CALIFORNIA — The average cost of family health coverage for California employers is projected to exceed $30,000 in 2027. The increase reflects a convergence of rising medical expenses, new state taxes on private health plans, and broader pressures that are straining business operations and household budgets across the state.

Health insurance companies anticipate that the cost of medical services and prescription drugs will rise by 9% in 2027, according to the PwC annual survey of insurers. That projected increase is the highest recorded by PwC researchers since 2011. Between 2022 and 2025, California employer family premiums already surged by 24%, reaching $28,397—nearly double the 12.2% rise in consumer prices over the same period.

Governor Gavin Newsom and California lawmakers agreed in June 2026 to raise taxes on private health plans to help fund Medi-Cal and balance the state budget. The California Association of Health Plans estimates the new tax will cost each insured person $100 next year, or $400 for a family of four. However, the tax still requires approval from the Trump administration, and in July 2026, Republicans in the California State Assembly wrote a letter urging federal officials to deny the request.

Christin Evans, owner of the Booksmith in San Francisco, said health insurance premiums for her staff rose by 17% in 2026. The monthly premium for her four employees totals $3,250. To manage costs, Evans reduced staff hours by closing the store earlier.

"We have to absorb it. We’re not paying the wages we want to pay or delivering the customer service we’d like to deliver," she said.

Glenn Melnick, USC professor of healthcare finance, stated that when employers spend more on health insurance, less money is available for wages. "It’s going to erode the standard of living for lots of California families," Melnick said. His remarks come as 374,000 Californians canceled their health insurance coverage in the first three months of 2026.

National trends contribute to California’s rising costs. Spending on cancer drugs hit $143 billion in 2025, a 12% annual increase. Nationwide spending on obesity medicines—including GLP-1 drugs such as Ozempic and Wegovy—jumped 81% in 2025.

A 30-day supply of these drugs lists for more than $1,000, and a Gallup survey found 11% of U.S. adults are taking them for weight loss. The California Healthcare Foundation estimated that 25 cents of every healthcare dollar spent in the state—over $73 billion annually—goes to excessive profits, administrative red tape, and other waste rather than patient care.