Covered California Health Plan Rates To Jump 13.2 Percent In 2017

CAL/AAEM News Service at
Thu Aug 4 19:19:32 PDT 2016



July 19, 2016


Covered California Health Plan Rates To Jump 13.2 Percent In 2017 



tV5xBPqgdhme7s0BFrJrc&_hsmi=31836370> California Healthline



By Chad Terhune and Pauline Bartolone 


California's Obamacare premiums will jump 13.2 percent on average next year,
a sharp increase that is likely to reverberate nationwide in an election


The Covered California exchange had won plaudits by negotiating 4 percent
average rate increases in its first two years. But that feat couldn't be
repeated for 2017, as overall medical costs continue to climb and two
federal programs that help insurers with expensive claims are set to expire
this year.


The increase announced Tuesday comes as major insurers around the country
seek even bigger rate hikes for open enrollment this fall, and the
presidential candidates clash over the future of President Barack Obama's
landmark health law.


Some health-policy experts were surprised by the magnitude of the increase
in California. Others said it was inevitable the rates would catch up to the
rest of the country after insurers determined their coverage had been priced
too low.


"This increase is a little higher than expected, since California seemed to
have a healthier population than many other states," said Kathy Hempstead,
director of health coverage issues at the Robert Wood Johnson Foundation.


Consumer advocates expressed disappointment, noting that rising health
insurance premiums keep taking a bigger bite out of the average person's
paycheck. Overall, they said, the rate hike shows that policymakers and
insurance company executives still have a lot of work to do in tackling the
high cost of health care.


"While these rates hikes aren't as bad as the annual double-digit increases
before the Affordable Care Act, that's not much comfort to consumers who
don't see their paychecks increase by the same percentage," said Anthony
Wright, executive director of Health Access, a consumer advocacy group.


Covered California's two largest health insurers, which cover more than half
of its 1.4 million enrollees, drove the statewide increase.


Blue Shield of California said its premiums were going up 19.9 percent, the
highest statewide increase. Anthem Inc., the nation's second largest health
insurer, said it had an average increase of 17.2 percent in its Covered
California plans. HMO giant Kaiser Permanente, in contrast, posted an
average increase of 6 percent.


All of the rates are subject to state regulatory review and public comment.
But neither of the state's insurance regulators, the Department of Managed
Health Care and Insurance Commissioner Dave Jones, has the authority to
block the hikes.


Critics of the health law, including Republican presidential candidate
Donald Trump, have been quick to seize on rising costs as further proof that
the Affordable Care Act is failing the average consumer and warrants repeal.


The Obama administration counters that federal subsidies spare most
consumers from the full impact of the premium increases, and the health law
enables people to shop around for a better deal.


The results in California mirror what's been unfolding across the country.
Last week, consulting firm Avalere Health found that the average rate
increase being sought for widely sold silver plans was 11 percent across 14


These rate increases apply to people who purchase their own coverage in the
individual market, not the majority of Americans who get their health
insurance through work or government programs such as Medicare and Medicaid.


Peter Lee, Covered California's executive director, said prices for 2017
reflect the rising cost of care, not efforts by insurers to pad their bottom
line. He said the average profit margin for the 11 insurers in the exchange
is 1.5 percent.


"We kicked the tires hard," Lee said. "This isn't about health plans making
big buckets of money. This is about health-care costs rising."


Two federal programs that have helped health insurers offset costly medical
claims and cover sick patients in general end this year. They were intended
as a temporary cushion for insurers, who are now required to accept all
applicants regardless of their medical histories.


Health insurers in California said their rates reflect the ever-increasing
cost of care, particularly for expensive specialty drugs. For the first time
since the Obamacare marketplaces opened in 2014, the companies said they had
the benefit of detailed data on exchange customers and their medical claims
in calculating proposed rates.


Blue Shield said its exchange members have been using more services than
expected, including hospital care, primary care and emergency-room visits.
The San Francisco-based insurer said its prescription drug costs for
exchange members were up 15 percent this year compared to a year ago.


The company said that its 2 percent average rate increase for this year was
too low. "In 2016, we are seeing that the cost of care is exceeding the
premiums we are collecting," said Blue Shield spokeswoman Mia Campitelli.


Anthem Blue Cross said it, too, was seeing a broad-based uptick in demand
for medical care as well as higher drug costs. These factors "underscore the
additional work that needs to be done to moderate the growth in health care
costs," Anthem spokesman Darrel Ng said.


Kaiser Permanente, which treats patients at its own hospitals and clinics,
struck a more upbeat tone, calling medical inflation "moderate."


Insurers have also complained about lax rules for special enrollment outside
the designated signup period that have allowed some people to game the
system by waiting until they need care before enrolling.


Blue Shield said its policyholders who joined during special enrollment used
up to 30 percent more medical services than people who signed up during the
regular period. Federal and state officials say they have tightened the
rules to address these industrywide complaints.


Among the 19 regions served by Covered California, the one encompassing
Monterey, San Benito and Santa Cruz counties had by far the largest average
increase in premiums - 28.6 percent. The smallest, 8.4 percent, was in the
region that includes San Joaquin, Stanislaus, Merced, Mariposa and Tulare


In Los Angeles County, which spans two different rating regions, the
increases run from 13.9 percent to 16.4 percent. Premiums in San Francisco
are slated to rise nearly 15 percent on average.


Cost-conscious consumers like David Arnson worry about the impact on their


Arnson, 57, of Los Angeles, qualifies for a federal subsidy and pays just
$32 each month for a Molina Healthcare policy he purchased through Covered
California. He relies on the coverage to help pay for treatment for ankle
and knee problems.


Arnson, who works at a record store and plays in a band, said he worries
about his monthly premium increasing next year.


"I make a marginal living. Like anything, you want to pay as little as
possible," he said. "I need healthcare - it is at the top of my pyramid of


State Sen. Ted Gaines (R-El Dorado), a critic of the health law, said the
dramatic rate increase in California shows that the Affordable Care Act
lacks any meaningful provisions to contain costs.


"Now we have a system, in my opinion, that is more bureaucratic with
increasing costs," Gaines said. "It's yet another tax on the middle class."


The higher rates in California may spur more consumers to switch health
plans. Lee said nearly 80 percent of consumers could pay less or limit their
rate increase to 5 percent if they shopped around for lower-priced plans.


But only 14 percent of Covered California enrollees who returned this year
chose a different insurer. On the federal exchange, 43 percent of people
switched plans in 2016.


The proliferation of narrow networks can make shopping complicated since
certain doctors and hospitals may only be available through one or two
insurers, and provider directories are often inaccurate.


Many consumer advocates in California had hoped that UnitedHealth Group Inc.
would become a formidable competitor on the state-run exchange. But United,
the nation's largest health insurer, is leaving Covered California after
just one year of minimal participation - part of a broader pullback
nationwide after the company posted heavy losses on individual plans.


The top four insurers in Covered California - Blue Shield, Anthem, Kaiser
Permanente and Health Net - account for more than 90 percent of enrollment.
There are at least two competing health plans in every region of the state
and more than 90 percent of consumers have at least three to choose from,
according to the exchange.


New York start-up Oscar Insurance Corp. will expand into three new counties
next year - San Francisco, San Mateo and Santa Clara. This year it has sold
policies through Covered California in Los Angeles and Orange Counties.


Jamie Court, president of Consumer Watchdog in Santa Monica, said state
lawmakers should revisit rate regulation in the wake of these "outrageous
premium hikes." California voters rejected a ballot measure in 2014 on
health insurance rate regulation, which insurers spent millions to help


That initiative, spearheaded by Consumer Watchdog, would have given the
insurance commissioner veto power over rate increases that were deemed


Since 2014, California has benefited from having a healthier mix of
enrollees than other states. One reason for that is state officials defied
the Obama administration by requiring insurers participating in Covered
California to cancel existing individual policies at the end of 2013.


That unpopular decision quickly moved people into coverage that fully
complied with the health law and created one giant risk pool for rating
purposes. Those previously insured customers were generally thought to be
healthier, because at the time they had purchased their policies, insurers
could deny coverage to people with pre-existing conditions.


But that positive effect may be wearing off as people get sick over time or
leave the individual market for other coverage including employer-sponsored
plans, experts say.


The expansion of coverage under the Affordable Care Act has driven the
percentage of uninsured Californians to a record low.


The proportion of Californians lacking health insurance was 8.1 percent at
the end of last year, down from 17 percent in 2013, before the
coverage-expanding provisions of Obamacare began, federal data show.


The expansion of Medi-Cal, the state's Medicaid program for lower-income
residents, accounts for a significant part of that reduction. Since January
2014, nearly 5 million people have joined the Medi-Cal rolls, bringing total
enrollment to 13.4 million - about one-third of the state's population.




Jeff Wells
Deputy Editor, CAL/AAEM News Service


Brian Potts MD, MBA
Managing Editor, CAL/AAEM News Service

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