Quick Summary: Michigan’s small group carriers, Blue Cross Blue Shield and Priority Health, are both raising premiums by double digits in 2026, and simply renewing at the new rate is not the only option. Employers can lower costs through a PEO’s large group buying power, a level funded or self funded plan, a high deductible plan paired with an HSA, or a narrower network design. The right alternative depends on group size, workforce health, and how much administrative risk the business is willing to take on directly.
Every Michigan small business with a Q3 or Q4 2026 renewal is staring at the same letter, a double digit premium increase from Blue Cross Blue Shield of Michigan or Priority Health. Once that number lands, the instinct is to assume there are only two choices, pay it or cut coverage. In reality, Michigan small group health plan alternatives for 2026 go further than most brokers walk through in a single renewal call, and several of them can meaningfully soften the hit without gutting your benefits package.
We covered exactly what is driving these increases and who they affect in our breakdown of the 2026 Michigan small group rate hike. This article picks up where that one leaves off and walks through the actual alternatives on the table, what each one costs, who it fits, and which businesses should rule it out.
The 2026 Rate Hike, in Brief
Blue Cross Blue Shield of Michigan posted a 1.7 billion dollar underwriting loss in 2024, driven by claims exceeding 20.7 billion dollars, GLP-1 drug costs that rose 29 percent year over year, and rising outpatient care expenses. Those losses pushed its original 10 to 11 percent filing up to 13 percent for Q3 and Q4 renewals. Priority Health initially filed for increases near 9.7 percent for HMO plans, then requested a midyear bump nearly matching Blue Cross Blue Shield’s 13 percent filing. Michigan’s Department of Insurance and Financial Services ultimately approved a 9.8 percent increase for Priority Health’s small group plans.
Both carriers point to the same underlying pressure, rising claims costs and specialty drug spending, and neither increase is likely to be a one year event. That is exactly why it is worth evaluating alternatives now rather than treating this renewal as a one time hit to absorb.
Option 1: Join a PEO’s Large Group Risk Pool
A PEO moves your employees into a large group risk pool, often thousands of lives, which unlocks pricing and carrier options unavailable on the small group market. For businesses facing the 2026 rate hike, this is typically the single most effective way to reduce premium costs without shrinking coverage. It also comes bundled with shared compliance and payroll support, which our Michigan PEO vs ASO decision guide for HR managers covers in more depth. This option fits the widest range of Michigan SMBs, particularly those under 150 employees who lack the internal scale to negotiate favorable small group terms on their own.
Option 2: High Deductible Health Plans Paired with an HSA
A high deductible health plan lowers the monthly premium in exchange for a higher deductible, and pairing it with a health savings account lets employees set aside pre tax dollars to cover that gap. This combination tends to work best for younger, healthier workforces who do not expect to hit their deductible most years, and it gives employees a tax advantaged way to absorb more of the cost curve themselves. The tradeoff is real: employees with ongoing medical needs may end up paying more out of pocket before coverage kicks in fully.
Option 3: Level Funded and Self Funded Plans
Level funded and self funded plans shift some or all of the claims risk from the insurance carrier to the employer, in exchange for the potential to keep the difference when a healthy group’s actual claims come in under budget. Level funded plans include stop loss protection that caps the employer’s downside, while fully self funded plans carry more risk and are usually reserved for larger groups. This option works best for Michigan employers with a healthy, relatively stable workforce and the appetite to take on more risk in pursuit of lower long term costs.
Narrow network plans trade a smaller list of in network doctors and facilities for a meaningfully lower premium. Carriers can offer these lower rates because they negotiate deeper discounts with a smaller group of providers in exchange for directing patient volume to them. This option delivers steady, moderate savings without the risk exposure of a level funded plan, but it asks employees to confirm their current doctors are included or be willing to switch providers.
Which Alternative Fits Your Business?
The right alternative depends on your group’s size, the health profile of your workforce, and how much risk your business is willing to carry directly. The table below summarizes how the four options compare.
| Option | Best Fit | Main Tradeoff | Cost Impact |
| PEO large group pool | Most Michigan SMBs under 150 employees | Shifts some HR control to the PEO | Largest potential savings |
| HDHP with HSA | Healthier, younger workforce | Higher upfront cost for employees | Lowers premium, raises deductible |
| Level funded or self funded | Healthy groups willing to take on risk | Employer bears more claims risk | Savings if claims run low |
| Narrow network | Groups open to changing providers | Fewer doctors and facilities in network | Moderate, steady savings |
Frequently Asked Questions
How can Michigan small businesses avoid the 2026 health insurance rate hike?
No business can opt out of a carrier’s filed rate increase, but they can opt out of the small group market itself. Joining a PEO’s large group risk pool, switching to a level funded plan, or adopting a high deductible plan with an HSA are the most effective ways to soften or avoid the full hike.
How much is the Priority Health small group rate hike for 2026?
Priority Health initially filed for increases near 9.7 percent for HMO plans, then requested a midyear bump nearly matching Blue Cross Blue Shield’s 13 percent filing for Q3 and Q4 2026 renewals. Michigan’s Department of Insurance and Financial Services ultimately approved a 9.8 percent increase for Priority Health’s small group plans.
Why did BCBS Michigan raise small group rates 13 percent?
Blue Cross Blue Shield of Michigan posted a 1.7 billion dollar underwriting loss in 2024, driven by claims exceeding 20.7 billion dollars, GLP-1 drug costs that rose 29 percent year over year, and rising outpatient care expenses. Those losses pushed its original 10 to 11 percent filing up to 13 percent for Q3 and Q4 renewals.
Can a PEO lower my health insurance costs in Michigan?
Yes. A PEO moves your employees into a large group risk pool, often thousands of lives, which unlocks pricing and carrier options unavailable on the small group market. For businesses facing the 2026 rate hike, this is typically the single most effective way to reduce premium costs without shrinking coverage.
Renewing at the New Rate Is a Choice, Not a Requirement
None of these alternatives are free of tradeoffs. Level funded plans work best for healthier groups willing to take on some risk. High deductible plans shift more cost to employees upfront. Narrow networks ask your team to change doctors. But every one of them gives you more control than simply accepting a 13 percent increase because that is what showed up in the renewal packet.
The fastest way to know which alternative actually fits your business is to run the numbers against a real PEO proposal. Start with our Benefits Compliance Guide to see what shifts to DynamicHR once you make the move, and if retirement benefits are part of the conversation, see how we bundle 401(k) plans for Michigan small businesses into the same package.
Reach out to our Auburn Hills team before your renewal deadline, not after.
