Covered Calif. Premium Increase Underscores Need to Make Healthcare More Affordable for Small Businesses

“Covered California’s announced preliminary weighted average rate increase of 10.3 percent for 2026 is another setback for small businesses that are already struggling under the weight of ballooning healthcare costs. And in places like San Bernardino and Riverside Counties, some of the most under-resourced areas in the state, the preliminary premium increase is more than 12%. These increases will impact a wide swath of small businesses in the state because more than 450,000 Covered California enrollees are small business owners and/or self-employed workers, as of 2022. 

The cost of healthcare in California has vastly outpaced wages in recent years, and Small Business Majority’s research has found that small firms that currently offer health insurance coverage to their employees reported that the cost of insurance premiums, deductibles, prescription drug copays and hospital visits have increased. Despite the commendable steps California has taken to bring down costs–like establishing a 3% cost growth target for providers set by the Office of Health Care Affordability–rising expenses are forcing many entrepreneurs to make unwanted changes. These include increased employee contributions to health plans, switching to health plans with more limited coverage and cutting other employee benefits. Notably, nearly one-quarter of small businesses have dropped health coverage altogether. 

The announced increase for Covered California health plans is just the latest reminder that federal lawmakers must do more to help California’s entrepreneurs get some relief from high medical expenses. This can be accomplished by Congress renewing enhanced premium tax credits that have helped make healthcare more affordable for those who purchase plans through the Affordable Care Act Marketplace. These credits are critical for small businesses and their employees. In fact, Covered California estimated that the loss of the enhanced premium tax credits could mean 1.7 million enrollees see an additional average net increase of 66 percent for their premiums next year. That’s why nearly three-quarters (74%) of small businesses favor extending the credits rather than letting them expire, according to Small Business Majority's research. Another important step lawmakers in California and elsewhere should take to lower healthcare costs for small businesses would be to eliminate hospital facility fees and other causes of rising prices that do little to improve the quality of care but significantly impact costs for small businesses and their employees.

The bottom line is that when it comes to small business healthcare costs, inaction is not an option. Skyrocketing healthcare expenses are unsustainable for most entrepreneurs, and we risk losing a generation of small businesses simply because they cannot afford to pay for their own health insurance. That is a preventable problem but one that will not resolve itself. Federal policymakers must act now.”