California’s small businesses, particularly minority-owned enterprises, are facing a slow but steady squeeze. It is not just inflation, labor shortages or regulatory compliance. It is also the cost of providing healthcare to employees.

According to the Los Angeles County Economic Development Corp., Los Angeles County has more than 1.3 million small businesses, with the highest proportion of woman- and BIPOC-owned small businesses of any U.S. county. Across California, healthcare coverage has become one of the fastest growing and least predictable costs of doing business. And unlike larger corporations, small and minority-owned businesses often lack the negotiating power, scale, or margins to absorb these increases. The result is a growing affordability crisis that threatens not only business viability but also the stability of employer-sponsored coverage itself.

Recent data from the California Health Care Foundation underscores the scope of the problem. Average family premiums for employer-sponsored coverage in California have climbed to nearly $28,400, rising 24% since 2022 alone and outpacing both inflation and wage growth. For small employers operating on thin margins, those increases are not abstract, they are existential.

Insurance costs keep hurting

The consequences are cascading. Workers are contributing more out of pocket, with California employees paying roughly 27% of family premiums on average. Deductibles and cost sharing continue to rise, and affordability concerns are widespread: nearly half of employers report that their workforce is worried about out-of-pocket costs. At the same time, small-group premiums are projected to rise another 10% or more, putting further pressure on employers already struggling to keep up.

For minority-owned Los Angeles businesses, many of which operate in lower-margin industries and serve cost-sensitive communities, these pressures are even more acute. Healthcare costs are not just a line item; they are a barrier to hiring, wage growth and long-term investment. Too often, they force business owners into impossible trade-offs: reduce benefits, shift costs to employees or forgo coverage altogether.

This is the reality policymakers must confront. Yet much of the current policy conversation is focused elsewhere: restructuring markets, expanding mandates or revisiting sweeping proposals like single-payer systems.

While sometimes well-intentioned, these approaches risk overlooking a fundamental truth: simply shifting costs within the system does not reduce them. A single-payer model, which has been proposed over and over and blocked, may change who pays, but it does not inherently address the underlying drivers of cost growth, mainly provider pricing, utilization and inefficiencies. For small businesses, the concern is straightforward: if costs continue to rise, they will ultimately be borne by taxpayers, employers, or workers in one form or another.

Instead of pursuing one-size-fits-all solutions, policymakers should ask a more practical question: Where in the healthcare system are costs being managed effectively, and what can we learn from those examples?

One answer lies in an often-overlooked segment of healthcare: vision care.

Unlike medical coverage, vision benefits have remained stable for the last 10 years, with the average family premium being no more than $20 per month. At a moment when healthcare costs are growing faster than wages, that distinction matters. It demonstrates that affordability is not an unattainable goal, it is a function of how markets are structured and incentives are aligned.

Several features of the vision care model offer useful lessons for policymakers. Vision benefits are typically voluntary, which creates pressure to keep premiums affordable and value clear. The market remains highly competitive with more than 100 carriers offering vision plans, and vision care offers an important preventive health opportunity, as eye exams can lead to early detection of diabetes and a multitude of other chronic conditions. Additionally, the coexistence of vision benefits and direct-pay options provides flexibility for consumers while maintaining downward pressure on costs.

None of this suggests that vision care’s model can be directly replicated across all of healthcare. But it does illustrate an important point: cost containment is possible when markets are structured to promote competition, transparency and consumer choice.

Thinking pragmatically

For California’s small businesses, the stakes could not be higher. According to CHCF, seven in 10 Californians say healthcare costs are a financial burden, and nearly six in 10 report skipping or delaying care due to cost. These are not just statistics: they reflect real pressures on employees and employers alike.

If policymakers continue to pursue solutions that fail to address underlying cost drivers or that inadvertently disrupt parts of the system that are working, they risk making an already difficult situation worse.

The path forward should be grounded in pragmatism, not ideology. That means focusing on policies that preserve affordability for employers and employees, promote choice and competition and encourage preventive care. It also means recognizing that small businesses, especially those owned by entrepreneurs of color, operate under constraints that large systems do not.

Policymakers would do well to listen to the small business community and to learn from the parts of the healthcare system that are already delivering value.

Ruben Guerra is board chair of the Latin Business Association and member of the Alliance for Affordable Vision Care.