Rising Health Insurance Premiums
In 2027, employers in California anticipate the highest rise in health insurance premiums in 16 years, pushing the average cost of family coverage over $30,000. This increase mirrors the price of a new compact car. A survey by PwC reveals that the cost of medical services and prescription drugs is expected to climb by 9% in 2027, the most significant rise since 2011.
Impact on Workers and Businesses
Many employers require employees to cover part of these costs. Experts suggest that rising premiums reduce wages and take-home pay. They also contribute to the rising prices of goods and services in California and nationwide. “It’s going to erode the standard of living for lots of California families,” said Glenn Melnick, a healthcare finance professor at USC. When employers allocate more to health insurance, less is available for employee wages.
Small business owners, like Camden Avery of The Booksmith in San Francisco, face challenging decisions. Premiums for their staff increased by 17% this year. To cope, owner Christin Evans reduced staff hours and store hours. “We have to absorb it,” she said. “We’re not paying the wages we want to pay or delivering the customer service we’d like to deliver.”
Health Insurance in California
Seventeen million Californians receive employer-sponsored health benefits. These premiums have risen faster than the national average. From 2022 to 2025, average family premiums in California climbed by 24% to $28,397, nearly doubling the 12.2% rise in consumer prices during that time. Hospital, pharmaceutical, and medical costs accelerated even more after 2025.
Contributing Factors
Pivotal factors in rising medical costs include high prices from hospitals. Organizations like UCLA and Cedars-Sinai have expanded by purchasing hospitals and clinics, reducing competition and dictating prices to insurance companies. A 2022 study showed for-profit system prices rose faster than nonprofit ones, which include Cedars.
Another factor is the increased cost of prescription drugs. Spending on cancer drugs, a costly category, reached $143 billion in 2025, growing 12% annually. The nation’s expenditure on obesity medications, such as Ozempic and Wegovy, surged by 81% last year. Although manufacturers claim these drugs prevent other expensive conditions, data showing cost savings is scarce.
Further Challenges
The California Healthcare Foundation reported in 2022 that 25 cents of every healthcare dollar in the state goes to profits, red tape, and waste rather than patient care. Another reason for rising premiums is new taxes agreed upon by Gov. Gavin Newsom and lawmakers in June to support Medi-Cal programs. These taxes could add $400 to the cost for a family of four next year if approved by the Trump administration.
Families purchasing insurance on state marketplaces like Covered California are also expected to see higher premiums in 2027. Many experienced double-digit increases this year due to ending pandemic-related subsidies. This led nearly 400,000 Californians to drop their plans as costs soared.
Adjustments by Employers
Some employers adjust their health plans to shift expenses to workers by increasing deductibles and co-pays. According to a Mercer survey, 22% of chief financial officers halted hiring or enacted layoffs due to expensive benefits. Many smaller businesses, with thin margins, either add customer fees or raise menu prices to cover costs, worsening inflation for consumers.
Some companies switch to bronze plans, which lower employer costs but decrease employee benefits. Others opt to hire overseas due to more affordable labor and benefits. Melnick emphasizes the need to review the W-2 tax form for premium costs as rising premiums take a substantial toll on wages.
“The base is so high that even a small increase has a big impact,” said Melnick, referring to his family’s $45,000 premiums. He warns that the continual rise in premiums is “bad news for everybody.”