Small firms keep health plans despite 31% premium jump

Health coverage has largely survived four years of rising premiums at small companies. In 2026, the median annual cost was $8,743 for each worker, a 31% increase compared with 2022. About 21% of small employers continued to provide insurance. Gusto based its findings on anonymized payroll and benefits records covering more than 500,000 businesses with two to 49 workers.

The burden is greatest for companies with only two to five employees. Their 2026 median was $9,170 for each covered worker, about 6% above the amount paid by businesses employing 25 to 49 people. Since 2022, premiums at these smallest firms have grown by more than 35%. After accounting for inflation, healthcare expenses across small businesses increased about 17% over that period.

Owners appear more willing to take the financial hit than reduce benefits. In an August Gusto survey, 52.7% said they would cover an increase themselves instead of passing it to workers or scaling back the plan. Just 2.1% would eliminate coverage. Plan choices are changing, however. By 2026, 12.7% offered at least one HSA-compatible option, compared with 9.6% in 2019. Such plans lower monthly premiums but expose employees to greater out-of-pocket expenses.