The Rate Increase is Lower in Comparison to Several Other State Exchanges

Amidst great uncertainty about federal health policy, Covered California announced Tuesday that insurance premiums on the state-run exchange will rise on average 12.5 percent next year, an increase that is slightly lower than in 2017. The agency reiterated that it has a containment plan should the Trump administration cease to provide cost-sharing subsidies for lower-income exchange enrollees.

All 11 insurers currently offering coverage on the state’ exchange will return in 2018, although Anthem Blue Cross will withdraw from Southern California.

The premium hike for 2018 is down from the 13.2 percent average increase for this year, but still much higher than the low single-digit rate hikes announced for 2015 and 2016.

Covered California Executive Director Peter V. Lee noted that if consumers shop around for different plans in each tier of coverage, they could keep their rate increases down to 3.3 percent.

“For consumers, no increase is a good increase, but Covered California did a good job in these uncertain times,” said Betsy Imholz, director of special projects for Consumers Union in San Francisco.

Imholz credited the exchange for taking a tough negotiating stance with the health insurers and ensuring that competition remains in place in most of the state. According to Lee, 82 percent of Covered California’s enrollees will have three or more health plans to choose from.

Higher Increases in Several Other States  

Covered California’s announcement has been in sharp contrast to increases announced for exchange enrollees in other states. According to data released this week by the U.S. Department of Health and Human Services, insurers offering plans on federally-operated exchanges in Idaho, West Virginia, South Carolina, Iowa and Wyoming are seeking to raise premiums by about 30 percent on average, with many other states seeing increases averaging more than 20 percent.

A large proportion of those rate increases have been attributed to insurers saying too much uncertainty has been injected into the market. President Donald Trump has stated that the federal Affordable Care Act has been a “disaster” and is “dead.” He has also threatened to withhold the $7 billion in annual cost-sharing reduction payments, which help low- and moderate-income people afford health coverage, particularly after a Republican attempt to repeal and replace the healthcare law failed in Congress last week.

Cost-sharing payments are provided to insurers to alleviate out-of-pocket costs for enrollees in silver-level plans, or those that provide a moderate-level of health coverage, who have incomes up to 250 percent of the federal poverty level. Trump is expected later this week to announce if these payments will continue.

In Montana, for example, one of the state’s biggest insurers, Health Care Service, Inc., said that 17 percentage points of its 23 percent proposed increase is linked to the market uncertainty. In California, according to Lee, that market uncertainty accounted for about 3 percent of the overall increase.

Uncertainties Remain

Should the cost-sharing payments be pulled, Covered California would impose an additional 12.5 percent surcharge on silver-level plans. However, Imholz noted many enrollees would receive a boost in their advanced premium tax credits. And for those whose incomes are too high for tax credits, the insurers have agreed to offer identical plans off of the Covered California exchange that would not be subject to the surcharge.

Nevertheless, some California policy experts expressed concerns about the continued rate hikes, and the potential havoc of a cost-sharing surcharge.

Gerald Kominski, director of the UCLA Center for Health Policy Research, noted that two-thirds of the plans purchased through Covered California are from the silver tier. He was unsure how those enrollees would respond to a rate hike exceeding 25 percent.

“At that level, people will find it difficult to purchase policies, even with higher subsidies,” Kominski said in an email.

Some California Counties Will See Higher Increases

Most of Covered California’s biggest insurers announced rate hikes in the mid-single to low-double digits in the most populous counties. Kaiser Foundation Health Plan, the exchange’s biggest health plan with 28 percent of enrollees, announced rate hikes ranging from 3 to 10 percent, although in most regions where it does business the increase would be no more than 7 percent. Some insurers, such as Oscar Health and Blue Shield of California, announced moderate premium reductions for some plans in some areas where they do business.

The one consistently high rate spike from an insurer not pulling out of any significant markets came from Molina Healthcare. Its increases for 2018 ranged from 16 percent to 51 percent in the regions of Southern California where it offers plans. The Long Beach-based insurer that primarily insures Medicaid populations has offered among the lowest premiums on the exchange.

Molina Healthcare spokesperson Sunny Yu declined comment on the rate hikes late Tuesday, citing a mandated silent period for the company prior to its announcing quarterly earnings later today.

Anthony Wright, executive director for Health Access California, said that the big premium bump on Molina’s part may be part of a shift in business strategy. Much of the top management at the health plan, including members of the founding Molina family, departed earlier this year.

Anthem, which is seeking rate hikes of 20 percent or more in many other states where it offers exchange plans, said it was withdrawing from all but three of the regions in California where it currently offers coverage. It currently covers 19 percent of Covered California enrollees. Its withdrawal will impact about 153,000 Californians. Another 108,000 enrollees will still have Anthem as an option in 2018, although it is seeking rate hikes as high as 54 percent in some regions where it will remain in the market.

Wright encouraged people with Covered California insurance—particularly those who receive tax credits to subsidize their coverage—to shop around.

“Given the attacks by the Trump administration and all of the chaos, it could have been a lot worse,” he said.