California ACA rates to rise almost 9% next year
As in many states across the nation, the 1.4 million Californians who buy coverage on the state's individual insurance exchange will pay more in 2019 in part because of the zeroing out of the federal penalty for not enrolling in coverage. But Covered California's heavy investments in promoting the exchange helped put a check on insurers' rate increases.
Covered California's 11 insurers—the same ones selling coverage on the exchange in 2018—are returning next year and have asked to raise rates by 8.7% on average. The rate increases range from 5% to 13%, which is lower than increases requested by insurers in several other states, such as Washington, where the average rate hike requested is 19%, or New York, at 24%. The rate requests across the states are not yet final and could change before open enrollment begins in November.
While it's good news that the average rate increase in California is in the single digits, it's still one "that is about double what it should have been and could have been but for federal policies, in particular the removal of the penalty for not having insurance coverage," said Peter Lee, Covered California's executive director.
Health insurers in California attributed anywhere from 2.5 to 6 percentage points—or an average of 3.5 points—of rate increases to the zeroed-out individual mandate penalty, which takes effect in 2019 and has insurers and health policy experts worried that millions of healthy individuals will forgo insurance when there's no fine in place to encourage enrollment. California alone estimates that 250,000 individuals will leave the market next year, which could increase the amount of uncompensated care delivered at hospitals in the state.
Lee said Covered California's annual investment of more than $100 million into marketing the open enrollment period has helped blunt the effects of the federal administration's decision to nix the mandate, however, and has encouraged a good mix of both healthy and riskier enrollees in the marketplace.
The biggest factor driving rate increases in 2019 is the rising cost and use of healthcare services.
Insurers' rates did not account for the expansion of association health plans and short-term medical plans, Lee said, because they see those types of health plans having more of an effect on 2020 rates.
"But they all raised a yellow flag of warning for us to say if these products become substantial in 2020 it might be a different picture. They might be needing to add costs on if there's going to be a migration of healthy people" to those plans, Lee said.
About 1.2 million of Covered California's members receive financial subsidies from the federal government to help them pay for premiums. Those consumers will experience an average rate increase of 6% next year, amounting to a monthly premium of $123 after receiving tax credits.
The 200,000 unsubsidized people on the exchange will bear the entire cost of the rate increases. Additionally, about 900,000 Californians buy coverage through the individual market but off of the exchange and aren't eligible for financial help.
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