Tania Hewett-Mader, who owns Alma Mader Brewing with her husband, believes providing health benefits to her employees is the right thing to do.
“That’s part of our values — taking good care of our people,” she said. “Not only for their sake, but to be competitive in the market.”
But two years ago, after the company had offered traditional insurance coverage for a couple of years, premiums were going to become unaffordable. The Kansas City small business, which only has five employees — including Hewett-Mader and her husband — had to find a different option.
“We had to make a decision at that point,” Hewett-Mader said.
It’s a familiar story for business owners. Large and small businesses alike have been scrambling to absorb rising insurance costs for years, and the 2026 increases are promising to be even worse.
Missouri proposed rate filings for 2026
According to Mercer, the global consulting firm, benefit costs per employee for large firms are expected to increase an average 6.5% in 2026, the largest jump in 15 years. And that’s only if businesses take “cost-reduction measures.” If they don’t, Mercer said, plan costs would go up almost 9% on average.
For small groups — businesses with fewer than 50 employees — the increases could be far steeper.
Blue Cross and Blue Shield of Kansas City has requested an average increase next year of 19% for its small-group plans that are regulated by the state of Missouri. Other insurers in the state’s small-group market have requested rate increases of 10% to 13%.
Rick Welsch, an insurance broker in Fairway, said he has already broken the news to clients that rates will be going up “dramatically.” And other insurance brokers in the area said they’re seeing a similar trend.
“I was a little blown away,” Welsch said.
Business owners ‘hope it’s not awful’
Now business owners may be left deciding how to absorb significant cost increases.
For Alma Mader Brewing, the answer to continuing health benefits was to switch from a traditional insurance plan to a self-funded plan. That means the business pays into a pool of money that covers claims.
The change came with more paperwork and bigger copays for employees. The business also takes on more risk. If claims are higher one year, premiums will increase the next to compensate, which makes Hewett-Mader nervous.
She found out that next year the business will see a 13% jump because claims this year ran higher. But even that rate is doable, unlike the traditional coverage, so employees will keep their health insurance.
“‘It would be really hard to offer it and take it away,” she said.
Karen Crnkovich, owner of DMC Service Inc., a commercial heating and cooling company in Olathe, said she spends hours every year trying to find a plan her company can afford that still provides good coverage for the 23 employees who are insured.
“We hold our breath and cross our fingers and hope it’s not awful,” she said.
Last year she saved $20,000 by moving to an individual coverage health reimbursement arrangement, known as an ICHRA plan. That gave employees a tax-free allowance to buy an individual plan on the Affordable Care Act marketplace. But the model proved to be “too burdensome.” That and expected increases in the cost of marketplace plans next year made Crnkovich rethink that switch. She’s moving back to a self-funded plan.
“Every year we’ve got to look at it,” she said.
Employers face a lot of pressure trying to maintain benefits when costs continue to rise, business owners said.
“It’s kind of like, ‘How can you provide all the benefits and still be above water?’” said Ariel Johnston, who owns The Tasty Balance, a dietitian practice with offices in Prairie Village and St. Louis.
Johnston said the rates for her nine-person company will stay flat next year, but many employers won’t be so lucky.
Businesses confronting surging premiums may look for cost-saving options like adopting a self-funded model, like Alma Mader did. They may offer plans with narrower networks of doctors and hospitals in an effort to steer people to less-expensive providers, or force employees to pay more for going to a doctor not on a plan’s preferred list. Employers might also choose plans that limit what drugs are covered.
In addition, there is growing recognition that health plans that emphasize preventive care and behavioral health care will pay off in a healthier workforce and, eventually, lower premium costs. Johnston said many people don’t realize that dietitian services, like the ones her business offers, are fully covered by most insurance plans.
But to cover bigger premiums next year, many employers will also likely ask employees to pay more for their insurance.
Almost 60% of large employers Mercer surveyed said they would make cost-cutting changes, which generally means choosing plans with higher deductibles and bigger copays next year, adding to employees’ out-of-pocket costs.
Who will pay?
KFF research found that nearly half of adults are already struggling to afford health care, more than one in three report skipping or postponing care and almost one in four said they have medical or dental bills that are past due that they can’t pay.
One in five people surveyed by KFF said they are paying off debt to a provider, 17% owe a bank or collection agency, 17% have put medical bills on a credit card and 10% said they owe family members.
Additional health insurance increases would compound the problem, consumer advocates said, and add strain when people are already dealing with increased prices for other basic needs.
“We see rising utility rates and rent going up and now health care,” said Mary Shannon of the Consumers Council of Missouri. “It reflects a broader trend of consumer costs increasing.”
Frank Lenk, an economist with the Mid-America Regional Council, said that there will be economic consequences of rising medical costs. When people have to spend more on health care, already a sizable chunk of most household budgets, they’ll have less money to spend on other things, like local stores and restaurants.
“It will be happening when belts already seem to be tightening and the economy seems to be slowing down,” Lenk said.
The changes could also have longer-term consequences, he said. When people have to pay more for the doctor or to fill a prescription, they may be less likely to seek care, which could lead to a less healthy workforce.
“Businesses may save money on the one hand,” Lenk said, “but they may see loss of productivity on the other. It comes down to — there’s no free lunch.”
Employer-sponsored health insurance is the primary source of health coverage in this country.
According to the U.S. Census Bureau, 92% of people had health insurance for at least part of the year during 2024. Employment-based insurance covered 53.8% of that population, down from almost 67% in 1998. Medicare covered 19.1%, Medicaid covered 17.6%, and 10.7% of people were covered by plans they purchased directly, including through the Affordable Care Act marketplace.
Insurance premiums on employer plans have been trending up for years. The national average annual premium per employee enrolled in an employer-based plan was $5,963 in 2015, and jumped to $8.486 in 2024. In the same period Missouri’s average rates went from $5,726 to $8,552, and Kansas’ went from $5,558 to $7,874.
During that time, employers picked up between 75% and 79% of that premium cost. But employee costs still increased, both because the overall premium went up and because out-of-pocket costs climbed.
Why is insurance going up?
Insurance companies give many reasons for increasing premiums. But the two main factors are the price of health care is going up and more people are using their health benefits, which means insurance companies have to pay more.
Medical costs are set to grow 8.5% in 2026, according to a study by the consulting firm PwC, also known as PricewaterhouseCoopers. That’s the same rate as the last two years, but substantially greater than 2022 when the growth rate was 5.5%.
That slower growth reflected lower medical use during the pandemic, which is also one of the factors driving increased costs now, analysts said.
During the COVID pandemic, people put off doctor visits and routine care. That meant fewer claims being sent to insurance companies. It also caused a backlog of medical visits and procedures and led to growth in serious conditions that are more expensive to treat.
More expensive drugs are also adding to insurers’ costs. PwC said drug spending grew by $50 billion to $487 billion in 2024. GLP-1s, drugs that regulate blood sugar and help people lose weight, were a significant driver of the increase, leading some insurance companies to look at reining in who can get coverage for the drugs and for what conditions.
Insurers are also having to pay hospitals and doctors more, another reason for increased premiums. Analysts said several factors have caused that:
Labor shortages in the medical field have forced hospitals and physician practices to pay higher salaries.Artificial intelligence, which is helping providers bill for services more efficiently, has prompted providers to track, and bill for, more services.And hospital system mergers, along with other provider consolidation, have helped providers negotiate higher reimbursement rates from insurers.But one of the biggest reasons insurers may see higher costs starting in 2026 involves policy decisions coming out of the Trump administration, said Sara R. Collins, a senior scholar who studies health care for the Commonwealth Fund.
“We’re on the brink of some major changes,” she said.
Congress has cut about $1 trillion from federal Medicaid spending and made changes to the Affordable Care Act marketplace, and is expected to allow enhanced tax credits to expire at the end of the year. Those tax credits help more than 90% of participants afford coverage and have helped marketplace enrollment to double since 2021.
All told, those policy changes are expected to result in 17 million people becoming uninsured, which will lead to more people needing free care. And that will drive higher costs for everyone else.
Beyond that, Collins said, President Donald Trump’s tariffs could lead to higher drug costs, which will also increase insurance costs.
All the federal policy changes “will reverberate through the rest of the insurance system,” Collins said. “Those are potential cost drivers on the hospital side and on the provider side.”
Trend toward self-funded insurance
Health industry analysts said the rising costs are driving changes in the insurance marketplace, which could also contribute to higher premiums.
Derek Skoog, a health care actuary with PwC, said businesses facing big premium spikes are increasingly moving to self-funded insurance models.
This means that rather than paying an insurance company a monthly fee to cover all employee health claims, they set aside a pool of money and pay those claims themselves. If the business has employees who are young, healthy and low-risk, it may be a good bet that paying claims outright will cost less than paying an insurance premium.
The increased number of companies shifting to this self-funded model has been quietly diluting the risk pool for traditional insurance plans, known as fully insured plans, Skoog said. That means fewer premium dollars to cover the actual cost of claims. And potentially more expensive patients to cover.
Skoog said industry analysts had been wondering when that shift to self-funded plans would catch up to the fully insured segment of the market. And it seems to be happening. His firm’s analysis found that underwriting margins in the fully insured segment — basically an insurance company’s profits once claims have been paid — dropped to zero this year.
And that could also be a factor pushing insurance companies to raise rates in 2026, he said.
“The billion-dollar question here is,” Skoog said, “does that then further accelerate … the conversion from fully insured to self-funded?”
He called it a “pretty big concern” if healthier-than-average groups continue to leave the fully insured market.
“The long-term viability of that fully insured group segment, if it starts to run away, that can become a real challenge,” Skoog said.
Centivo, a New York-based company just entering the Kansas City market, is betting that more companies will take the leap to self-funded insurance as premiums for traditional plans climb.
The firm administers self-funded plans for businesses, which includes making deals with hospitals and doctors’ practices to get fixed rates for services. Centivo also works with “transparent pharmacy benefit managers” in an effort to lower the cost of medicine. And the company emphasizes preventive care.
Every Centivo patient is required to have a primary care physician and they pay nothing out of pocket for primary care services as long as they’re in the company’s network. The idea is that treating health problems earlier will help avoid serious issues and keep care costs down for the employers paying the bills.
“If you give them access to care,” said Ryan Moore, Centivo’s chief revenue officer, “all the data … show you’re going to have a lower cost of care in the long run.”
But that model might not hold up over time, said Collins of the Commonwealth Fund.
“Those employers that self-fund end up, as their workforce ages or they have workers who develop health problems, (needing) to come back into the fully insured market,” Collins said.
And that adds to the problem of care costing more and premiums going up, she said.
This article first appeared on Beacon: Kansas City and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
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