Californians should prepare for higher health insurance costs in 2026. Covered California, the state’s health insurance marketplace under the Affordable Care Act (ACA), has announced that premiums are projected to increase by an average of 10.3%—a jump from the 7.9% increase seen in 2025.
This marks one of the largest year-over-year hikes in recent years, raising concerns for individuals, families, and employers who depend on Covered California for affordable health coverage.
Why Are Premiums Rising?
There are several key factors driving these increases:
- Rising Medical and Prescription Costs
The overall cost of healthcare continues to climb due to hospital care, specialist services, and expensive prescription drugs. Insurers must adjust premiums to cover these rising expenses. - Potential Loss of Federal Subsidies
Enhanced federal subsidies, introduced in 2021 to make health insurance more affordable, are set to expire at the end of 2025. If Congress does not extend them, monthly premiums for about 1.7 million Californians could spike by an average of 66%. - Limited State Funding
The state has committed $190 million to help offset premium costs for low-income enrollees, but this falls far short of the estimated $2.1 billion shortfall if federal subsidies are not renewed. - Carrier Market Changes
Covered California will continue to offer plans from 11 insurance carriers across the state. However, Aetna is set to exit the marketplace in 2026, impacting around 21,000 members who will need to select new plans.
What This Means for Employers and Brokers
For employers and benefits consultants, these projected increases highlight the importance of proactive planning:
- Reassess Contribution Strategies: Employers may need to adjust how much they contribute toward employee premiums to help cushion the impact of rising costs.
- Communicate Early with Employees: Many individuals may be shocked by premium increases. Early communication helps employees prepare and make informed coverage decisions.
- Evaluate Plan Options: With Aetna’s exit, members will need help transitioning smoothly to new carriers without losing access to important providers.
- Explore Supplemental Benefits: Adding or bundling dental, vision, or wellness programs can provide value and offset employee frustration with higher premiums.
The Bigger Picture
While premium increases are not new, the combination of rising healthcare costs, expiring subsidies, and shifting carrier participation makes 2026 a pivotal year for California’s health insurance market. Without federal action, affordability could become a significant challenge for millions.
How BetterFit Benefits Can Help
At BetterFit Benefits, we work closely with employers, brokers, and individuals to navigate these changes. Our team provides personalized benefits strategies, renewal guidance, and support in selecting the right plans for employees and their families.
With costs rising, making the right choices is more important than ever. Whether you’re an employer seeking solutions or an individual looking for the best coverage, BetterFit Benefits is here to guide you every step of the way.