Your health insurance renewal came back 20% higher. What are your six options?

A 20% renewal increase (the example this guide uses) reads like a final offer. Treat it as an opening number. Here are six levers, which can be combined.

First, find out which rules apply to you

Two federal size tests and one status check shape your options.

• Small group or large group (insurance market rules). A small employer averaged 1 to 50 employees on business days during the preceding calendar year (45 CFR 144.103). States may raise that line to 100; the CMS state rating table does not list Alabama among the states that did.
• Applicable large employer, or ALE (ACA employer rules). An employer is an ALE for the current year if it averaged at least 50 full-time employees, including full-time equivalents, during the prior year. Full-time means at least 30 hours of service per week, or 130 in a month. Companies with a common owner, or otherwise related under section 414 of the Internal Revenue Code, are generally counted together. An employer above 50 for 120 days or fewer, where the extra workers are seasonal workers, stays under the line. A new employer is an ALE in its first year if it reasonably expects to employ, and actually employs, an average of at least 50 (IRS).
• Grandfathered or transitional status. Grandfathered coverage (in place on March 23, 2010, with that status kept) is exempt from the federal rating and essential health benefit rules below (45 CFR 147.140). CMS also lets states allow certain “transitional” small-group policies, renewed continually since 2014, to keep renewing outside several ACA market rules, including fair premiums (CMS).

For ACA-compliant small-group coverage that is neither grandfathered nor transitional, premiums may vary only by individual or family coverage, rating area, age (within 3:1 for adults), and tobacco use (within 1.5:1), and “must not vary” by any other factor (45 CFR 147.102). Health status and claims history are outside that list.

1. Negotiate the renewal with your current carrier

How it works: You (or your broker) ask the carrier to revisit the assumptions behind the increase, backed by data and competing quotes.

Where it fits: Large groups, where the small-group rating limits do not apply and claims experience can be part of pricing (NAIC).

Data that helps a large group’s case: claims experience reports, de-identified large-claim detail, and the carrier’s trend assumptions.

Tradeoffs: The least disruptive lever, and the weakest without competing quotes. For ACA-compliant fully insured small-group coverage that is neither grandfathered nor transitional, a group’s own claims history cannot change its premium under the rating rules above.

Lead time: Start 90 days out.

2. Re-shop the market with other carriers

How it works: Other carriers quote from an employee census. For ACA-compliant small-group plans it covers what rates can vary by: coverage tier, location, age, and tobacco use (45 CFR 147.102). Stop-loss underwriters (levers 5 and 6) also examine claims history (NAIC).

Where it fits: Groups whose renewal looks out of line with the market.

Tradeoffs:

• Network disruption. A new carrier can mean different doctors, hospitals, and pharmacy formularies. Check where employees get care before comparing prices.
• Participation rules. Small-group carriers may apply minimum participation or employer contribution requirements (45 CFR 147.104).
• Status. If your current policy is grandfathered or transitional, ask counsel what a switch would do to that status before you move.

Lead time: 90 to 120 days, for underwriting and a network review.

3. Change plan design

How it works: You change what the plan pays. Common moves: higher deductibles or copays, a narrower provider network, different pharmacy tiers, or a high-deductible health plan (HDHP) paired with a health savings account (HSA), a tax-advantaged account for medical costs.

For 2027 the IRS set these amounts (Rev. Proc. 2026-24):

2027 IRS amount	Self-only coverage	Family coverage
HSA base contribution limit	$4,500	$9,000
HDHP minimum annual deductible	$1,750	$3,500
HDHP maximum out-of-pocket (excluding premiums)	$8,700	$17,400

HSA-eligible individuals who are 55 or older by the end of the year can contribute up to an extra $1,000, subject to the other contribution rules (26 U.S.C. 223(b)(3)).

Where it fits: Groups willing to share more cost at the point of care.

Tradeoffs:

• Cost shifts to employees who use the most care, which can affect recruiting and retention.
• Minimum value (ALEs). To avoid a potential employer payment tied to plan quality, the plan must cover at least 60% of total allowed costs and provide substantial coverage of inpatient hospital and physician services (26 CFR 1.36B-6).
• Grandfathered plans. Raising a coinsurance percentage, raising deductibles or copays beyond limits measured from March 23, 2010, or eliminating substantially all benefits for a condition can end grandfathered status (45 CFR 147.140).
• Mid-year changes. A material change that affects the summary of benefits and coverage (SBC), is missing from the latest SBC, and occurs other than in connection with a renewal or reissuance of coverage requires notice to enrollees at least 60 days before it takes effect (29 CFR 2590.715-2715).

Lead time: 60 to 90 days.

4. Rework your contribution strategy

How it works: You change how the premium is split: the employer’s share, tier pricing from employee-only through family, and the cost of adding dependents.

Constraints for every employer:

• Small-group carriers may require minimum participation or employer contributions; groups that fall short can still buy coverage from November 15 through December 15 each year (45 CFR 147.104).
• If employees pay premiums pre-tax through a cafeteria plan, federal nondiscrimination rules limit how much the plan can favor highly compensated or key employees (26 U.S.C. 125).
• A grandfathered plan loses its status if the employer’s contribution rate for any coverage tier falls more than 5 percentage points below its rate for the coverage period that included March 23, 2010. The comparison is cumulative across renewals, and contributions set by formula have a separate 5 percent test (45 CFR 147.140(g)).
• Check offer letters or agreements that promise a contribution level.

If you are an ALE: A payment can arise only when at least one full-time employee receives a premium tax credit for Marketplace coverage. There are two kinds (IRS):

• Section 4980H(a), the offer payment. It can apply if you offer coverage to fewer than 95% of full-time employees and their dependents. Offering coverage to all but five full-time employees also satisfies the rule when five is greater than 5%. Here “dependents” means children under 26, with some exclusions, and does not include spouses.
• Section 4980H(b), the per-employee payment. It can apply even when you pass the offer test, for each full-time employee who gets a premium tax credit because they were not offered coverage or because the coverage was unaffordable or lacked minimum value. Affordability uses the lowest-cost self-only option that provides minimum value: for plan years beginning in 2027, the employee’s cost can be no more than 10.22% of household income (Rev. Proc. 2026-26), or of an IRS safe harbor measure such as W-2 wages (IRS).

Tradeoffs: Your spend falls and employee payroll deductions rise. If enrollment drops, you can run into carrier participation minimums.

Lead time: 45 to 60 days, with current payroll data.

5. Move to a level-funded plan

How it works: You pay a fixed monthly amount that funds expected claims, stop-loss insurance (explained in lever 6), and administration. KFF describes these plans as combining “a relatively small self-funded component with stop-loss insurance,” which limits the employer’s liability (KFF). When claims come in lower than expected, some contracts return a surplus refund at year end where the law allows it (one national carrier’s product description).

Where it fits: Smaller, relatively healthy groups that want some self-funding upside with a predictable monthly cost. In KFF’s 2025 survey, 37% of covered workers at firms with 10 to 199 workers were in level-funded plans (KFF).

Tradeoffs and risks:

• Medical underwriting. Level-funded plans use health status in rating and underwriting (KFF), which ACA-compliant fully insured small-group rates cannot. A group with known high-cost conditions may see a high price or no offer.
• Renewal after a bad year. The stop-loss policy is underwritten again at renewal, and the insurer may raise the rate or refuse coverage (NAIC). Such a group can end up back in the fully insured market (CHIR).
• Benefits package. These plans are not required to include the essential health benefits package that ACA-compliant small-group insurance must cover (45 CFR 147.150; KFF).
• Ending the arrangement. Ask how late-paid claims are handled; stop-loss policies may include a run-out or “tail” period (NAIC).
• Self-funded obligations. Review lever 6 with your advisor and counsel.

Lead time: 90 to 120 days.

6. Self-fund, partially or fully, with stop-loss insurance

How it works: Your company pays employees’ claims as they are incurred, usually through a third-party administrator (TPA), a company that processes claims. Stop-loss insurance reimburses the employer for claims above set amounts called attachment points (DOL; NAIC):

• Specific attachment point: protects against one person’s high-dollar claim or series of claims.
• Aggregate attachment point: protects against the total of many smaller claims across the group.

Where it fits: Larger employers with the cash reserves to absorb swings. In KFF’s 2025 survey, 27% of covered workers at firms with 10 to 199 workers were in self-funded plans, compared with 80% at larger firms (KFF).

Obligations that come with it:

• Fiduciary duty. For an ERISA-covered plan, the employer is a fiduciary to the extent it exercises discretion in managing the plan, has discretionary authority or responsibility for administering it, or controls plan assets (29 U.S.C. 1002(21)(A)). Selecting and monitoring the TPA and other service providers is a fiduciary function (NAIC). Fiduciaries must act solely in participants’ interest, act prudently, follow plan documents, and pay only reasonable expenses, and can be personally liable to restore plan losses (DOL).
• State law. For an ERISA-covered self-funded plan of a single employer, ERISA preempts most state insurance laws, including benefit mandates (KFF). Different rules apply to governmental plans and to church plans that have not elected ERISA coverage, which fall outside ERISA (29 U.S.C. 1003(b)), and to multiple employer welfare arrangements (MEWAs), which states can regulate (29 U.S.C. 1144(b)(6)).

Tradeoffs and risks: The biggest is cash flow. A catastrophic January claim can mean paying the entire claim first, then waiting for stop-loss to reimburse the eligible amount above the specific attachment point. Check the contract’s reimbursement timing and any advance-funding provision, along with claims the policy excludes (NAIC).

Lead time: 120 days or more, to select a TPA, adopt a plan document, underwrite stop-loss, and set aside reserves.

Side-by-side comparison

Lever	Best fit	Main tradeoff	Start at least
1. Negotiate with current carrier	Large groups with usable claims data	Limited leverage without competing quotes	90 days out
2. Re-shop the market	Groups that have not shopped in several renewals	Provider network and formulary disruption	90 to 120 days out
3. Change plan design	Groups willing to share more cost at the point of care	Higher costs for employees who use care	60 to 90 days out
4. Rework contributions	Employers with room in their premium split	Higher payroll deductions; ALE affordability limits	45 to 60 days out
5. Level-funded plan	Smaller, relatively healthy groups	Medical underwriting and renewal risk after a bad year	90 to 120 days out
6. Self-fund with stop-loss	Larger employers with cash reserves	Fiduciary duties and cash-flow swings	120 days or more

Lead times are planning estimates; confirm deadlines with each carrier.

Timeline: what to do in the 90, 60, and 30 days before renewal

90 days out (or earlier):

1. Confirm both size tests (counting related companies) and whether your policy is grandfathered or transitional.
2. Gather the census, plan documents, and any claims reports.
3. Set a budget, pick the levers, and request competing quotes.

60 days out:

1. Compare the renewal against quotes on matching plan designs.
2. Model design and contribution changes. ALEs with 2027 plan years: check affordability at 10.22%.
3. Take the best competing numbers back to your carrier, then decide.

30 days out:

1. Get the SBC to employees. For a plan that renews automatically, it is due no later than 30 days before the plan year. If the insurance policy has not been issued or renewed by then, it is due as soon as practicable, and no later than seven business days after issuance or written confirmation of intent to renew, whichever comes first. If enrollment requires a written application, it goes out with those materials (29 CFR 2590.715-2715).
2. Run open enrollment and set up payroll deductions.
3. For level-funded or self-funded plans, confirm the stop-loss contract, run-out terms, and plan document before the effective date.

How My Advisor helps

My Advisor opens renewal season early, on your calendar, and brokers across carriers and across fully insured, level-funded, and self-funded arrangements. The renewal pass includes contract review, claims analysis, and actuarial consultation where the numbers need it, and we show you the math behind the recommendation. ERISA documents and ACA reporting live with our compliance practice, backed by legal experts on retainer for our clients.