As a small business owner in California, whenever you open the mail and see the packet from your insurance carrier with your annual renewal notice, you may start to sweat. Over the last several years, healthcare premiums have increased year after year. A recent survey from KFF shows that the annual family premium for employer-sponsored health coverage increased 6% in 2025. Mercer, another analytics expert, projects that 2026 will bring with it another increase, adding more financial stress to smaller businesses.
What can you do to avoid this? Your immediate reaction may be to start making cuts. Reduce benefit levels, shift a larger share of the monthly costs to your employees, or even delay offering coverage to new employees.
Before you do any of this, though, you do need to realize how it will affect your team. Employees are likely to feel less respected, and many may start looking for new jobs. It can be difficult to recruit new hires, too, when you don’t offer the same benefits. Instead of making cuts or putting more on your employees, there are some other strategies you should consider. The first step in dealing with rising premium costs is to look at what you can actually control.
Once you’ve done that, you can start looking at ways to make your small business health insurance cost in California meet your budget without damaging your reputation or upsetting your employees. The team here at JC Lewis has put together a list of factors you as the business owner have control of. Let’s walk through them and see how you can deal with increasing premiums.
What You Can Control vs. What You Cannot Control
One of the most critical pieces of information you need when looking at small business health insurance in California is how the Affordable Care Act (ACA) mandates affect businesses with fewer than 100 employees. Insurance carriers cannot charge you more simply because one of your employees had a lot of expensive claims last year. However, their plans are priced based on several demographic variables.
Let’s take a look at what is fixed by regulations or by the market and what is under your control:
| Uncontrollable Due to Regulations or the Market | Controllable Choices |
|---|---|
| Employee Age Profile: Premiums typically take into account the individual age of each employee and their covered dependents. | Carrier & Network Selection: You have full control in choosing between full, narrow, regional, or high-performance provider networks (HMO, PPO, etc.). |
| Geographic Area: Premium rates are determined by your primary business location or employee ZIP codes in California. | Metal Tier Strategy: You can select between Bronze, Silver, Gold, and Platinum tiers. |
| Medical Inflation and Carrier Rate Increases: Overall healthcare pricing trends, pharmaceutical costs, and state-mandated benefit adjustments are all out of your control. | Employer Contribution: You decide on your contribution strategies (such as funding 50% of the Silver plan or setting a flat dollar amount per employee across all plans). |
| ACA Essential Health Benefit Mandates: Federal regulations and California state requirements set the minimum baseline benefit coverage . | Employee Participation & Option Bundles: Offering dual-choice or multi-option plan menus to allow employees to right-size their own coverage. |
| Community Rates: These rates are published by carriers and regulated by the state; carriers cannot change underlying base rates for small groups. | Deductible and HSA/HRA Strategies: You can decide to pair High-Deductible Health Plans (HDHPs) with Health Savings Accounts or Health Reimbursement Arrangements. |
| Renewal Timing and Open Enrollment: Employers select coverage effective dates and may leverage Covered California for Small Business (CCSB) open enrollment flexibility. | |
The Cost-Control Framework for California Employers
Instead of simply accepting a 10% renewal increase or raising your employees’ contributions, we recommend looking at a structured cost-control framework. By adjusting these seven variables, you can make certain your employees have the coverage they need while also protecting your budget.
1. Carrier and Provider Network
One of the biggest costs if your network selection. A full-network PPO plan that includes every major healthcare provider in California comes with a premium price. Moving to a narrower HMO network or a High-Performance Network focuses on cost-effectiveness can instantly drop your premiums by anywhere from 10 to 25% without affecting your deductible or copay structure.
2. Metal Tier Structuring
ACA plans are organized into Bronze, Silver, Gold, and Platinum tiers based on their determined actuarial value, which is how cost is shared between the plan and the employee. You don’t have to offer only Gold or Platinum tiers. This option goes hand-in-hand with the next key point: your contribution strategy.
3. Employer Contribution Strategy
You don’t have to contribute a fixed percentage to whatever plan an employee chooses. Instead, you can use a defined contribution model. This means you contribute a fixed dollar amount or set percentage of a specific “benchmark” plan such as a Bronze or Silver option. Employees who want the benefits of a higher Gold or Platinum tier can choose to pay the difference by contributing more in pre-tax payroll deductions.
4. Employee Participation and Multi-Plan Choice
California’s small group programs, including the Covered California for Small Business (CCSB) allow employers to offer different choices across multiple carriers but receive one consolidated invoice. This means your employees can make their own choices from the options provided. Younger, healthier employees aren’t pushed onto expensive plans with coverage they don’t need, while older employees or those with families can select coverage that meets their needs.
5. Deductible and Savings Account Strategies (HSA / HRA)
One way of lowering your monthly premiums is to transition to a High-Deductible Health Plan (HDHP) paired with a Health Savings Account (HSA). You can redirect a portion of the money you save on premiums to each employee’s HSA or set up a Health Reimbursement Arrangement. With this type of arrangement, you only pay out when an employee actually makes use of a medical care service. If you have a team of younger, fairly healthy individuals, this could lead to a significant savings.
6. Dependent Coverage Policies
While you can offer dependent coverage as an extra benefit, this does significantly increase how much you pay in premiums every month. You aren’t required to cover dependents at all, nor are you required to pay the same percentage of premiums for dependents as you do employees. You can contribute to dependent premiums at a lower rate, helping your employees with their costs while also keeping your own budget under control.
7. Strategic Renewal Timing
Small business health insurance in California isn’t tied to a specific enrollment period. You can apply for insurance or adjust your coverage at any point. However, there are special enrollment windows such as the annual late-year employee participation waiver period that you can take advantage of. These special enrollment windows let employers with a small number of employees with lower participation rates qualify for higher level coverage that they might otherwise not be able to offer.
JC Lewis Can Help You Optimize Your Plan Before Making Cuts
Rising healthcare insurance premiums are, unfortunately, a reality. However, small business owners in California don’t have to simply accept these annual hikes. By realizing what you can’t change and focusing on what you are in control of, you can create a health insurance strategy that provides your employees with the options they need while also protecting your budget.
Before you reduce coverage or raise employee contributions, ask J.C. Lewis for a no-cost plan review that compares the same employer budget across multiple carriers and plan designs. We can assist you in navigating the complex health insurance industry without leaving your employees’ health at risk. Reach out today to learn more.
