Covered California\'s 2017 Rates Skyrocket

The abbreviated era of single-digit annual premium increases for consumers who buy their coverage through the Covered California health insurance exchange has come to an end.

            At a time when many other state exchanges are struggling to keep their health insurance premiums in check, Covered California officials announced this week that 2017 premiums would increase 13.2% on average. Those consumers looking for lower increases would have to consider finding a less comprehensive insurance plan, said Peter E. Lee, Covered California's executive director.

            The announced rate hike was much higher than for the 2016 rates, which rose an average of 4%. That was actually lower than the 2015 increase of 4.2%, and made Covered California a seeming role model for the rest of the nation's health insurance exchanges in terms of keeping costs to consumers down.

            The hikes were even higher in urban areas of California. In northeast Los Angeles County, premiums are projected to rise an unweighted average of 16.4%, although premiums for the lowest-priced bronze plan are projected to drop 4.1% and for silver plans increase an average of 3.3%. The rate increase is slightly lower for the southwest portion of the county – 13.9%. There were also significantly lower average rate increases in nearby San Diego, Riverside and San Bernardino counties.

            In San Francisco County premiums are projected to rise 14.8%, with premiums among lowest-priced bronze plans projected to rise an unweighted average of 18.3%. The increases were significantly lower in Santa Clara County at 9.2%, and slightly lower than average in Alameda County and most rural regions of Northern California.

            The increases were biggest amongst the state's two largest insurers. Blue Shield of California said it would raise premiums an average of 19.9%. Anthem Blue Cross of California's hike said it would average 17.2%. However, in northeast Los Angeles County, the most heavily populated portion of the state, premiums for both carriers would rise more than 20% for non-HMO plans.

            “The premium increases were higher in California than nationwide,” Dylan Roby, a faculty professor at the UCLA Center for Health Policy Research, said on a Southern California Public Radio show on Wednesday. He noted that a 14-state survey conducted by Avalere Health indicated an average premium increase of about 11%.

            Covered California said that the end of reinsurance for health carriers – a three-year program put into place by the Affordable Care Act – was partly to blame and could account for a third to more than half of the premium increases.

            The insurance sector said rising costs for care were also to blame.

            “Some rate increases are necessary to cover the cost of care as more and more Californians use medical services that have become increasingly expensive each year,” said Charles Bacchi, chief executive officer for the California Association of Health Plan. “As prices for hospitals, doctors, specialty drugs and other services keep climbing, we cannot lose focus on our goal of affordability.”

            That was confirmed by Lee. “Under the new rules of the Affordable Care Act, insurers face strict limits on the amount of profit they can make selling health insurance,” he said. “So, while all plans are experiencing different cost pressures, we can be confident their rate increases are directly linked to health care costs, not administration or profit, which averaged 1.5% across our contracted plans.”

            Roby also said there was increased use of healthcare services reported by many of the plans. Blue Shield for example, saw a 15% increase in the use of prescription drugs.

            Competition also thinned in the exchange. UnitedHealth, which claimed to have lost hundreds of millions of dollars operating in the state exchanges, plans to pull out of Covered California by the end of this year.

            There will be no new insurers introduced into the exchange next year and minimal expansion by those remaining. Oscar Health Plan of California, which began offering coverage in 2016 and represents just a sliver of enrollees, will expand into San Francisco, Santa Clara and San Mateo Counties. Molina Healthcare, which operates primarily as a Medi-Cal managed care insurer, will expand into Orange County. Kaiser Foundation Health Plan will offer coverage in Santa Cruz County.

            Lee noted that nearly 80% of exchange-based health plan enrollees would experience premium increases of no more than 5% if they were willing to switch to less expensive plans with skimpier benefits. And according to the exchange, a consumer switching to the lowest-priced plan in their current tier of coverage would save an average of 1.2%.

            The increases were blasted by consumer advocates. Jamie Court, president of the advocacy group Consumer Watchdog, blamed them on a lack of rate regulation in California.

            “These outrageous premium hikes are the consequence of California’s failure to adopt health insurance premium regulation like the majority of the states and the disappearance of federal subsidies for insurance companies to even out bumps in the road,” Court said. His organization sponsored Proposition 45 in 2014, which failed at the ballot box. The insurance sector spent nearly $60 million to defeat it. Court said the group was considering sponsoring another voter initiative.

            Lee spun the less-than-welcome news of the impending rate increases by referring to the historical trend.

            “Looking out over the last three years, you average these three years together, they're about a 7% (annual average)  increase. That's dramatically lower than the years before the ACA,” when double-digit increases were the norm for individual health plans, Lee said.