employer

Employers are bracing for what could be the highest rise in health insurance premiums in 16 years in 2027, driving up the average cost of family coverage in California to more than $30,000 — the price of a new compact car.

Health insurance companies expect the cost of medical services and prescription drugs to soar by 9% in 2027, according to a new survey by PwC, the highest rise the researchers have found since 2011. Insurers use those expected medical costs to calculate the price of premiums in the coming year. Many employers require workers to pay part of that cost.

Experts say the escalating costs of employers’ premiums are reducing workers’ wages and take-home pay, while raising the prices of goods and services in California and across the country.

“It’s going to erode the standard of living for lots of California families,” said Glenn Melnick, a USC professor of healthcare finance.

Melnick said when employers are forced to spend more on health insurance, there is less money available for wages. The skyrocketing premiums, he said, are like a hidden pay cut for working families.

The higher cost also has small-business owners wondering whether they can continue paying for their workers’ health insurance.

Co-owner Camden Avery makes a sale at the Booksmith in San Francisco.

(Josh Edelson / For The Times)

This year, premiums for staff at the Booksmith, an independent bookstore on Haight Street in San Francisco, leaped by 17%, said Christin Evans, the store’s owner. Next year could bring even more pain. The monthly premium for four employees is $3,250.

To try to cope, Evans said, she has reduced staff hours by closing the store earlier.

“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.”

Seventeen million Californians receive health benefits from an employer. Those premiums have been rising faster in California than the national average.

Between 2022 and 2025, the average family premium for employers in the state rose by 24% to $28,397, according to a survey by KFF and the California Healthcare Foundation. That was nearly double the 12.2% increase in consumer prices during those years.

Hospital, pharmaceutical and other medical costs escalated even faster after 2025.

PwC’s annual survey of insurers last year found an expected rise of 8.5% in 2026, which its researchers later revised to 9%.

A key driver of the rising medical costs, according to experts, is prices charged by hospitals. In recent years, some health systems, including UCLA and Cedars-Sinai, have grown larger by buying nearby hospitals and expanding their clinics, becoming more dominant in the community and reducing competition.

Melnick said the expansion of some health systems into giant organizations means that they can “tell insurance companies what the price will be.”

A Cedars-Sinai spokesperson pointed to a 2022 paper that found that for-profit health system prices had escalated faster than those at nonprofit systems like Cedars. The paper was partly funded by Cedars.

“Cedars-Sinai Health System’s growth in recent years has expanded access to the highest levels of patient care and medical innovation across the Los Angeles region,” the spokesperson said.

UCLA did not respond to requests for comment.

Another factor is the rising cost of prescription drugs. Spending on cancer drugs, the most costly category, reached $143 billion in 2025, an annual increase of 12%, the PwC survey found.

The nation’s spending on obesity medicines, including GLP-1 drugs such as Ozempic and Wegovy, soared by 81% last year, PwC said. A 30-day supply of the drugs lists for more than $1,000.

An Ozempic injection pen.

(Christina House / Los Angeles Times)

Gallup said this month that its survey found that 11% of U.S. adults are now taking the GLP-1 drugs for weight loss.

The obesity drug manufacturers say the medicines can reduce medical expenses by preventing other costly conditions such as diabetes and heart disease, but data don’t yet show such reductions, PwC said.

Researchers at the California Healthcare Foundation say a large part of the problem is that hospital operating costs, prescription drug prices and doctor fees have been allowed to grow unchecked for decades.

The foundation estimated in a report last year that 25 cents of every dollar spent in California — more than $73 billion each year — does nothing to help patients. Instead it goes to excessive profits for providers, administrative red tape and other waste, the foundation found.

California employer premiums are expected to rise next year for another reason: Gov. Gavin Newsom and lawmakers agreed in June to raise taxes on the private plans to help pay for the cost of Medi-Cal, which covers the medical costs for the poor, and to help balance the state budget.

The California Assn. of Health Plans said insurers will add the tax to next year’s premiums. The trade group estimates the higher tax will cost each insured person $100 next year or $400 for a family of four.

The higher tax must still be approved by the Trump administration. Republicans in the state Assembly wrote a letter to the administration this month, asking officials to deny the request.

Researchers also expect a jump in premiums for families without employer insurance who purchase policies on state marketplaces such as Covered California. Some of those families faced double-digit increases this year because of rising medical costs and the end of enhanced federal subsidies that Congress had approved as a temporary measure during the pandemic. Almost 400,000 Californians dropped their Obamacare plans this year as prices soared.

To deal with the higher premiums, some employers are changing the design of their health plans to shift more of the cost to workers by raising deductibles and co-pays.

Those higher out-of-pocket costs are just the beginning of the fallout. Twenty-two percent of chief financial officers surveyed by Mercer in February said the high price of health benefits had forced them to stop hiring or led to layoffs. Thirty-six percent of those executives said the rising premium costs have harmed workers’ wages and raises.

Candice Elliott, a human resources consultant in Santa Cruz, said smaller businesses such as restaurants struggle to find ways to cover the higher costs.

Many restaurants, Elliott said, already have a slim margin between their revenues and expenses. When premiums rise, she said, some restaurants have added a fee to the customer bill to help cover workers’ health costs. Others have hiked menu prices.

“That impacts affordability for the consumer,” Elliott said. “It makes inflation greater.”

Some small businesses have moved from so-called silver plans to the lower-priced bronze plans, she said, which cover less of the employee’s monthly premium. “It’s effectively a decrease in pay for the employee,” she said.

Others are hiring employees overseas, Elliott said. “You can pay someone in the global south half of what you pay an American and still afford them a good standard of living and benefits that are unaffordable in the U.S.,” she said.

Melnick, the USC professor, said many workers don’t realize how much they are losing as their employers’ premiums rise. He tells people to look at their W-2 tax form from last year, where employers are required to report the cost of the employee’s premium in box 12, under “Code DD.”

He said USC’s premium for his family of four is $45,000.

“The base is so high that even a small increase has a big impact,” he said. The continuing annual increases, he said, are “bad news for everybody.”

New Jersey is launching a new fee on companies whose workers have Medicaid health coverage instead of being covered by their employers. Other states are considering it, too.

Democratic lawmakers and governors see it as a way to help pay for the joint federal and state insurance program that covers low-income residents as federal policy changes are expected to make the program more expensive for states and may lead to a reduction in the number of people with coverage.

Proponents also say it’s about fairness because employers benefit from having some lower-income workers with taxpayer-funded health coverage.

Business groups object. So do some liberal policy organizations.

New Jersey is putting the fee in place

New Jersey Gov. Mikie Sherrill signed a measure Tuesday night to charge employers that have at least 50 workers covered by Medicaid, and the state budget she approved earlier in the week counts on raising $145 million this year from the program.

Under the plan, companies will be billed for each employee and employees’ dependent receiving Medicaid, the joint state-federal insurance program.

The fees per person would start at $325 a year for companies with 50 to 249 Medicaid beneficiaries and top out at $725 annually for employers with at least 500 recipients.

A bill passed this week in California doesn’t impose a charge now, but it does direct the state administration to present lawmakers options for doing so next year.

Finishing the job would fall to the successor of Gov. Gavin Newsom, a Democrat who is leaving office in January. Democratic gubernatorial candidate Xavier Becerra has made an employer charge part of his election platform.

State Sen. John Laird, a Democrat who sponsored the California proposal, said the big tax and policy law President Trump signed a year ago was a major factor in the need for action because it could prompt the state to spend more on Medicaid to plug holes left by federal changes.

The nonpartisan Congressional Budget Office expects more than 10 million people will be uninsured because of the law by 2034. It requires some beneficiaries to work, be in school or volunteer — and requires even more to document whether they meet the requirements.

Most employees at the bigger companies would not be at risk of losing Medicaid coverage as long as they’re working at least 20 hours a week.

Laird also said there’s an equity issue involved.

“If you’re a small business person in California, you are quite likely paying for health insurance for your employees. And through your taxes, you’re paying for health insurance for some of the biggest employers in California,” he said. “And that’s not fair.”

Legislation with similar intents passed one legislative chamber in both Colorado and Oregon this year, but neither made it to law. A measure was also introduced in Washington.

Connecticut Gov. Ned Lamont, a Democrat who is seeking a third term in November’s election, has called for the same move there with the idea of making it a part of the state budget that would kick in two years from now.

Opposition comes from business and some liberal groups

It’s no surprise that business organizations have criticized the approach, which would add to their expenses.

“The fact remains that many job-creators are still going to be penalized for something they have no control over,” Christopher Emigholz, the chief government affairs officer at the New Jersey Business and Industry Assn., said in a statement. “If an employee declines an employer-provided health plan because they’d rather be on Medicaid, it is unfair to penalize the employer for that employee’s decision.”

Some left-leaning policy organizations also oppose the charges.

Gideon Lukens, who analyzes health policy at the left-leaning Center on Budget and Policy Priorities, said that while the idea may be well-intentioned, it could lead companies to employ fewer people from low-income household or single parents. He said companies could also consider the policy in decisions about whom to hire or lay off — and also on where to locate or how many workers to employ.

And, he said, it could make employees — or potential employees — less likely to enroll in Medicaid knowing it would make them less attractive to employers.

“Usually, when I see a tax on something it’s going to discourage whatever being taxed,” he said in an interview.

New Jersey’s legislation tries to address some of the concerns. It would exempt temporary, seasonal and part-time employees. It would also bar employment decisions based on a workers’ Medicaid status.

Charging companies whose workers are covered by Medicaid isn’t a new idea. At least two states have previously enacted it, and it’s been proposed in Congress.

Massachusetts lawmakers in 2017 adopted a charge on employers up to $750 per nondisabled worker who was covered through Medicaid or a state-subsidized health exchange plan. The program began in 2018 was not renewed when it expired the next year.

An even earlier policy in Maryland, in 2006, immediately affected only Walmart. An industry group challenged it in court and won, stopping the fees.

The latest generation of proposals may avoid that legal pitfall by not referencing those health plans in the legislation.

Mulvihill writes for the Associated Press.

The union representing workers employed by the Writers Guild of America have reached an agreement on their first contract, ending a strike that lasted nearly three months.

The pending contract includes seniority and layoff protections, higher wages and outlines provisions for progressive discipline and a stepped grievance process, the Writers Guild Staff Union said in a statement Friday.

The union represents 116 members, who work in areas including legal, communications and residuals. They will vote on proposed contract in the coming days.

“Once ratified, the WGSU strike will end and Writers Guild staff will return to doing what we do best: defending the writers’ hard-fought gains and helping them build collective power,” the WGSU Bargaining Committee said in a statement.

WGA also said in a statement that they “are pleased to have reached a tentative agreement” with the union for its first collective bargaining agreement.

If ratified, members would see a minimum of 12% increases in pay for all Writers Guild staff over the course of the three year term. The salary floor would rise from $43,000 to $57,000. The staff would also see better protections against AI.

The strike began in February, weeks before the WGA was set to enter negotiations with the major studios, with the workers accusing their employer of bargaining in bad faith.

Over the last several months, tensions have been high between the two unions. In March, WGA had to cancel its Los Angeles-based award show, as it could “not ask our members or guests to cross a picket line.” The staffers also lost access to their healthcare in April, as they were no longer eligible.

Last month, Hollywood writers officially ratified their newest contract with the Alliance of Motion Picture and Television Producers, with more than 90% voting in favor of the deal. The union represents 11,000 members.