Obamacare Premiums In California May Rise 8 Percent Next Year, State Predicts
By Chad Terhune
May 11, 2016 - Kaiser Health News
Californiafs health insurance exchange estimates that its Obamacare premiums
may rise 8 percent on average next year, which would end two consecutive years
of more modest 4 percent increases.
The projected rate increase in California, included in the exchangefs proposed annual budget, comes amid growing
nationwide concern about insurers seeking double-digit premium hikes in the
health lawfs insurance marketplaces.
Any increases in California, a closely watched state in the health law
rollout, are sure to draw intense scrutiny during a presidential election.
Republicans are quick to seize on rate hikes as further proof that President
Barack Obamafs signature law isnft doing enough to hold down health care costs
for the average consumer.
Insurers in California have submitted initial rates for 2017, but the final
figures wonft be known until July after state officials conduct private
negotiations.
Peter Lee, executive director of Covered California, underscored that the
estimate was preliminary but said some one-time factors under the Affordable
Care Act mean g2017 will be an adjustment yearh for rates.
gWe shouldnft put too much focus on this 8 percent number when we will know
the reality in two months,h Lee told California Healthline on Tuesday.
gThere are a number of reasons 2017 will have higher rate increases than the
last few years. But we believe in California we wonft see the significant
headwinds many other states are experiencing.h
Lee said the expiration this year of two federal programs that have helped
health insurers offset expensive medical claims and cover sick patients in
general will affect premium rates across the country. In addition, he cited
ever-increasing medical costs, particularly for expensive specialty drugs.
The nationfs largest health insurer, UnitedHealth Group, already has said it
will exit all but a handful of state exchanges after suffering substantial
losses on individual policies.
Lee declined to comment on whether UnitedHealth has submitted a bid to
continue selling in Covered California next year.
Health-policy experts said the California rate projection mirrors an upward
trend around the country as health insurers reassess their pricing and strategy
under Obamacare.
gNone of us should be surprised to see average rate increases that are
slightly higher than last year,h said Sabrina Corlette, a research professor at
Georgetown Universityfs Center on Health Insurance Reforms. gItfs still really
difficult to discern where we will end up.h
Robert Laszewski, a health care consultant in Alexandria, Virginia, and a
frequent critic of Covered California, said Californians will be fortunate if
the 8 percent projection holds up.
gThat is not a troubling rate increase,h he said. gCalifornia is coming back
toward the average. A bunch of states would die for just an 8 percent increase
in 2017.h
A bigger concern, Laszewski said, is the tepid growth in Covered Californiafs
enrollment and what that may mean for future premiums.
As part of its proposed budget for the next fiscal year, starting July 1, the
state exchange expects its annual enrollment to grow by only 2 percent over the
next year to 1.34 million. Covered California counts about 1.4 million as
currently enrolled but that figure is expected to drop to 1.32 million as of
June 30 through normal attrition as people get insurance elsewhere or drop
coverage.
Sign-ups are crucial for keeping a diverse mix of enrollees and spreading the
insurance costs across a pool of healthy and sick policyholders.
About 3 million Californians remain uninsured, but fewer than 1.4 million of
them are eligible for premium subsidies under the Affordable Care Act, according
to the exchangefs proposed budget.
Lee said California already boasts one of the healthiest risk pools in the
country, which insurers have cited as a main reason for the lower-than-average
rate increases the past two years. He said the exchange signs up hundreds of
thousands of new enrollees each year, but thatfs offset by high turnover as many
people leave the marketplace for job-based coverage, Medicare or Medicaid.
The average tenure of a Covered California enrollee is about 25 months,
according to exchange data.
Over time, Covered California expects the gradual increases in the statefs
minimum wage to $15 an hour could shift more low-income people from Medi-Cal,
the statefs Medicaid program, to subsidized exchange policies as their pay
increases. By 2020, the exchange expects to reach enrollment of 1.52
million.
gCalifornia grew very rapidly in the first few years and now we have reached
a cruising altitude after three years. We are projecting modest net growth,h Lee
said. gI think any questions about the sustainability [of exchanges] are just
pure hot air.h
Covered Californiafs five-member board will discuss the proposed $308 million
budget at a meeting Thursday and vote on it next month.
The proposed budget for 2017 is 8 percent lower than the current year budget,
reflecting the slower enrollment growth and the fact that Covered California
must operate next year without federal startup funds for the first time.
The exchange is planning to draw on $58 million in reserves for operations,
and it wants to raise its surcharge on customer policies to 4 percent of
premiums, up from 3.4 percent now, or $13.95 per member per month.
Covered California doesnft receive money from the statefs general fund and
relies on policyholder assessments to pay for marketing, service center
operations and other expenses.
Health insurers have urged the exchange not to pass on any unnecessary costs
to consumers.
gPrice is the number one factor impacting consumers when they enroll, so we
must always keep an eye toward affordability,h said Charles Bacchi, chief
executive of the California Association of Health Plans. gWe urge Covered
California to move cautiously before increasing this fee and look for cost
savings.h
The exchange is proposing to spend $2 million to establish an ombudsman
program to help resolve customer service problems.
Consumer groups have criticized Covered California for failing to fix
long-standing enrollment and tax-related errors that have blocked people from
getting coverage and left some with unforeseen bills.
Last month, federal lawmakers called on Covered California to resolve a
problem that has caused some pregnant women to be dropped from their health
plans and enrolled in Medi-Cal without notice or consent.
gAbsolutely, some consumers have had problems with customer service,h Lee
said. gWe are making significant investments to do better.h