Covered CA premiums set to spike

 

For some time, Obamacare critics have warned that health insurance premiums would skyrocket once the Affordable Care Act went into effect.

Now they say the leap in premiums, as calculated by state Insurance Commissioner Dave Jones, is just the beginning of hefty annual hikes in the years ahead.

Jones recently released an analysis – conducted in response to complaints regarding steep increases in health insurance rates – that compared 2013 and 2014 health insurance plan rates. The analysis found the average rate increases for people who had insurance in 2013 and bought 2014 coverage were between 22 and 88 percent.

Those with incomes that were low enough received premium subsidies under the Affordable Care Act. But many Californians whose incomes were not low enough received a major rate increase, Jones said.

“What the department found was that in many cases those purchasing 2014 coverage were paying significantly higher rates than what they had paid in 2013 and the beneficial differences in policies was minimal and therefore could not be justification for the significant rate increases,” said Janice Rocco, the deputy commissioner over health policy for the California Department of Insurance.

Just the beginning

Stephen Parente, a professor of health finance and the associate dean of the Carlson School of Management at the University of Minnesota, said these sharp premium hikes are just the beginning for Californians who don’t qualify for the Affordable Care Act.

Parente released a study in May finding that structural problems in the ACA would lead to significant premium increases in the years ahead, prompting droves of Californians to cancel their health insurance policies. As a result, Parente calculated the ranks of the uninsured in California would swell to 11 percent within a decade.

“The increases will be above 3-4 percent a year and will probably average 6-8 percent on average over the next 20 years,” Parente said. “There will be a spike, unless the Obama administration changes its policies, in 2017. That spike could increase the number of the uninsured by 2-3 million people over the long term and that would mean that 5-6 years later up to 5 million would be uninsured than otherwise would have been insured.

“So the short of it is that premium increases are going to drive increases in the number of the uninsured, so that by the time you get to 2023, we could have essentially 40 million uninsured nationwide. In fact, because of the premium increases, from 2015 on, we’ll have an increase in the number of uninsured that continues to grow for the next 10 years and beyond.”

For some, Parente’s expectation of rapidly rising health insurance hikes may seem puzzling, especially after Covered California announced recently that the vast majority of their clients will see low increases in their health insurance premiums next year. Covered California, the state’s marketplace for the federal Affordable Care Act, announced health insurance premiums will only rise an average of 4.2 percent next year.

‘Good news’

“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,” Covered California Executive Director Peter V. Lee said in a prepared statement.

But Parente explained that the 4.2 percent increase over the next year is just to mollify voters between now and the 2016 presidential election and rates will spike significantly in 2017.

“It’s not surprising that they tried to get as much of a price increase as they could before the whole Affordable Care Act went into play and now, particularly with Proposition 45 on the ballot, the insurance companies who have enormous political influence decided not to raise their premiums very much,” said Joel W. Hay, a professor of health policy and economics at the University of Southern California.

In November, California voters will decide whether to approve Prop. 45 – a measure that is opposed by insurers, who have spent $37 million in an effort to defeat it. The measure would grant Jones the power to determine whether proposed health insurance rate increases are justified.

Delays

Opponents of Prop. 45 argue it would create lengthy delays and barriers to care and threaten access to affordable care for the more than 1.4 million Californians who secured health coverage through Covered California. They also dispute Jones’ analysis.

“The Insurance Commissioner’s report was misleading and politically motivated in order to promote a ballot measure that would give him sweeping new powers over health care decisions,” said Robin Swanson, the No on Prop. 45 spokesperson.

Proponents of Prop. 45 say it would prohibit excessive profits and require health insurers to get approval for rate hikes. Consumer Watchdog, a Santa Monica-based nonprofit organization, argues the measure will apply the same rules to health insurance that have saved state drivers more than $100 billion since 1988 while making the auto insurance market highly competitive.

“California consumers have been overwhelmed by a tsunami of relentless rate hikes because there is nothing at the federal or state level to stop insurers from imposing unreasonable increases,” Robert Leonard of the Consumer Watchdog Campaign said in a prepared statement. “Insurers hope that a $37 million campaign of deception will defeat Proposition 45. But if Prop. 45 doesn’t pass, health insurers will continue to stick it to consumers as they have for years.”

Continued increases

In spite of the pro and con arguments surrounding Prop. 45, Michael Cannon, director of health policy studies at the Cato Institute in Washington, D.C., said the reality is that health insurance costs will continue to rise for the majority of Californians in the years ahead.

“The overall trend is for premiums to rise,” Cannon said. “You’ll still get some disagreement about that. They will say that, after accounting for subsidies, a lot of people’s premiums will fall. The problem with that is it doesn’t mean premiums have gone down, but that the costs have just been shifted to the taxpayers.

“On average, premiums are increasing and you’d expect that to happen because this law makes health insurance available to people who were too sick to get health insurance before. And both of those factors will lead to higher claims and higher premiums.”