Health insurers faced growing pressure in the Individual and Small Group markets in 2025 as medical costs rose faster than premiums, creating losses and prompting employers to reconsider how they offer health benefits.
The Individual health insurance market recorded a $5.5 billion underwriting loss in 2025, while the Small Group market reported a $507.5 million loss, according to an analysis from Mark Farrah Associates, using data from the National Association of Insurance Commissioners’ Supplemental Health Care Exhibit.
The results reflect a challenge employers and employees are both facing: the cost of healthcare continues to rise, putting pressure on traditional coverage models.
In the Individual market, enrollment declined slightly to 21.3 million members in 2025, down from 21.5 million the previous year. Medical claims increased 11.4% on a per-member, per-month basis, rising from $493 in 2024 to $549 in 2025.
Premiums also increased, but at a slower pace. Average Individual premiums grew 3.1% in 2025 to $577 per member per month.
See also: Even insured Americans are struggling to afford healthcare, study finds
Individuals, small firms both feeling cost pressures
For consumers purchasing their own coverage, the combination of higher medical costs and rising out-of-pocket expenses contributed to enrollment declines, according to the report.
The pressure was also felt among small employers.
Small Group enrollment fell 7.9% in 2025 to 7.3 million members, continuing a longer-term decline. Since 2022, the Small Group market has lost more than 1.9 million members.
The decline is not simply because employers are abandoning benefits. Instead, many small businesses are looking for different ways to provide coverage as traditional group plans become more expensive.
According to Mark Farrah Associates, some employers have shifted toward options such as level-funded plans and Individual Coverage Health Reimbursement Arrangements.
Level-funded plans allow employers to pay a predictable monthly amount while taking on some responsibility for claims costs, with protections in place for unusually high medical expenses. ICHRAs allow employers to provide employees with funds they can use toward individual health plans rather than offering one group plan to the entire workforce.
Those alternatives can give smaller employers more control over costs while still providing workers with financial support for health care coverage.
Claims costs continued to rise across the Small Group market as well. Average medical claims expenses increased 10% in 2025, climbing from $537 to $590 per member per month. Premiums increased as well, rising 7.2% to $659 per member per month.
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