Federal Changes to Health Care Hit California in the Form of Higher Insurance Premiums

On average, premium increases for Covered California health insurance plans and those on the individual market will rise 9 percent in 2019. That’s less than the 12.5 percent increase in 2018, but still more than double the region’s rate of inflationPhoto credit: iStock

Federal attempts to undermine the Affordable Care Act will ratchet up California’s health insurance premiums next year, but the spike is below last year’s increase and premium hikes projected for many other states.

On average, premium increases for Covered California health insurance plans and those on the individual market will rise 9 percent in 2019, according to officials with the state’s health insurance exchange. That’s less than the 12.5 percent increase in 2018, but still more than double the region’s rate of inflation.

Exchange officials said up to two thirds of the premium increases this year can be attributed to Congress’ decision to eliminate what’s known as the individual mandate. The mandate—a key part of the Obama-era health care lawrequired people to buy health insurance or pay a tax penalty. Congress repealed the mandate in December as part of its tax overhaul.

Covered California officials said the repeal has pushed insurance companies to add between 2.5 and 6 percent to their rates out of concern that fewer healthy people will be signing up for plans. Healthy people with insurance help offset the cost of providing coverage to those who utilize health care more often.

More than 260,000 people are expected to drop their health care coverage next year as a result of the mandate repeal, according to exchange officials.

Peter Lee, executive director of Covered California, lamented what he said was a largely unnecessary premium increase.

“It is unfortunate when a rate change of nearly 9 percent is generally viewed as good news, when the rate change could—and should—have been much lower,” he said in a statement. “The cost of the penalty removal will manifest for unsubsidized consumers in higher rates. While subsidized people will not bear the full costs, taxpayers will.”

People who receive subsidies through the Covered California exchange will be largely protected from the rate increases because the amount of financial help rises when rates go up. Consumers may even be able to pay the same amount for insurance as in 2018 or slightly less by opting for a cheaper plan, officials said.

Nevertheless, about 1 million people who purchase health insurance individually and do not receive subsidies will face the full premium increase. Employer-sponsored coverage could also rise between 2 and 4 percent as a result of the individual mandate repeal, an analysis by PricewaterhouseCoopers found.

Still, California could be doing a lot worse. Premiums proposed for 2019 health insurance exchange plans nationwide are up 15 percent on average, according to the research firm Avalere. Anthony Wright, executive director of the advocacy group Health Access California, said the difference is largely because of the state’s efforts to counteract federal actions that undermine the Affordable Care Act. But he said California consumers and policymakers must continue to push for improvements.

Wright said two bills pending in the legislature–SB 910 and SB 1375–would limit the availability of so-called “junk” insurance in California, which the Trump administration is trying to promote. This short-term insurance does not meet the comprehensive coverage standards required under the Affordable Care Act.

Additionally, Wright said he hoped California’s next governor will take up proposals left out of the budget package this year, including imposing a state-level individual mandate and increasing health exchange subsidies.

“Californians have an ability to have an influence on their rates, not just as active consumers shopping and comparing, but as active citizens: telling their federal and state policymakers to take actions,” Wright said.

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