Pay & Compensation
Health insurance is getting more expensive for small employers, but most of those that offer it are not dropping it. In an analysis published September 22, payroll and benefits company Gusto reported that the median individual health premium at the small businesses it studied reached $8,743 in 2026. That is up 7% from about $8,169 in 2025 and 31% from 2022, before adjusting for inflation. After adjusting for inflation, Gusto says premiums are up about 17% since 2022.
What Gusto found
The share of small businesses offering health insurance held at about 21% in 2026, and employers still covered roughly two-thirds of the premium, 68% this year. The smallest firms feel the most pressure. For businesses with two to five employees, Gusto put the median individual premium at $9,170 a year, roughly 6% more than for firms with 25 to 49 employees. Since 2022, premiums at the two-to-five-employee firms have risen more than 35%, the largest increase of any size group, yet those firms have kept offering coverage at about their historical rate of roughly 12%.
In an August 2026 survey, Gusto asked small businesses how they would respond to a premium increase. The most common answer, from 52.7%, was that the business would absorb the cost; 2.1% said they would drop coverage. Gusto also reported rising use of health-savings-account-eligible plans: the share of small businesses offering at least one climbed from about 11.4% in 2025 to 12.7% in 2026.
How the data were built
This is company research, not a Bureau of Labor Statistics employer-cost series. Gusto economists Tom Bowen and Nich Tremper drew on anonymized payroll and health-insurance data from more than 500,000 small businesses with 2 to 49 employees across all 50 states from 2019 to 2026. Offer rates use that full sample. The premium and cost figures come only from the smaller subset of companies for which Gusto acts as the health-insurance broker. Unless noted, Gusto reweights the sample to reflect the U.S. small-business population by industry, size and geography, using BLS Quarterly Census of Employment and Wages data. The survey answers describe what owners say they would do, not what they have done.
Why it matters for pay and hiring
Benefit costs compete with wages and headcount. Gusto’s own authors suggest that higher premiums “have to surface somewhere else in the business, potentially as slower wage growth, smaller retirement matches, or reduced hiring.” For workers, the premium is only part of the picture: the employer’s share, the deductible and out-of-pocket limits determine how much the plan is actually worth. The next thing to watch is whether firms keep absorbing increases or start shifting more of the cost to employees.
Sources
- Gusto Insights (Tom Bowen, Nich Tremper), “Small Businesses Continue to Offer Health Insurance to Employees, Despite a 7% Annual Rise in Premiums” (State of SMB Healthcare 2026), September 22, 2026. https://gusto.com/resources/gusto-insights/state-of-smb-healthcare-2026
Featured photo: An employee arranges tools at Newton’s Tru-Value Hardware Store in Cherryvale, Kan. Representative image of a small business; the store is not connected to the Gusto analysis. Photo: U.S. Department of Agriculture, via Wikimedia Commons (Public domain). Cropped from the original.
