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Reform Update: California exchange plans have small increases for 2015


By Rachel Landen
Posted: July 31, 2014 - 4:00 pm ET
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Most consumers purchasing coverage on the California health insurance exchange will see small or moderate increases in their 2015 premiums when open enrollment starts Nov. 15. But those consumers paid significantly more for their individual-market coverage in 2014 than they paid for similar plans in 2013, before the healthcare reform law took full effect.

The average proposed statewide rate increase for premiums announced Thursday is 4.2%, with some plans proposing no increase and others proposing to reduce rates by as much as 8.5%. The announced average overall increase is a weighted average, meaning it takes into account the number of enrollees in each of the plans so the rates of plans with larger enrollment carry a heavier weight than plans with smaller enrollment.

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“This is good news for Californians and an example of how Covered California and the Affordable Care Act are working to make health insurance affordable,” Peter Lee, executive director of the state's exchange, Covered California, said in a news release. “As we move into our second open enrollment and first renewal for many Californians, we are glad to see consumers have a real choice, with affordable options in all regions.”

That's also good news for Obamacare supporters because California had by far the largest exchange enrollment in the country. If the law's implementation is working there it gives the Affordable Care Act a big political boost. About 1.4 million Californians selected plans through the exchange during the 2014 open enrollment. A new Kaiser Family Foundation survey found that about 6 in 10 uninsured Californians—totaling 3.4 million people—gained coverage this year through the exchange or the healthcare reform law's Medicaid expansion.

The California rates announced Thursday remain subject to an independent review by the state's regulators, with the California Department of Managed Health Care reviewing the rates proposed by nine of the participating insurers and the California Department of Insurance reviewing the rates of one. All 10 of the health insurance companies that will participate in the state health exchange in 2015 were also in the exchange in 2014.

Thursday's announcement fell in line with what experts had anticipated, though for varying reasons.

Gerald Kominski, director of the UCLA Center for Health Policy Research, had predicted increases to be relatively modest—possibly in the 5% to 8% range. “We don't believe that people who signed up for coverage were necessarily sicker than the average population, so there's no reason for premiums to go up because of the mix of members or enrollees,” Kominski said. “Healthcare expenses have not been rising extremely fast in California or the nation, so that's also been a moderating influence.”

California Insurance Commissioner Dave Jones also had predicted that premium hikes would be moderate due to the threat of Proposition 45, a November ballot measure he supports that could give Jones the authority to reject excessive health insurance rate hikes. At a news conference Tuesday, he said insurers will raise rates cautiously because if they came in with big hikes “there would be a huge public outcry and the public would respond at the ballot box.”

That suggestion, as well as Covered California's Thursday announcement, came on the heels of a California Department of Insurance analysis out this week that showed significant rate hikes in 2014 following implementation of the Patient Protection and Affordable Care Act.

“The Department of Insurance found that those who had health insurance in 2013 and who then bought coverage in 2014 experienced rate hikes on average between 22% and 88%, after considering variations for region and age,” Jones said in a written statement accompanying the report.

The department's health actuarial office used data provided by the four largest health insurers in the state showing the price of health insurance and available health plans in the individual market in 2013 and 2014. But some critics, including the California Association of Health Plans, have called into question the significance of the study.

“(Jones') analysis doesn't take into account subsidies, enrollees who are benefitting from the ACA or acknowledge how the ACA has substantially expanded coverage and benefits while also changing the way premiums are priced,” California Association of Health Plans Executive Vice President Charles Bacchi said (PDF) in a written statement.

Of those purchasing plans through the state exchange during the first open-enrollment period, 90% were eligible for premium tax credits to help offset the expense of their premiums, Covered California reported. And the expectation is that the amount of subsidy for most individuals in 2015 either will increase or be similar to what they received in 2014.

Some experts note that it can be misleading to compare individual-market plans in 2013 and 2014 because plans under Obamacare have to offer a comprehensive set of benefits and insurers have to accept all applicants including those with pre-existing health conditions and can only charge older enrollees three times more than younger applicants.

“Unfortunately the headline suggests there were enormous increases overall in premiums, with the implication being that after subsidies, people were still paying more for insurance,” Kominski said. “That's an unfortunate interpretation.”

Difficult to reach

The Kaiser Family Foundation released a survey this week showing that California's remaining uninsured population may continue to be a difficult group to reach during the second wave. They are more likely to be undocumented male immigrants or those who have never previously had insurance. In fact, 62% are Hispanic, and about half of them may not be eligible for coverage as a result of their immigration status. But even for those who could enroll in coverage, fears of exposing their family members' undocumented status continue to hold them back, with 54% of the remaining uninsured Hispanics included in the Kaiser survey reporting that they worry it could bring undesirable attention to their family's status. Drew Altman, CEO of the foundation, wrote that “bridging the fear gap” is key to providing coverage to these legal immigrants.

HealthCare.gov risks remain

A Government Accountability Office official warned Thursday that unless the CMS improves its oversight of HealthCare.gov, "significant risks remain that upcoming open enrollment periods could encounter challenges." William Woods, GAO's director of acquisition and sourcing management, told the House Energy and Commerce Committee's Oversight and Investigations Subcommittee hearing that the HealthCare.gov tech job was done "without effective planning or oversight practices." The GAO wants the agency to develop better surveillance plans, provide better direction and oversight regarding contractor responsibilities, and ensure that the agency's governance board overseeing such projects does a better job overseeing contractors. “They have the tools in place,” Woods testified. “They just didn't use them.”

Also testifying Thursday, new CMS Principal Deputy Administrator Andy Slavitt said he agreed with the GAO's recommendations and that the CMS has already done what the GAO suggests and more, firing main contractor CGI, changing its new contracts and putting oversight safeguards in place.

Follow Rachel Landen on Twitter: @MHrlanden


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