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.

Millenials Underestimate the Cost of Care

Millennials (ages 18 to 36) are more likely than are non-millennials to underestimate the cost of an injury or illness, including medical, household, and out-of-pocket costs (66% versus 45%), according to a survey by Aflac. Sixty-five percent say they could afford less than $1,000 for an unexpected out-of-pocket expense. Millenials are more inclined to try unconventional ways to pay for out-of-pocket health care expenses, such as borrowing from friends or family and crowd sourcing. The online study surveyed 1,500 benefit decision-makers and 5,000 employees at small, medium, and large companies

Health Insurers Increase Debt in Wake of the ACA

Since 2011, U.S. health insurers have nearly doubled their borrowing levels due to the Affordable Care Act (ACA), according to a report by A.M. Best. With traditional health insurance products, insurers receive full premium payment every month before paying any claims. But that’s not the case with exchange products. In the first few years of the exchanges, insurers relied heavily on risk-adjustment, reinsurance, and risk corridors. The timing of paying direct premium subsidies fluctuated significantly. So health insurers had to pay the claims because their liquidity was under pressure. They turned to borrowing to alleviate this pressure. A.M. Best has not seen any significant rating pressures due to borrowing. However, heavy reliance on borrowed funds could put pressure on ratings if it reduces financial flexibility or slows the growth of capital and surplus. However, financial institutions see the use of borrowed funds as favorable since many top borrowing insurers are very big, highly capitalized, and highly rated, according to the report. 

What to Do If You Lose Your Tax Subsidies from the Health Insurance Marketplace

CMS announced a special enrollment for those who lost their tax subsidies. Jim Jalil CEO ofHealthCareForYouNow.com said, “We have seen a large of number of individual losing there tax credit despite sending the required documents needed for their subsidies. We first noticed around May this year when our members completed their taxes for 2014. Most who have changed their income or adjusted the subsidies notice that the subsidies were removed despite sending all the required documentation.”

Jalil offers the following advice: In order to regain the lost tax credit you will need your 2015 application ID number from the Marketplace as well as your updated projected income for 2015 to reissue a tax credit for the remainder of the 2015 calendar year. You’re likely entitled to a grace period. Most people who purchased insurance plans on state and federal marketplaces qualified for tax credits, making their insurance more affordable. If you got a premium tax credit to reduce your monthly premiums, you’re in luck: The Affordable Care Act instituted a 90-day grace period for these subsidized plans.

For the first 30 days after your missed payment, your insurance company must pay your claims. For days 31 to 90 of the grace period, they don’t have to pay the claims but will hold them rather than flat-out denying them. During the entire 90-day grace period, you can get caught up and have your insurance pick back up once you are current on your premiums. Any claims held during this time will be processed once you’re caught up. If you’re unable to get caught up during this time, your policy will be canceled and any claims submitted after the initial 30 days will be your responsibility entirely.

Key Senate Republicans offer bridge if ACA tax credits fall

Consumers who enrolled in health insurance through HealthCare.gov would not immediately lose tax credits and subsidies if the Supreme Court rules against the Obama administration, Republican Sens. Orrin Hatch of Utah, John Barrasso of Wyoming and Lamar Alexander of Tennessee wrote in the Washington Post. “We would provide financial assistance to help Americans keep the coverage they picked for a transitional period,” the senators wrote. Bloomberg (3/1), The Washington Post (tiered subscription model) (3/1)

HHS Urged to Prepare for Possible Elimination of ACA Subsidies

The American Academy of Actuaries called on HHS to address the possible elimination of Affordable Care Act (ACA) premium subsidies. If the U.S. Supreme Court decides in favor of the petitioners in King v. Burwell, there could be a significant drop in health plan enrollment and an increase in the risk profile of remaining enrollees. This would drive up average health costs for health plans. Insurers are limited in their ability to change premiums for 2015 and 2016. As a result, premiums for  2015 and 2016 are likely to be inadequate to cover claims. These premiums need to be submitted before the court’s ruling.

The Academy said that HHS and state authorities should consider allowing contingent premium rate submissions and/or revised submissions to help mitigate the potential for inadequate 2016 premiums in FFM states. These changes could include the following:

  • Allowing insurers to submit two sets of contingent premium rates. One set would reflect pricing assumptions that would be appropriate if premium tax credits continue to be available; the other set would reflect pricing assumptions that would be appropriate if premium tax credits are no longer allowed.
  • Allowing premium rate revisions after the May 15 submission deadline.

Millions Would Drop Coverage If Subsidies Were Eliminated

Eliminating government subsidies for low- and moderate-income people through federally run health insurance marketplaces would reduce enrollment in the individual market by more than 9.6 million, according to a new RAND study. If the Republican controlled Congress strikes down the subsidies, enrollment in the ACA-compliant individual market would drop to 4.1 million in 34 states. Individual market enrollment would drop 70% among people buying policies that comply with the Affordable Care Act.Christine Eibner, the study’s senior author and a senior economist at RAND said, “The disruption would cause significant instability and threaten the viability of the individual health insurance market in the states involved. Our analysis confirms just how much the subsidies are an essential component to the functioning of the ACA-compliant individual market.”

Premium costs for a 40-year-old nonsmoker purchasing a silver plan would rise from $3,450 annually to $5,060.  In addition, unsubsidized individual market premiums would rise 47% in those states. The hike would correspond to a $1,610 annual increase for a 40-year-old nonsmoker with a silver-level plan.

The Supreme Court has agreed to hear a court case (King v. Burwell) that challenges the use of government subsidies to help low- and moderate-income people buy health insurance in marketplaces operated by the federal government. Ending federal subsidies would have a bigger effect in states with federally run marketplaces than in states that run their own marketplaces. States with federally run marketplaces generally have more low-income participants who are more likely to drop insurance without subsidies. Those states also had higher uninsurance rates prior to adoption of the Affordable Care Act

Eliminating Subsidies Would Increase the Number of Uninsured

Ending ACA subsidies would increase premium costs in the individual exchanges by as much as 43% and cause enrollment to drop 68%, according to a RAND study. The tax subsidies have been challenged, in federal courts across the country, on the grounds that the wording of the law only allows aid to people who buy policies through state-run exchanges. “If subsidies are eliminated entirely, our research predicts substantial disruption in the individual health insurance market,” said Christine Eibner of RAND.

Replacing subsidies with vouchers would make the health insurance exchanges more sensitive to changes in the age mix of those enrolling. For example, with vouchers instead of tax credits, each 1% reduction in young adult enrollment would trigger a premium increase of about three-quarters of 1% on the insurance exchanges. A 1% reduction in young adult enrollment would trigger less than one-half of 1% – with the ACA’s tax credit structure. For more information, visitwww.rand.org.

What happens to people who get subsidies, then find out they shouldn’t?

People who received subsidies for purchasing health insurance through an Affordable Care Act exchange and are found to be ineligible for that aid will have to pay it back, but maybe not the full amount. This information from the Treasury Department could affect the 300,000 consumers who were asked to provide more information about their immigration status or citizenship by this week’s deadline as well as anyone who received tax credits and is later found to be ineligible. Kaiser Health News (8/29)

Appeals Court “Cuts the Heart Out of the ACA”

In the case, Halbig v. Burwell, The U.S. Court of Appeals for the District of Columbia Circuit ruled that the Affordable Care Act’s (ACA) tax credits are only available to persons in state-run marketplaces. Elizabeth Taylor, executive director of The National Health Law Program (NHeLP) said, “Today’s ruling is misguided and, if not corrected, will cut the heart out of the ACA. Only 14 states established their own Marketplace.” As noted in the amicus brief filed by AARP Foundation Litigation and NHeLP, tax credits are crucial to achieving the law’s mission of providing near universal health care coverage. According to analysis by the Urban Institute, 7.3 million people could lose their subsidies. Jane Perkins, NHeLP legal director said, “If today’s decision stands…older adults, the chronically ill, and those with low to moderate incomes would feel the brunt. Without the financial help required by the ACA, quality coverage will be out of reach. These Americans will be too poor for private coverage, but not eligible for public programs — the very situation the ACA was designed to avoid.” The ruling does not immediately affect the availability of financial assistance in the federal Marketplace. The government is likely to petition the appeals court for review by the full 11 judge panel.

Last Updated 04/14/2021

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