Covered California Rates Jump 13% in 2017

Covered California Rising costs

Covered California’s premiums jumped 13.2% for 2017, up from about a 4% increase in each of the past two years. However, most consumers will see a much smaller increase or pay less next year if they switch to another plan. California executive director Peter Lee said, “Shopping will be more important this year…Almost 80% of our consumers will be able to pay less than they are paying now, or see their rates go up by no more than 5% if they shop and buy the lowest-cost plan at their same benefit level.”

While premiums will rise, the subsidies will rise as well. About 90% of Covered California enrollees get help to pay for their premiums. The average subsidy covers roughly 77% of the consumer’s monthly premium. “Even though the average rate increase is larger this year than the Past two years, the three-year average increase is 7% – substantially better than rate trends before the Affordable Care Act was enacted,” Lee said.

Covered CaliforniaPremium increases 2014-2015 2015-2016 2016-2017 3-year average
Average weighted increase 4.2% 4% 13.2% 7%
Lowest price Bronze plan 4.4% 3.3% 3.9% 3.9%
Lowest priced Silver plan 4.8% 1.5% 8.1% 4.8%
Second lowest priced Silver plan 2.6% 1.8% 8.1% 4.1%
If a consumer switches to the lowest priced plan in the same tier -4.5% -1.2%

 

Lee said the average rate increase reflects the following factors:

  • A one-year adjustment due to the end of the reinsurance funding mechanism in the Affordable Care Act. The provision was designed to moderate rate increases during the first three years when exchanges were being established. The American Academy of Actuaries estimates that this will add 4% to 7% to premiums for 2017.
  • Special enrollment by some consumers who sign up only after they become sick or need care, which has had a significant effect on rates for two insurance plans.
  • The rising cost of health care, especially for specialty drugs.
  • Pent-up demand for health care among those who were uninsured before the Affordable Care Act.

Lee said, “Covered California is working to address some of these issues on multiple fronts. The exchange is aggressively marketing to attract healthy consumers year-round, and is working to ensure special enrollment is available only to those who meet qualifying circumstances. It is also sampling the special enrollment population to better understand how to make any further improvements needed.”

Covered California is reducing the number of services that are subject to a consumer’s deductible. Starting in 2017, consumers in Silver 70 plans will save as much as $55 on an urgent care visit and $10 on a primary care visit. Consumers in Silver, Gold, and Platinum plans will pay a flat copay for emergency room visits without having to satisfy a deductible, which could save them thousands of dollars.

These improvements build on features already in place that ensure most outpatient services in Silver, Gold and Platinum plans are not subject to a deductible, including primary care visits, specialist visits, lab tests, X-rays and imaging. Some Enhanced Silver plans have little or no deductible and very low copays, such as $3 for an office visit. Consumers in Covered California’s most affordable Bronze plans can see their doctor or a specialist three times before the visits are subject to the deductible.

The contract with health insurers for 2017 ensures that consumers select or are provisionally assigned a primary care physician. Below are the companies selected for the 2017 exchange:

  • Anthem Blue Cross of California
  • Molina Healthcare
  • Blue Shield of California
  • Oscar Health Plan of California
  • Chinese Community Health Plan
  • Sharp Health Plan
  • Health Net
  • Valley Health Plan
  • Kaiser Permanente
  • Western Health Advantage
  • A. Care Health Plan

The following carriers are increasing their coverage areas in 2017:

  • Oscar will be entering the market in San Francisco, Santa Clara, and San Mateo counties.
  • Molina will expand into Orange County.
  • Kaiser will be available in Santa Cruz County.

With the expansion of carriers, 93% of consumers will be able to choose from three or more carriers, and all will have at least two to select from. In addition, more than 93% of hospitals in California will be available through at least one Covered California health insurance company in 2017, and 74% will be available in three or more plans. Rate details by pricing regions can be found in Covered California’s Health Insurance Companies and Plan Rates for 2017, posted online at: http://coveredca.com/news/pdfs/CoveredCA-2017-rate-booklet.pdf.

California Employer Health Benefits: Workers Pay the Price

The percentage of employers offering coverage continued to decline in California, according to a report by the California HealthCare Foundation. Only 57% of employers say they provided health insurance to employees in 2015, down from 69% in 2000. Twenty-seven percent reduced benefits or increased cost sharing, and 41% said they were very or somewhat likely to increase employees’ premium contribution in the next year. This trend will have major implications for household budgets. The report also finds the following:

  • 42% of  firms that had  many workers earning $23,000 or less offered health coverage in 2015 compared to 18% in 2014.
  • Health insurance premiums for family coverage grew 4.5%, which is a slower growth rate than in recent years. Family coverage premiums have seen a cumulative 216% increase since 2002, compared to a 37% increase in prices.
  • The average monthly health insurance premium was $573 for single coverage and $1,554 for family coverage in California, including the employer contribution. It was significantly higher than the national average.
  • 40% of workers in small firms faced an annual deductible of at least $1,000 for single coverage, compared to 10% of workers in larger firms.

Consumer Reports Praises Covered California

Consumer Reports says that Covered California earned its way on the nice column of its annual Naughty & Nice list because its standardized benefits eliminate much of the confusion for consumers buying health insurance. Unlike most other states, which offer an unlimited number of designs, Covered California requires insurance companies to compete for consumers based on the same basic benefits and co-pays, which makes it easier for consumers to compare their option from plan to plan.

Others listed on the Consumer Reports Nice list are Home Depot, Chipotle, Panera Bread, CVS, Dish Network, Dr. Martens for Life, JetBlue, Norobo, Proctor and Gamble, Price Waterhouse Coopers, Southwest Airlines, and Target. Included on the Naughty list are Citibank, Citizens Bank, Costco, FedEx and UPS, LifeLock, Sprint, and Verizon, Tom’s of Maine, Turing Pharmaceuticals, Volkswagen, and Whole Foods

House Passes Medicare Advantage Bill


On June 17th, the House of Representatives passed The Strengthening Medicare Advantage through Innovation and Transparency for Seniors Act of 2015 (H.R. 2570. The bill would establish a demonstration project allowing Medicare Advantage plans to use Value-Based Insurance Design (V-BID). The concept comes from Univ. of Michigan research. Researchers found that reducing out-of-pocket costs for some high-value medical services for certain patients can improve health outcomes and reduce disparities. It may also slow the growth of health care costs. If the bill becomes law, it would allow Medicare Advantage plans to lower co-payments and coinsurance for beneficiaries, encouraging the use of high-value, evidence-based medical services to manage chronic conditions. It prevents plans from increasing beneficiary cost sharing on any service.

The legislation was originally introduced by U.S. Reps. Diane Black (R-TN), Earl Blumenauer (D-OR) and Cathy McMorris Rodgers (R-WA). The bipartisan companion bill, the Value-Based Insurance Design Seniors Copayment Reduction Act of 2015 (S.1396), was introduced to the Senate on May 20th by U.S. Senators Debbie Stabenow (D-MI) and John Thune (R-SD). In addition to the Capitol Hill activity, V-BID was included in a recent Centers for Medicare and Medicaid Services (CMS) Request for Information to Innovate Medicare. Numerous private and public payers have implemented V-BID programs.

House Passes Medicare Advantage Bill

On June 17th, the House of Representatives passed The Strengthening Medicare Advantage through Innovation and Transparency for Seniors Act of 2015 (H.R. 2570, available via umhealth.me/vbid-bill). The bipartisan legislation would establish a demonstration project allowing Medicare Advantage plans to use a principle called Value-Based Insurance Design (V-BID). The concept comes from University of Michigan research that aligns patients’ out-of-pocket costs, such as copayments, with the value of health care services.

If the bill becomes law, it would allow Medicare Advantage plans to lower copayments and coinsurance for beneficiaries, encouraging the use of high-value, evidence-based medical services to better manage chronic conditions. It prevents plans from increasing beneficiary cost sharing on any service. The legislation was originally introduced by U.S. Reps. Diane Black (R-TN), Earl Blumenauer (D-OR) and Cathy McMorris Rodgers (R-WA).

The bipartisan companion bill, the Value-Based Insurance Design Seniors Copayment Reduction Act of 2015 (S.1396), was introduced to the Senate on May 20th by U.S. Senators Debbie Stabenow (D-MI) and John Thune (R-SD). In addition to the Capitol Hill activity, V-BID was included in a recent Centers for Medicare and Medicaid Services (CMS) Request for Information to Innovate Medicare. To date, V-BID programs have been implemented by numerous private and public payers, employers, unions, and business coalitions nationwide. The accumulating evidence validates a central V-BID premise that reducing out-of-pocket costs for selected high-value medical services for certain patients can improve health outcomes, reduce disparities and potentially slow the growth of health care costs.

When a Platinum Plan Is a Better Buy

Platinum plans may have the highest premiums among the Obamacare health plans. But they may save money for people taking specialty drugs because of their reduced co-payments and lower caps on annual out-of-pocket costs, according to a study by HealthPocket. Platinum plans have the lowest average out-of-pocket costs for the five common specialty drugs. HealthPocket looked at 2015 Obamacare metal plans whose rate filings have been made public. The average out-of-pocket specialty drug costs for platinum plans were 64% lower than gold plans, 74% lower than silver plans, and 78% lower than bronze plans.

The difference in out-of-pocket costs is dramatic. For example, taking the specialty drug Humira (used to treat inflammation) could result in annual out-of-pocket costs of $6,381.38 for 2015 bronze plans compared to only $1,416.67 for 2015 platinum plans. However, not every Obamacare health plan covers the same drugs; and caps on annual out-of-pocket costs can vary within the same metal tier. Consumers who take expensive specialty drugs need to make sure that their drugs are included in the list of covered medications on the Obamacare plans they are comparing.

“Specialty drugs represent an increasing percentage of insurance spending for prescription medications. In coming years, they’ll become the largest single cost category despite the fact that specialty drugs serve a minority of the population,” said Kev Coleman, Head of Research & Data at HealthPocket. For those who depend on these drugs, comparing premiums and annual caps on out-of-pocket costs is often more important than comparing health plans’ copayments and co-insurance fees for drugs, he added. For more information, visit www.HealthPocket.com.,

Even savvy savers can underestimate health care costs in retirement

Edgar Norton, professor at the College of Business at Illinois State University, notes that even smart savers can easily trip over health care costs. “The average 65-year-old couple will spend about $250,000 over their joint life expectancies on insurance premiums, deductibles, co-pays and other out-of-pocket expenses,” he says, adding that most people don’t expect such a burden. Fox Business/Bankrate (4/22)

Patients Are Stuck With a Big Chunk of the Medical Bill

Patients are responsible for nearly one-quarter of their medical bills through copays, deductibles, and coinsurance, according to a study by the American Medical Assn. (AMA). During Feb. and March of this year, patients paid 23.6% of the amount that health insurers set for paying physicians. The AMA is calling on insurers to give physicians the tools to automatically determine a patient’s payment responsibility prior to treatment.

The AMA also unveiled its new Administrative Burden Index (ABI), which ranks commercial health insurers according to how much unnecessary cost they contribute to the billing and payment of medical claims. Avoidable errors, inefficiency, and waste in medical claims resulted in an average ABI cost per claim of $2.36 for physicians and insurers. Cigna had the best ABI cost per claim of $1.25, or 47% below the commercial insurer average.

The AMA estimates that insurers could save the system $12 billion a year if they used automated systems for processing and paying medical claims. This savings represents 21% of total administrative costs that physicians spend to ensure accurate payments from insurers.

Commercial health insurers’ error rates on paid medical claims have dropped significantly – from nearly 20% in 2010 to 7.1% in 2013. While they have made dramatic improvements, commercial insurers could have saved more than $43 billion if they had consistently paid claims correctly since 2010. UnitedHealthcare led commercial health insurers with an accuracy rating of 97.52%.  Medicare led all insurers with an accuracy rating of 98.10%.

Medical claim denials dropped 47% in 2013 after a sharp spike among most commercial health insurers in 2012. The denial rate for commercial health insurers went from 3.48% in 2012 to 1.82% in 2013. Cigna had the lowest denial rate at .54%, while Medicare had the highest denial rate at 4.92%.

Health insurers have improved response times to medical claims by 17% from 2008 to 2013. Humana had the fastest median response time at six days while Aetna had the slowest at 14 days. Medicare’s median response time of 14 days is has not changed from 2008.

Health insurers have improved the transparency of rules used to edit medical claims by 37% from 2008 to 2013. Reducing the use of undisclosed payer-edits reduces the administrative costs of reconciling medical claims. For more information, visit www.ama-assn.org/go/reportcard.

Last Updated 06/29/2022

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