California's insurance marketplace carriers will raise rates in 2017; Covered California rates to jump average of 13 percent in 2017
After two years of moderate rate increases, Californians who get their coverage through the state health insurance marketplace will see their 2017 premiums increase by an average of 13.2 percent.
That's more than triple the average 4 percent rate increasesthat consumers have seen since the state's Affordable Care Act exchange started offering coverage in 2014. The preliminary rates for Bay Area counties are even higher than the state average, with San Francisco premiums set to increase by nearly 15 percent.
"We've known for a long time that 2017 will be a transition year," said Peter Lee, executive director of Covered California, in a media conference call Tuesday morning to announce next year's rates.
Lee blamed two of the biggest plans – Anthem, which sells Blue Cross plans, and Blue Shield of California – for helping to drive the double-digit rate increase. He cited Anthem's weighted average increase of 17.2 percent and Blue Shield's of nearly 20 percent, but noted those increases vary by region.
Behind the increases
Additional factors behind the hike included rising medical costs, particularly prescription drugs, and the end of two federal programs designed to stabilize premium increases, Lee said. While the end of the federal programs is expected to have a one-year impact, other trends are ongoing.
"These increases, while big, are still lower than what states are seeing," said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a nonpartisan health research and communications organization.
While rates vary greatly by region, Levitt said some parts of the country are seeing individual plans raise premiums by as much as 40 to 60 percent.
An analysis by the consulting firm Avalere Health of the 14 states that have complete pricing data estimated the cost of a middle-of-the-road plan to rise 11 percent.
California continues to have a competitive marketplace, with the expansion of Oscar Health into San Francisco, San Mateo and Santa Clara counties and Kaiser Permanente into Santa Cruz, Levitt said. "While some big insurance companies like Blue Shield and Anthem are raising premiums substantially, other plans are keeping premiums down."
Blue Shield and Anthem, for their part, said their rate hikes reflect a deeper understanding of the market changes since the exchange debuted in 2014.
"Our 2017 statewide average increase of 19.9 percent is being driven by our members using more health care services than we expected," said Mia Campitelli, spokeswoman for Blue Shield, which has its headquarters in San Francisco.
Anthem spokesman Darrel Ng said in a statement that the increased use of medical services and added costs of drugs "put upward pressure on rates and underscore the additional work that needs to be done to moderate the growth in health care costs."
Regional cost rates
Northern California historically has had higher premiums and medical costs than Southern California for a variety of reasons, including greater hospital consolidation and higher labor costs. San Franciscans will see a weighted average increase of 14.8 percent, rates will rise by an average of 13.6 percent in Contra Costa County and Alameda County will see a 12.3 percent increase on average.
Covered California officials noted that nearly 80 percent of consumers will pay less or see rate hikes of no more than 5 percent if they switch plans, although changing plans could mean they wouldn't be able to see the same doctor.
About 90 percent of Covered California consumers receive federal subsidies to help cover the cost of their premiums.
Still, Lee didn't think next year's premium increases signal a return to the high double-digit increases that helped propel the passage of the federal Affordable Care Act.
Very problematic trends
"I don't think we're seeing a rebound right now across the board," he said. "We are seeing very problematic trends in the area of prescription drugs, especially in the area of specialty prescription drugs."
Lee lauded the overall impact of California's program, which covers about 1.4 million residents. He noted the percentage of Californians without health insurance dropped to 8.1 percent at the end of last year, compared with 17 percent in 2013, the year before the federal health law went into effect.
Officials from Consumers Union encouraged Californians to shop around for the best rates when open enrollment begins in the fall. But they worried that double-digit increases for those in the state exchange will mean individual consumers who don't qualify for federal subsidies will see even higher hikes.
"We look to state regulators to now closely scrutinize these proposals to ensure that every penny requested is necessary and fair for consumers," said Dena Mendelsohn, staff attorney for the group, which publishes Consumer Reports magazine.
Consumer Watchdog, which has advocated for state regulators to be given the power to deny unreasonable rate increases, criticized Covered California's negotiating clout.
Jamie Court, the group's president, said the double-digit increases show that consumers won't get a fair shake in the future if nothing changes. "This is the poster child for why we need to give the state the power to reject excessive rate hikes," he said. "This should be a wake-up call for the Legislature."
What Covered California will look like
– Consumers will see a weighted average price hike of 13.2 percent after past increases of about 4 percent.
– Eleven plans will be offered in the state exchange. New options include the expansion of Oscar Health into San Francisco, San Mateo and Santa Clara; Kaiser into Santa Cruz; and Molina Healthcare to Orange County.
– Covered California plans to tighten rules surrounding the "special enrollment" period in which consumers may sign up outside the open enrollment period, which starts Nov. 1. Officials suspect some consumers may have signed up only after they became sick.
– For a complete copy of Covered California's preliminary rates, go to: http://bit.ly/29MSqSx
Source: Covered California