Small businesses are bracing for the steepest health insurance increases in more than a decade. Premiums have been climbing year after year, but 2026 is projected to bring an even sharper jump. Industry analysts expect costs to rise between 6.5% and 9.5%, depending on plan design.
The reasons aren’t a mystery: hospitals are paying more for labor, prescription drug spending is climbing, employees are using more care, and new laws are reshaping coverage and pricing.
For small businesses, the impact is outsized. Benefits are often the second-largest expense after payroll, and even modest increases can stretch budgets and test employee loyalty.
With individual-market open enrollment running from November 1st through January 15th in states like Pennsylvania, New Jersey, and Delaware, now is the time to prepare. The decisions made this fall could influence your 2026 budget and your employees’ satisfaction.
Why Costs Keep Rising
Several forces are pushing premiums higher:
- Hospital and labor inflation: Health systems are paying more for staff and operations, which feeds directly into premiums.
- Pharmacy trend: GLP-1 medications and other high-cost drugs are driving claims. On the Medicare side, negotiated drug pricing* begins in 2026 for 10 high-cost drugs (including Eliquis, Jardiance, and Xarelto), reflecting how seriously policymakers are trying to rein in spending.
- Higher utilization: Preventive care, mental health, and virtual care remain popular, raising overall claims volume.
- Legislative and regulatory shifts: The Inflation Reduction Act’s drug price provisions, changes to Medicare Advantage supplemental benefits, and the broader uncertainty from the “One Big Beautiful Bill Act” all add complexity. Even if your business doesn’t offer Medicare-related coverage, these moves affect insurers’ pricing strategies and can trickle down into employer plan costs.
*Note: The negotiated prices in 2026 apply to Medicare plans only.
Together, these pressures create tough choices for employers. The stakes are especially high for small businesses that lack the financial cushion of larger organizations.
For small businesses, higher premiums often translate into tighter budgets. A 20% increase for a 12-person team could add roughly $25,000 in annual costs, leaving little room to absorb other expenses. Passing those costs along to employees can create retention risks, as workers may look to larger competitors offering more stable benefits.
At the same time, Applicable Large Employers (groups with 50+ full-time employees) must ensure their lowest-cost self-only plan remains “affordable,” with the 2026 ACA affordability threshold set at 9.96% of household income.
How to Get Ahead Before Open Enrollment
While these challenges are real, small businesses are not without options. With new laws reshaping coverage and pricing, proactive planning is more important than ever.
By rethinking plan design, exploring alternative funding models, and educating employees, employers can ease the impact of rising costs and keep their benefits strategy competitive.
- Consider alternatives to a traditional group plan – Options like ICHRA could allow employers to set a fixed monthly allowance while employees choose individual-market plans.
- Revisit plan design – Offer a “good, better, best” lineup, adjust deductibles, seed an HSA, or pair a core plan with a buy-up option.
- Focus on employee education – Costs are shaped not just by plan design but by how benefits are used. Encourage employees to stay in-network, take advantage of preventive care, and use telehealth or urgent care when appropriate. Legislative changes also matter here: for example, starting in 2026, Medicare will negotiate lower prices on drugs like Eliquis and Jardiance. If your employee or their spouse relies on one of these medications, knowing whether their plan’s formulary reflects the new pricing could mean the difference between affordable care and thousands in extra expense.
- Work with an advisor – An experienced advisor can compare carriers, design plans, ensure ACA compliance, and explain legislative changes to your team in plain language.
Health & Benefits Partners can guide you through these steps, helping you compare options, manage compliance, and communicate changes to employees.
Compliance Checklist for Open Enrollment
While requirements vary by plan type, employer size, and state law, these are the notices most small businesses should keep top of mind. Always confirm with your advisor or legal counsel to ensure full compliance.
- Summary of Benefits & Coverage (SBC). Required every year; foundational.
- ICHRA Notice. If you offer an ICHRA, this must be distributed to eligible employees before the plan year.
- Medicare Part D Creditable Coverage Notice. Required annually if your plan offers prescription coverage and employees may be eligible for Medicare.
- WHCRA Notice. Required annually if the plan includes medical/surgical benefits for mastectomies.
- CHIP/Medicaid Premium Assistance Notice. Required if employees live in states offering premium assistance.
- HIPAA Special Enrollment Rights. Must be provided at or before an employee’s first day of eligibility to enroll.
- COBRA Initial Notice. Required if employer size triggers COBRA obligations.
Providing these on time supports compliance and builds trust through transparency.
Important 2025–26 Enrollment Dates
- Medicare Open Enrollment: October 15–December 7, 2025. For employees or owners on Medicare, review drug formularies and plan changes carefully. Some Medicare Advantage perks are shrinking in 2026, and prior authorization pilots are beginning in select states.
- Marketplace/Individual Market Open Enrollment: November 1, 2025–January 15, 2026 in most states**. Enroll by December 15 for coverage starting January 1.
**Note: Some states, like New Jersey, often extend enrollment past January 15, so always confirm with your state marketplace.
Frequently Asked Questions
How do new laws like the Inflation Reduction Act affect my business’s health plan?
Even if your company doesn’t offer Medicare coverage, legislative changes ripple through the entire system. The Inflation Reduction Act’s drug price negotiations and the “One Big Beautiful Bill Act” influence how insurers set premiums, design formularies, and structure plan benefits. Understanding these shifts helps you anticipate cost drivers and explain them to employees.
Which open enrollment dates apply to us?
Both may matter: Medicare OE (Oct 15–Dec 7) for older workers and spouses, and Marketplace OE (Nov 1–Jan 15) for individual and ICHRA coverage.
What if my spouse is on Medicare?
It may make sense to compare employer coverage with a Medicare plan that better fits their drug and provider needs in 2026. HB&P can run both scenarios.
What should I say to my employees?
Oftentimes, small business owners may not know how to start the conversation about rising costs. Consider framing it this way:
“Health insurance costs are rising nationwide, and new laws are changing how plans are priced and what’s covered. We’re reviewing our options carefully to keep benefits affordable and competitive for 2026. During open enrollment, you’ll have a chance to compare plans, ask questions, and learn how changes like new drug pricing rules might affect your coverage. Our goal is to help you make informed choices and get the most value from your benefits.”
How We Can Help
Costs are rising, but you still have options. Planning early, exploring alternatives, and educating employees can keep your benefits both affordable and competitive.
Health & Benefits Partners helps small businesses across Pennsylvania, New Jersey, and Delaware control costs, stay compliant, and support employees through clear communication. Contact us to review your 2026 options before open enrollment begins on November 1st.
