Covered California Predicting 13 Percent Premium Increase

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Sacramento, CA — Monthly premiums in California's health insurance exchange will increase by more than 13 percent on average next year, after two major insurers requested large rate increases, officials said Tuesday.
The increases are significantly higher than the 4 percent hikes in each of the last two years. They come as many other states report big premium spikes in the fourth year of President Barack Obama's health overhaul.

Covered California sells health plans to about 1.4 million people who don't get coverage from an employer or from the two large government-funded programs, Medicare and Medi-Cal. The exchange is a central piece of Obama's health insurance overhaul, allowing people to compare policies and collect a subsidy to lower their monthly premiums if they qualify based on income.

The average increase is driven by two large insurers, Anthem Blue Cross and Blue Shield of California, which together cover half of the Covered California market, said Peter Lee, executive director of Covered California.

Anthem requested a 17 percent increase, while Blue Shield is seeking 20 percent. The average increase ended up at 13 percent because most of the other participating insurers requested rate increases of less than that amount. Prices for the two lowest-cost plans with the most popular benefit package, known as a "silver" plan, will rise by 8 percent.

The proposed rates are subject to review by state regulators, who can label them as unreasonable but can't block them.

Consumers can limit the impact on their premium cost increases by changing plans, Lee said, although that may require some people to change doctors depending on the provider networks offered by each plan.
"We have a competitive marketplace," Lee said. "Health plans that raise their rates do so at their peril."

Almost 90 percent of Covered California customers get federal subsidies that will help offset the premium increases.

Regional differences
The rate increases vary across the 19 "pricing regions" the state is divided into by Covered California. In the Northern Counties, which includes Butte, Glenn and Tehama counties, the average increase is 12 percent. The lowest-priced benefit package is up 11 percent, however.

By comparison, in Santa Cruz, San Benito and Monterey counties, the average rate hike of 29 percent is the highest in California. The lowest jump was 8 percent in San Joaquin, Stanislaus, Merced, Mariposa and Tulare counties.

Only two insurance firm's packages are available throughout the 23 Northern Counties. Anthem's exclusive provider plan has 85 percent of the people enrolled under Covered California in the region, and it is seeking increases ranging from 6 to 15 percent. Blue Shield's preferred provider plan covered 14 percent of those enrolled, and it was seeking 17 to 23 percent increases. Three other firms provide coverage only in parts of the area, and each have less than 1 percent of those enrolled.

The proposed increase in California is higher than the average for states that have already reported insurance premiums so far, though many insurance companies are seeking large increases. In 14 states analyzed by the Washington, D.C.-based consulting firm Avalere Health, the cost of an average-priced plan will rise 11 percent if insurers are allowed to adopt the rates they've requested.

Price increases for the average cost plan ranged from 5 percent in Washington state to 19 percent in Virginia, according to the Avalere study released last week. Rhode Island was the only state among those surveyed registering a decrease, at 5 percent.

What's causing this?
Price growth for next year's premiums is driven by rising health costs for a population that has turned out to be more expensive to insure than anticipated. Officials also blame rising prescription drug costs and people who hold off buying coverage until they get sick.

Health plans are adapting to big changes in the health care market since 2014, when the bulk of Obama's health care insurance overhaul was put in place.

Fewer people are signing up through the exchanges than anticipated, and they're using more health care services than anticipated. That's left insurers with fewer customers to share the overall cost.

Insurers are also dealing with the end of two temporary programs created to help them absorb the uncertainties of the new world of health care.

The programs helped provide a financial backstop for health insurance companies that took on especially costly pools of consumers. Obama's Affordable Care Act requires insurers to issue policies without considering customers' health.

"Insurers are still getting used to the new rules prohibiting discrimination against people with pre-existing conditions, so this is a bit of a shakeout," said Larry Levitt, senior vice president of the Kaiser Family Foundation, a health policy group.

Insurance rates have been more stable in the employer-based insurance market where many more Americans have coverage, he said. Covered California insures about 5 percent of California's population.

The California premium increases were denounced by Consumer Watchdog, an advocacy group that backed a failed 2014 ballot measure that would have given regulators more power over insurance rates.

"Rate regulation needs to move to the top of the legislature's list," said Jamie Court, the group's president.

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