{"id":12384155,"date":"2025-12-27T05:00:25","date_gmt":"2025-12-27T13:00:25","guid":{"rendered":"https:\/\/www.mercurynews.com\/?p=12384155"},"modified":"2025-12-28T00:33:31","modified_gmt":"2025-12-28T08:33:31","slug":"workplace-health-insurance-spike","status":"publish","type":"post","link":"https:\/\/www.mercurynews.com\/2025\/12\/27\/workplace-health-insurance-spike\/","title":{"rendered":"Health insurance costs spike for California businesses, workers after pandemic"},"content":{"rendered":"

The cost of employer-sponsored health insurance in California rose at twice the pace of inflation over the past three years, squeezing workers’ paychecks and small businesses alike.<\/p>\n

More than 17 million Californians have health insurance through their job<\/a>, according to a survey released in November by the health information group KFF. The average cost of premium payments for an employee’s family plan rose 24% to $28,400 a year, the survey found. Meanwhile, the national inflation rate was 12%, and wages grew by 14%, KFF wrote.<\/p>\n

Health insurance premiums have risen year after year for decades. But costs spiked after the start of the COVID-19 pandemic, driven by industry consolidation, increasing use of Ozempic and similar weight-loss drugs and other factors, according to KFF. Together, these forces are putting pressure on families and businesses, while some major health insurance providers in California continue to post profits.<\/p>\n

\u201cPeople are paying more and more, it\u2019s taking up more and more of their family budgets, and they\u2019re getting less,\u201d said Miranda Dietz, who leads UC Berkeley Labor Center’s health program.<\/p>\n

Along with rising premiums, more California employees also face increasing out-of-pocket costs. Workers bear indirect costs, too, Dietz said. As businesses spend more on health plans, they spend less on wages and other benefits<\/span>, she said. She cited a study that concluded the average family with employer-sponsored health insurance would have earned nearly $9,000 more in 2019<\/a> if the cost of care hadn’t increased disproportionately since the late 1980s.<\/p>\n

Under the Affordable Care Act, businesses with at least 50 full-time equivalent employees must offer health insurance coverage that meets affordability and care requirements, or face fines. Workers and businesses split the cost, and in practice, businesses shoulder most of the burden: employers pay about three-quarters of a family plan premium, on average, and about 85% of single plans, according to KFF.<\/p>\n

\"Co-owner
Co-owner Christin Evans works at The Booksmith on Haight Street in San Francisco, Calif., on Wednesday, Dec. 24, 2025. Evans provides four of her employees with 100% free health insurance. (Jane Tyska\/Bay Area News Group) <\/figcaption><\/figure>\n

At the independent bookstore Booksmith in San Francisco’s storied Haight-Ashbury neighborhood, owner Christin Evans said four of her employees qualify for health benefits. She said she covers the full cost of her workers’ Kaiser Permanente care \u2014 one of her “top expenses” of doing business.<\/p>\n

Her costs are rising, she said, by about 17% \u2014 to $3,250 each month in 2026 from $2,776 in 2025. Last year, premiums rose 7.5%, she said.<\/p>\n

“Many small business owners will likely decide to cut benefit offerings and reduce wages,” said Bianca Blomquist, director of the advocacy group Small Business Majority California, in an email. “While some entrepreneurs may even close up shop and go work for someone else, mainly so they can access quality health insurance.”<\/p>\n

\"ChartFaced with high health insurance costs, owners could be unable to make other investments in their businesses, she said.<\/p>\n

Matthew Rae, associate director of KFF’s health care marketplace program, led the California survey. Between January and July 2025, KFF oversaw interviews with 460 employee benefit managers at companies based in California or with workers here.<\/p>\n

In an interview, Rae pinned part of the cost spike on the pandemic, which officially ended in May 2023. During the worst days of the pandemic, in 2020 and 2021, insurance costs grew slowly as patients delayed serious care, he said.<\/p>\n

Then “pent-up” need for care arrived, inflation nationally drove up prices and health care workers fought for better pay and benefits, Rae said.<\/p>\n

In California, Gov. Gavin Newsom signed a law in 2023 setting separate minimum wages for health care employees, which reached $24 per hour at hospitals with 10,000 or more full-time employees this year. (The state’s general minimum wage is $16.50 per hour.)<\/p>\n

Meanwhile, more Californians began using expensive GLP-1s such as Ozempic or Wegovy to manage diabetes and lose weight, Rae said. The hospital industry became more consolidated nationally, he said, which contributes to rising costs by reducing competition. More than 400 hospital and health system mergers were announced from 2018 to 2023, KFF said.<\/p>\n