2026 Open Enrollment: What California Employers Need to Know

If you're a California employer with a renewal coming up this year, you've probably already gotten the letter. The number is higher than last year. Maybe a lot higher. And your first instinct might be to just sign it and move on because you've got a business to run.

I'd encourage you to pause before you do that. The 2026 renewal season has more moving parts than usual, and there are real opportunities to manage costs if you know where to look. This article covers what we're seeing across our book of business and what you can do about it.

Rate Trends for 2026: Why Everything Costs More

Let's start with the headline: medical rates in California's small group market are up 6-9% on average for 2026. That's not a typo, and it's not an outlier. It's the new normal, at least for now.

Why? Three things are driving it.

Post-pandemic utilization rebound. During COVID, people deferred care. Skipped screenings. Postponed surgeries. That's all catching up now. Carriers are seeing higher claims volumes across the board, and those costs flow directly into your premiums.

Specialty drug costs. The pharmacy line item on carrier financials has exploded. Biologics, gene therapies, and cancer treatments that cost six figures per patient per year are becoming more common, not less. A single high-cost claimant can move the needle for an entire small group pool.

GLP-1 medications. This is the big one everyone's talking about. Ozempic, Wegovy, Mounjaro, and their cousins have gone from niche diabetes drugs to mainstream weight-loss treatments. The demand is enormous, the costs are significant, and carriers are still figuring out how to price for them. Some are covering them broadly, others are adding prior authorization requirements or formulary restrictions. Either way, it's showing up in your rates.

Plan Design Changes Worth Watching

Rates get all the attention, but plan design changes can have just as much impact on what your employees actually experience when they use their benefits.

Copay and coinsurance adjustments. Several carriers have quietly adjusted cost-sharing structures for 2026. You might see the same plan name on your renewal, but the specialist copay went from $60 to $75, or the coinsurance on outpatient surgery shifted from 20% to 30%. Read the fine print. These changes affect your employees directly.

Narrower networks are back. The trend toward “skinny” networks never really went away, but it's accelerating. Carriers are offering meaningful premium savings on plans that restrict you to a tighter set of providers. For some groups, this works great. For others, it means employees lose access to doctors they've been seeing for years. We always map your employees' current providers against any new network before recommending a switch.

HDHP/HSA plans gaining traction. High-deductible health plans paired with Health Savings Accounts continue to grow in the small group market. The combination of lower premiums and tax-advantaged savings is compelling, especially for younger, healthier workforces. If you haven't looked at adding an HDHP option alongside your traditional plan, 2026 might be the year.

Covered California plan standardization. If you're on Covered California for Small Business (CCSB), be aware that plan designs are standardized across metal tiers. You can still choose between carriers, but the benefit structures within each tier are largely identical. This makes apples-to-apples comparison easier, but it also means your main lever for savings is carrier selection, contribution strategy, and tier mix.

Compliance Updates You Can't Ignore

Nobody gets excited about compliance. But getting it wrong is expensive and stressful, so here's what you need to know for 2026.

ACA affordability threshold. The IRS adjusts the affordability percentage every year. For plan years beginning in 2026, the employee's required contribution for self-only coverage can't exceed a set percentage of their household income for the plan to be considered “affordable” under the ACA. If your contribution strategy hasn't been reviewed since you set it up, now's the time. Getting this wrong can trigger penalties under the employer mandate.

PCORI fee deadlines. The Patient-Centered Outcomes Research Institute fee is still a thing, and it's still due annually for self-funded plans and HRAs. Mark your calendar and make sure your TPA or carrier is handling it. The fee amount adjusts each year.

Form 1095-C reporting. If you're an Applicable Large Employer (50+ full-time equivalent employees), you're required to furnish 1095-C forms to employees and file with the IRS. The deadlines and penalty amounts continue to increase. Even if you've been doing this for years, double-check that your reporting is accurate. The IRS has gotten more aggressive about enforcement.

ERISA wrap document requirements. If you offer benefits through multiple carriers, you likely need an ERISA wrap SPD (Summary Plan Description) that ties everything together into a single plan document. Many employers don't have one, and it's technically a compliance gap. We provide wrap documents for all of our group clients as part of our standard service.

Your Open Enrollment Timeline

One of the most common mistakes we see is employers starting the process too late. By the time you get your renewal letter, you've often already lost weeks you could have been using to explore options. Here's the timeline we recommend:

• 90 Days OutContact your broker. This is when we start pulling market data, requesting quotes from competing carriers, and reviewing your current plan performance. If you don't have a broker, or your current broker isn't proactively reaching out to you at this stage, that tells you something.
• 60 Days OutReview the market analysis. By now, you should have a side-by-side comparison of your renewal vs. alternative options. This includes plan designs, networks, rates, and total cost modeling for your specific census. We build interactive models that let you see exactly how different contribution strategies affect your bottom line and your employees' paychecks.
• 30 Days OutFinalize plan selection and contribution strategy. Decide which plans to offer, how much the company will contribute, and whether you're changing carriers. Lock in your decision so there's time for paperwork and enrollment setup.
• 2 Weeks OutEmployee communications. Give your team clear information about what's changing, what their costs will be, and what they need to do. We provide enrollment guides and can schedule employee meetings (in-person or virtual) to walk through options.
• Effective DateEnrollment complete. All elections submitted, new ID cards ordered, payroll deductions updated. You should be able to start the new plan year without scrambling.

What Employers Should Do Right Now

If you take one thing away from this article, let it be this: don't just accept the renewal.

Your renewal letter is a starting point, not a final answer. It's the carrier's best guess at what they think you'll pay without pushing back. And most of the time, there are better options available if you're willing to look.

Shop the market. Even if you love your current carrier, get competitive quotes. You need to know what the alternatives look like to have any leverage. We typically pull quotes from 8-10 carriers for every client renewal.

Model different contribution strategies. The way you split costs between the company and employees matters as much as the plan you choose. A small change in contribution percentages can save thousands annually without meaningfully impacting employees. Our benefits modeler lets you see these tradeoffs in real time.

Consider plan design changes. Maybe you've been offering a Gold PPO for five years and it's time to add a Silver HDHP option for employees who want lower premiums. Or maybe your current plan has an out-of-network benefit nobody uses and switching to an HMO would save 10%. These are the conversations we have with clients every day.

Start early. The employers who get the best outcomes are the ones who give themselves time. If your renewal is in Q3 or Q4, now is exactly the right time to start the conversation.

The best time to review your benefits strategy was three months before your renewal. The second best time is today.