Covered California, the State of California’s health insurance exchange, projects insurance premiums in the state will rise by about 8 percent in 2017, plus an additional 5 percent per year through 2020.
The figures appeared in the exchange’s $308 million budget proposal for the fiscal year beginning July 1, 2016.
The proposed budget is balanced by increasing the assessment fee on insurance plan premiums from a flat charge of $13.95 per plan to a fee of 4 percent of the premium for plans obtained directly through Covered California, which has 1.4 million enrollees. The per-plan charge would be applied in addition to the full price of the premium.
The fee increase will be spread across the entire individual market, including to 700,000 individuals who did not obtain their plans directly through Covered California, because the Affordable Care Act (ACA) requires premiums for plans offered outside of the Obamacare exchanges to match those of the same plans offered on the exchanges.
The price hike comes amid similar predictions from health insurers around the country, including projected premium increases of 20 percent or more in Maine and Washington State.
Double Digits Still Possible
Sally Pipes, president of the Pacific Research Institute and author of The Way Out of Obamacare, says the actual increase in California premiums will be much closer to the double-digit increases other states are experiencing.
“The final increase will not be released until July, which is at least one month after the June 7 California primary,” Pipes said. “It may well be that this is a political decision to keep the forecast rate low. If rates such as [those] being sought in other states are any indication, I find it odd that the California rate increases would be so low.”
Potential Plan Downgrades Loom
Robert Laszewski, president of Health Policy and Strategy Associates, says any significant increase in premium costs in California would affect all insured patients in the state, potentially forcing them to downgrade to plans with less-expensive premiums and higher deductibles.
“For those getting a subsidy, they may have to move to another plan to keep their costs in check, since subsidies are tied to the second-lowest-cost Silver Plan,” Laszewski said. “While they would be able to avoid a rate increase, they would be moving to a cheaper plan than they have now. To be a cheaper plan, that plan might have higher out-of-pocket costs or copays.”
Increasing Value for Patients
Californians who have resisted buying health insurance will continue to do so until insurers sufficiently improve their plans’ value to patients, Laszewski says.
“Covered California has only attracted about half of those who are eligible,” Laszewski said. “Making it possible for health plans to offer a wider array of benefit options to attract more of the people who have not decided to sign up could improve the health of the pool.”
Pipes says free-market alternatives to ACA mandates would help lower costs, increase coverage, and empower patients and doctors in the health care system.
“We need to reduce state mandates and regulations that add significantly to the cost of coverage, promote [health savings accounts], and raise contribution amounts,” Pipes said. “Medicaid needs to be turned into a block grant program, and Medicare needs to endorse vouchers, raise the age of eligibility, and make it means-tested.”
Individuals should enjoy the same tax breaks as employers for the dollars they spend on health insurance, Pipes says.
“We need to change the federal tax code by leveling the playing field so that individuals have the same tax advantage as those who have employer-based coverage,” Pipes said. “The system should offer age-based, refundable credits that would be paid to individuals and not insurers.”
Jordan Finney ([email protected]) writes from Boise, Idaho.
“Sally Pipes: The Way Out of Obamacare,” Health Care News Podcast, The Heartland Institute, March 15, 2015: https://heartland.org/podcasts/2016/03/15/sally-pipes-way-out-obamacare
“Peter Ferrara: The Sessions-Cassidy Proposal to Replace Obamacare,” Health Care News Podcast, The Heartland Institute, June 2, 2016: https://heartland.org/podcasts/2016/06/02/peter-ferrara-sessions-cassidy-proposal-replace-obamacare
“Proposed Fiscal Year 2016–2017 Budget,” Covered California, May 9, 2016: https://heartland.org/policy-documents/proposed-fiscal-year-2016-2017-budget
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