California Residents Grapple with Rising Health Insurance Costs
For Kirk Vartan, the monthly cost of health insurance is a source of frustration. He pays over $2,000 a month for a high-deductible plan from Blue Shield through Covered California, the state’s Affordable Care Act marketplace. Despite the expense, he chose this plan to ensure his wife could continue seeing her preferred doctor.
“It’s for the two of us, and we’re not sick,” Vartan said, general manager at A Slice of New York pizza shops in the Bay Area. “It’s ridiculous.”
Vartan’s experience reflects a broader trend: millions of Californians are struggling to keep up with health insurance premiums that are climbing faster than inflation. A 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 over the last 15 years, from just over $1,000 in 2008 to almost $2,000 in 2023. This increase outpaces the rate of inflation by a considerable margin.
The rising cost is not confined to California. From 2008 through 2023, average premiums for families with employer-provided health coverage grew just as fast nationally as they did in California, federal data indicates. According to KFF, premiums continued to climb rapidly in 2024.
Small-business groups express concern that the problem could worsen for workers whose employers don’t provide coverage, especially if Congress fails to extend enhanced federal subsidies. These subsidies make health insurance more affordable on individual markets like Covered California, which insures over 1.9 million Californians. Premiums on Covered California have increased by about 25% since 2022, roughly double the inflation rate. However, subsidies, both state and federal, help nearly 90% of enrollees manage high costs, with many families paying little or nothing.
The rise in premiums also affects government employees and taxpayers. At CalPERS, which provides insurance to more than 1.5 million active and retired public employees and their families, premiums have jumped about 31% since 2022. Public employers share the premium cost as a result of negotiations with labor unions, with workers covering the remainder.
“Insurance premiums have been going up faster than wages over the last 20 years,” said Miranda Dietz, a researcher at the UC-Berkeley Labor Center who focuses on health insurance. “Especially in the last couple of years, those premium increases have been pretty dramatic.” According to Dietz, rising hospital prices are a primary cause. From 2009 through 2024, consumer costs for hospitals and nursing homes increased by about 88%, about double the overall inflation rate, according to Labor Department data. Furthermore, the growing cost of administering America’s complex health care system contributes to higher premiums, she noted.
Even though insurance companies remain highly profitable, KFF research shows that their gross margins – the amount by which premium income exceeds claims costs – have been relatively steady in recent years. Federal regulations require insurers to spend a minimum percentage of premiums on medical care.
Rising insurance costs are putting a strain on family incomes and creating hardships for small businesses. In 2023, according to the U.S. Department of Health and Human Services, the average annual cost of family health insurance offered by private sector companies in California was around $24,000, or approximately $2,000 a month. On average, employers paid about two-thirds of the bill, and workers paid the remaining third, around $650 a month. Worker contributions to premiums have grown faster in California than in the U.S. as a whole.
Many small-business employees who lack employer-provided healthcare turn to Covered California. According to the Employee Benefit Research Institute, over the last three decades, the proportion of businesses nationwide with 10 to 24 employees that offer health insurance fell from 65% to 52%. Additionally, coverage for businesses with fewer than 10 employees dropped from 34% to 23%.
“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,” said Bianca Blomquist, California director for Small Business Majority. Small Business Majority is an advocacy group representing over 85,000 small businesses across the U.S.
Kirk Vartan said his pizza shop employs about 25 people and operates as a worker cooperative. Being a worker cooperative, the small business has less power to negotiate discounts with insurance companies to cover its workers. According to Vartan, the best plans available were costly and would make it hard for the cooperative to operate. These plans didn’t offer the same coverage as workers could find through Covered California.
“It was a lose-lose all the way around,” Vartan said.
Mark Seelig, a spokesperson for Blue Shield of California, stated that rising costs for hospital stays, doctor visits, and prescription drugs drive up premiums. Blue Shield has unveiled a new initiative aimed at lowering drug prices and passing the savings on to consumers.
Even at California companies that do provide insurance, the percentage of employees enrolled in plans with a deductible has roughly doubled in 20 years, reaching 77%, federal data shows. Deductibles represent the amount a worker must pay for most types of care before insurance coverage begins.
The UC Berkeley Labor Center reports that the average annual deductible for an employer-provided family health insurance plan was about $3,200 in 2023. During the last two decades, the cost of health insurance premiums and deductibles in California increased from about 4% of median household income to about 12%. As a result, the center found that many Californians are delaying or foregoing health care, including some preventive care.
California is attempting to alleviate health care costs by implementing statewide spending growth caps, which state officials hope will curb premium increases. The state recently established the Office of Health Care Affordability, which set a five-year target for annual spending growth at 3.5%, decreasing to 3% by 2029. Healthcare organizations could face hefty fines for not meeting these targets, although it is likely that this will not begin until 2030 or later. According to Dietz, other states with similar caps have seen slower health care cost growth than states without them.
“Does that mean that health care becomes affordable for people?” Dietz asked. “No. It means it doesn’t get worse as quickly.”
