California Health Insurance Premiums Surge, Burdening Families and Employers
California families are grappling with soaring health insurance premiums that continue to outpace inflation, according to a recent KFF Health News analysis. This trend is placing a significant financial strain on both individuals and employers across the state.
Kirk Vartan, a general manager at A Slice of New York pizza shops in the Bay Area, pays over $2,000 a month for a high-deductible health insurance plan through Covered California, the state’s Affordable Care Act marketplace. While he could have chosen a cheaper option, he opted for a plan that included his wife’s doctor. “It’s for the two of us, and we’re not sick,” Vartan stated. “It’s ridiculous.”
Vartan’s experience mirrors that of millions of Californians struggling to manage skyrocketing health insurance costs. The KFF Health News analysis of federal data shows that average monthly premiums for families with employer-provided health coverage in California’s private sector nearly doubled between 2008 and 2023, jumping from just over $1,000 to almost $2,000. This increase far exceeds the rate of inflation over the same period, and employees are absorbing a larger portion of the cost.
The problem isn’t limited to California. National data reflect a similar trajectory: average premiums for families with employer-provided health coverage grew at the same rapid pace nationwide as they did in California from 2008 to 2023. KFF reports premiums continued to climb in 2024.
Small business advocacy groups have raised concerns that the situation could worsen if Congress doesn’t extend enhanced federal subsidies. These subsidies make health insurance more affordable in individual markets like Covered California, which insures over 1.9 million Californians.
Since 2022, premiums on Covered California have risen approximately 25%, about twice the rate of inflation. However, the exchange helps nearly 90% of enrollees offset high costs through state and federal subsidies, based on income, often leaving families with little or no out-of-pocket expenses. Rising premiums are also affecting government workers and taxpayers. CalPERS, which provides insurance to over 1.5 million active and retired public employees and their families, has seen its premiums increase around 31% since 2022. Public employers share in the cost of premiums, as negotiated with labor unions, with workers paying the remainder.
“Insurance premiums have been going up faster than wages over the last 20 years,” said Miranda Dietz, a researcher at the University of California-Berkeley Labor Center who focuses on health insurance. “Especially in the last couple of years, those premium increases have been pretty dramatic.”
Dietz attributes the rising costs primarily to the price of hospitalization. From 2009 through 2024, consumer costs for hospitals and nursing homes rose approximately 88%, which is approximately double the overall inflation rate according to information from the Department of Labor. The rising expenses of running the American healthcare system have further inflated premiums, she added.
While insurance companies remain profitable, their gross margins — the difference between premium income and claims costs — have remained relatively stable in recent years, according to KFF research. Federal regulations mandate that insurers spend a minimum percentage of premiums on medical care.
In 2023, the average annual cost of family health insurance offered by private sector companies came to about $24,000, or roughly $2,000 a month, in California, according to the U.S. Department of Health and Human Services. On average, employers pay around two-thirds of the bill, and employees pay around one-third, or roughly $650 per month. The growth of workers’ share of premiums has outpaced the rest of the nation.
Many workers in small businesses that do not offer health insurance are turning to Covered California to find coverage. The Employee Benefit Research Institute reports that the percentage of businesses nation-wide with 10 to 24 workers providing health insurance fell from 65% to 52% over the past three decades. Coverage decreased from 34% to 23% among businesses with fewer than 10 employees.
“When an employee of a small business isn’t able to access health insurance with their employer, they’re more likely to leave that employer,” stated Bianca Blomquist, California director for Small Business Majority, an advocacy group representing over 85,000 small businesses across the United States.
Kirk Vartan’s pizza shop operates as a worker cooperative and employs roughly 25 people. The small business lacks the negotiating power to secure discounts from insurance companies to cover its workers. Vartan said the best his shop could provide were costly plans that would hinder the operation. These plans wouldn’t offer as much coverage as employees could secure for themselves independently via Covered California. “It was a lose-lose all the way around,” he remarked.
Mark Seelig, a spokesperson for Blue Shield of California, said that increases in patient costs for doctor visits, prescription drugs, and hospital stays place upward pressure on premiums. A new initiative, Blue Shield is designing to lower drug prices, and they plan to pass on savings to consumers.
Federal data reveals that the percentage of employees enrolled in plans with a deductible has approximately doubled in the last 20 years, reaching 77% at California companies that offer insurance. Deductibles determine the amount a worker must pay for most kinds of health care before their insurance company starts contributing to costs. In 2023, the average annual deductible for an employer-provided family health insurance plan was about $3,200.
According to the UC Berkeley Labor Center, which studies labor and employment issues, the cost of health insurance premiums and deductibles in the last couple of decades increased from about 4% of median household income to about 12% in California. As a result, the center found, several Californians are delaying or forgoing health care, including some preventive care.
California is taking steps to reduce healthcare costs by instituting statewide spending growth caps. State officials are hoping that this will curb future premium increases. They recently established the Office of Health Care Affordability, which has a five-year goal for an annual rise in spending set at 3.5%, dropping to 3% by 2029. Failure to accomplish these goals may lead to significant fines for healthcare organizations. But that would likely not occur until 2030 or later.
Dietz mentioned that other states which adopted similar caps saw healthcare costs rise more slowly compared to states that did not. “Does that mean that health care becomes affordable for people?” she questioned. “No. It means it doesn’t get worse as quickly.”
This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.
