California Health Premiums Set for Double-Digit Hike in 2026 as Federal Subsidies Loom
Sacramento, CA – Californians relying on the state’s health insurance marketplace, Covered California, are bracing for a substantial increase in their premiums, with an average hike of 10.3% projected for next year. This marks the first time since 2018 that the state has announced a double-digit rate increase, a development officials attribute to a complex “confluence” of factors pushing healthcare costs upward.
What’s Driving the Increase?
According to Jessica Altman, Director of Covered California, the impending increase is primarily driven by an anticipated 8% rise in general healthcare costs, a trend insurers have come to expect annually. However, an additional 2% of the rate hike is directly linked to the expiration of enhanced federal subsidies at the close of the year. These vital financial aids, enacted by Congress during the COVID-19 pandemic to ensure broad access to health insurance, had been instrumental in nearly doubling nationwide Affordable Care Act enrollment from 12 million to 24 million people. Their omission from former President Donald Trump’s “One Big Beautiful Bill Act” now poses a significant financial threat to consumers.
The potential non-renewal of these subsidies by Congress in September could strip California of approximately $2.1 billion in crucial financial assistance for its residents. “We’ve never been through a loss in affordability like the expiration of the enhanced tax credits,” Altman stated, highlighting the unprecedented challenge.
A “Double Whammy” for Consumers
For consumers, the situation presents a severe “double whammy,” as described by Ariana Brill, a certified health insurance agent assisting Covered California enrollees. Brill notes that “rates will go up, assistance will go down, and the net premium, the consumer’s take home price, is going to go up considerably.” With open enrollment typically beginning November 1st, Brill’s 2,600 clients are already expressing concerns. She anticipates that many will be forced to downgrade to less comprehensive, lower-cost plans, or in some cases, forego coverage entirely, underscoring that “affordability is a huge part of their decision making.”
Broader Ramifications and the Risk of a “Death Spiral”
The ramifications of a significant number of people dropping coverage could extend beyond individual financial hardship. Covered California’s previous estimates suggest that 600,000 individuals might drop their insurance due to these changes. Experts warn that if healthier, lower-utilization individuals opt out, it leaves a pool primarily composed of sicker, higher-cost users, subsequently driving up premiums for those who remain insured. Matthew McGough, a policy analyst for KFF’s Affordable Care Act program and co-author of a recent study on 2026 premium increases, explained, “With those lower utilization people leaving the marketplace, which leaves only the high cost users in the pool, it drives up premiums for those who are left.”
California’s Mitigation Efforts and Remaining Gaps
In an effort to mitigate the impact on its most vulnerable residents, the state of California has committed $190 million to maintain subsidies for individuals earning up to 150% of the federal poverty level, roughly $23,000 for an individual or $48,000 for a family of four. However, this state investment falls significantly short of the $2.1 billion in federal aid California stands to lose, leaving a substantial gap for many consumers.
National Trends Mirror California’s Challenges
Nationally, the trend mirrors California’s challenges, with the median premium increase for next year estimated at 18%, according to KFF analysis, with 4% attributed to the loss of subsidies. Beyond the subsidy issue, insurers across the country cite other contributors to rising costs, including an aging population, the widespread use of expensive pharmaceuticals like Ozempic and Wegovy, tariffs on drugs and medical devices, enrollment and eligibility adjustments from the current budget package, and broader inflationary pressures.
A Critical Period for Health Insurance Affordability
The current climate of uncertainty, particularly surrounding the federal premium tax credits, is a dominant factor pushing rates beyond what has been observed in recent years, making 2026 a critical period for health insurance affordability in California and beyond.
