to group coverage. That changes the risk profile. Carriers are pricing 2026 group rates with that uncertainty baked in.
// None of those three forces will reverse in 2027. If anything, GLP-1 spend is going up and the subsidy migration will accelerate. The 2026 renewal you're looking at isn't a one-year blip. The fully-insured small-group market is structurally repricing. Anyone telling you "next year will be better" is selling you something.
The math, on a real 12-employee dental practice
I'm going to use approximate numbers from a client I worked with last quarter — a 12-employee dental practice in West Palm Beach. Plan is a typical Florida small-group HMO Silver. Names changed; numbers anonymized but representative.
| Line | 2025 (current) | 2026 renewal (fully-insured) |
|---|---|---|
| Monthly premium (employer + employee) | $8,400 | $10,250 |
| Annual cost | $100,800 | $123,000 |
| Year-over-year increase | — | +22.0% |
| Per-employee monthly cost | $700 | $854 |
// Standard fully-insured renewal. Carrier kept plan design identical (same network, same deductibles, same copays). The 22% is pure rate increase.
Now here's what I quoted them on the level-funded side. Same network. Same plan design. Different structure.
| Line | Fully-insured (renewal) | Level-funded (new quote) |
|---|---|---|
| Monthly cost | $10,250 | $7,920 |
| Annual cost | $123,000 | $95,040 |
| Year-end refund (estimated, claims-dependent) | $0 | ~$8,500 |
| Effective annual cost | $123,000 | ~$86,540 |
| Annual savings vs. fully-insured renewal | — | ~$36,460 (~30%) |
// Level-funded uses the same carrier (Cigna in this case), same plan design, same provider network. The structural difference is in how claims are funded and refunded.
The carrier didn't suddenly start charging less. The premium structure on the level-funded side simply allows the carrier to refund what it doesn't spend — which the fully-insured structure never does.
How level-funded actually works (in 60 seconds)
Fully-insured: you pay a flat premium. The carrier takes 100% of the claims risk. If your team has a low-claims year, the carrier keeps the surplus. If your team has a high-claims year, the carrier eats the loss. Your premium next year depends on the entire risk pool.
Level-funded: you pay a flat amount that's split into three buckets — admin fee (fixed), stop-loss reinsurance (fixed; covers catastrophic claims), and a claims fund (carrier's estimate of what your team will spend on actual claims). At year-end, if claims came in below the claims-fund estimate, the carrier refunds the difference to you. If claims came in above, the stop-loss insurance covers it — you don't owe extra.
If your team is younger, healthier than average, or simply a small enough group that one chronic condition isn't going to swing the whole year — level-funded transfers the financial upside back to you instead of the carrier. The catch: the carrier underwrites it. They'll look at your census, ask a basic health questionnaire, and price the claims fund based on what they think your team will actually spend.
When level-funded is NOT the answer
I'd be a bad broker if I told you this works for everyone. It doesn't. Specifically:
- Older teams (average age 55+) often get priced higher on level-funded because the underwriting is based on the actual census, not the community.
- Groups with one or two known high-cost employees may get quoted with exclusions or higher claims-fund estimates that eat into the savings.
- Very small groups (under 5 employees) often don't qualify — the underwriting pool is too thin.
- State regulation matters. A handful of states restrict level-funded plans or impose specific protections that change the math.
If you fall into one of those buckets, fully-insured may still be your best bet — but you should be benchmarking against multiple carriers, not just renewing with whichever one sent you the letter.
// Commissions differ. Fully-insured pays the broker a recurring percentage of premium (typically 3–6%). Level-funded often pays a flatter, per-employee-per-month admin fee — sometimes smaller in absolute terms over the life of the relationship. So a broker on volume-incentive may consciously or unconsciously favor recommending the fully-insured path. Ask your broker directly: "Did you quote this group on level-funded?" If they say no, ask why not.
What to do this week if your renewal letter has arrived
- Confirm the renewal date. Most small-group plans renew on January 1, but some carriers use the original policy effective date. You have until 30 days before renewal to change — sometimes less.
- Pull your current census. Employee count, dates of birth, dependent status, current monthly cost. That's all your broker needs to quote alternatives.
- Get at least 3 quotes across structures. Fully-insured renewal (already in hand), 2 level-funded quotes from different carriers, and — if you're 50+ employees — a self-funded quote with stop-loss.
- Compare networks, not just price. A 30% premium savings means nothing if your team has to switch primary care doctors. Verify network adequacy in your zip code.
- Run the worst-case math. If level-funded comes in cheaper and you're considering switching, ask the broker to model what you'd pay in a high-claims year. If the worst case is still in your acceptable range, the upside is yours.
What this means longer-term
The fully-insured small-group market is changing structurally. Average renewal increases are running 2–3x faster than wage growth. For groups under 50 employees, that math doesn't sustain. You'll see more migration to level-funded over the next 2–3 years — and over the next 5, the boundary between "fully-insured" and "level-funded" plans for small employers will keep blurring.
If you're an employer reading this and your broker hasn't proactively walked you through these alternatives, that's a signal. Brokers who only sell fully-insured aren't shopping for you — they're shopping you to one product structure. Worth asking why.
Next week we're decoding the EOB — the "explanation of benefits" form that shows up after every doctor's visit. Five numbers on it, only one matters, and most people don't know which one. Subscribe if you want it Monday morning.