Guest Commentary written by

Glenn Melnick

Glenn Melnick is a professor, Blue Cross of California chair of healthcare finance and director of USC’s Center for Health Financing, Policy and Management.

Rising health care costs rank among the top financial concerns for California families. 

A recent survey by the California Health Care Foundation found 7 in 10 Californians say health care expenses strain their household budgets, with nearly 2 in 3 worried about unexpected medical bills — more than those worried about rent or groceries. Many report they already are skipping or delaying health care as a result.

Soaring out-of-pocket health care costs are only part of the troubling financial picture for families. 

Millions of working Californians receive health insurance as part of the compensation paid by their employers, but it is far from free. In California, the cost of employer-sponsored family health coverage has risen sharply — from $22,818 in 2022 to $28,397 in 2025 — a 24% jump in just three years. 

That far outpaces general inflation (12%) and wage growth (14%). California’s premiums are growing faster than the 6% national average.

When employers spend more on health insurance, there is less money available for wages. Rising premiums are, in effect, a hidden pay cut for working families. This sad story — stagnant or reduced wages due to rising health care costs — has been documented by economists at the UC Berkeley Labor Center and the Federal Reserve.

California established the Office of Health Care Affordability to monitor and limit health spending growth. But hospital industry groups have pushed back against its targets, arguing they will starve patient care and jeopardize patient access. The California Hospital Association has filed a lawsuit challenging the affordability agency’s actions. 

Hospitals have real operational pressures, and those concerns deserve a hearing. But the core argument against the Office of Health Care Affordability’s targets does not hold up.

First, the affordability agency’s policy does not impose budget cuts. It is designed to slow health spending growth, not make actual cost reductions. 

California family premiums have been growing at 7% per year — well above the Office of Health Care Affordability’s approved spending growth limits of 3.5% in 2025, declining to 3% by 2029. 

Even that modest deceleration could meaningfully free up employer budgets for worker wages.

It makes sense for the affordability agency to target hospital spending first. It is the largest driver of health insurance premium costs. Payments to hospitals make up more than one-third of total premiums. 

Data reported by hospitals to the state show operating costs across all California general, acute care hospitals in 2024 totaled $148 billion, of which 40% ($59.4 billion) went to overhead — including administration, fiscal services and other non-patient care functions.

That represents a significant opportunity for efficiency gains and cost savings that need not touch direct patient care. Add to this the rapidly expanding role of artificial intelligence in streamlining administrative functions, and hospitals have more tools than ever to meet a modest growth target without sacrificing a single bed or a single nurse.

California’s workers have waited long enough for relief. The Office of Health Care Affordability’s spending targets are a reasonable, overdue course correction. 

The time to let them work is now.  

Every year of delay means thousands more California workers will go without a raise — not because their employers won’t give one, but because rising premiums driven by rising health care prices already took it.