For the first time since launching three years ago, Covered California – the state’s health insurance marketplace– announced double-digit rate increases, averaging 13.2 percent for 2017.
Tuesday’s announcement came as California consumers were encouraged to “shop around” for cheaper coverage under the federal Affordable Care Act and lawmakers were urged to do more to rein in medical costs.
“We’ve known for a long time that 2017 would be a transition year,” said Peter Lee, Covered California executive director, noting that one of the biggest factors – the end of federal “reinsurance” payments to insurance companies – was anticipated. He said that one-time adjustment alone added 4 percent to 7 percent to premiums statewide. The rates still require review by state regulators.
Other factors include nationwide hikes in specialty drug costs and “substantially sicker” consumers enrolling during the off-season special enrollment period, Lee said. He said two of the state’s largest insurers – Anthem Blue Cross and Blue Shield – had to account for large numbers of less-healthy individuals who enrolled due to life changes, such as marriage, children or loss of an employer’s coverage.
The premium hikes are not due to health insurer profits, he said. “We kicked the tires hard. … This isn’t about health plans making big buckets of money. It’s about rising costs of health care.” Lee said profits averaged 1.5 percent across all of the 11 health insurance plans under Covered California.
The average premium increase varies widely by geographic region. Some consumers will see only single-digit rate hikes, Lee noted, while others will have substantially higher rates. In the four-county Sacramento region, the average rate – 13.4 percent – is slightly higher than the statewide average. In San Francisco County, by comparison, the increase was nearly 15 percent.
For a 40-year-old Sacramento resident earning up to $23,760 a year, the monthly premium under the most popular silver-level plan after a federal subsidy would rise from $119 to $138.
Those who switch plans, Lee said, could actually pay less than last year or only up to 5 percent more. Lee noted that 90 percent of Covered California enrollees will still be eligible for federal subsidies to help cover their premium costs. Currently, about 1.4 million individuals have Covered California policies.
In each of the past two years, rate hikes for Covered California policies were about 4 percent, putting the state’s three-year average at 7 percent. Nationwide, the weighted average of premium hikes in 36 states that have posted 2017 rates was 22.7 percent, according to Charles Gaba, a data analyst at ACAsignups.net who looks at state exchange enrollments.
Consumer groups said the projected rate hikes are an urgent reminder that state regulators and legislators need to address prescription drug and other health care costs.
“These rate hikes indicate the urgency of getting more disclosure on health care costs, especially prescription drug prices,” said Anthony Wright, executive director of Health Access California, the statewide consumer advocacy group. “Why are certain drug prices going up 500 percent in one year?”
At least two pending state bills, SB 908 and SB 1010, call for more disclosure of insurers’ rate increases and specialty prescription drug costs.
“No one in California has the power to say no to a health insurance company if they choose to hike rates unreasonably,” said Carmen Balber, executive director of Consumer Watchdog, the nonprofit consumer advocacy group. She said California is one of only a few states that doesn’t give state insurance or health care regulators the power to reject rate increases. “The Legislature needs to act to give regulators the hammer to reject rates that can’t be justified,” Balber said.
Charles Bacchi, president and CEO of the California Association of Health Plans, said the higher rates reflect the growing cost of medical care.
“It’s important to remember that health care premiums are based on the cost of medical care,” Bacchi said. “How much it costs for an in-patient stay or a doctor visit or a prescription drug are the largest determinants of health care premiums.”
Even with this year’s rate hike, he said, the current marketplace is still preferable to conditions prior to passage of the Affordable Care Act, when annual double-digit increases were routine and those with pre-existing conditions were often unable to become insured.
For consumers, the new rates make it essential to shop for the right plan when open enrollment starts Nov. 1. “What was the best deal last year may not be the best deal this year,” said Wright of Health Access. “The good thing is people are no longer locked in because of pre-existing (health) conditions. They have the ability to shop around.”
Covered California’s Lee said consumers are “in the driver’s seat” to compare rates and plans so they can avoid premium increases or keep the doctors they prefer. He said nearly 93 percent of consumers will have a choice of three or more insurance carriers for 2017 plans, and every resident will have at least two choices.
In the Sacramento region, covering El Dorado, Placer, Sacramento and Yolo counties, consumers will have seven health plans from which to choose: two from Anthem, two from Blue Cross, as well as plans from Health Net, Kaiser Permanente and Western Health Advantage. For a typical 40-year-old single person getting federal assistance, the monthly premium could range from $35 to $656, depending on income and the type of plan selected.
In October, policyholders will receive notices from Covered California and their health care insurers about the new rate increases. During the open enrollment period, running from Nov. 1 through Jan. 31, consumers can decide whether to seek another carrier or stay with their current plan.
In the past three years, Lee said, the number of uninsured Californians – 8.1 percent as of December 2015 – has dropped by more than half, down from 17 percent in December 2013, the year before the federal health reforms started.