Covered California on Tuesday announced that health insurance rates on the state’s health insurance exchange created under the Affordable Care Act will increase by an average rate of 12.5 percent for 2018 plans.
Peter Lee, CEO of the exchange, said the increase normally would have been just under 10 percent, but for a 2.8 percent tax on health insurers that resumes next year.
But a bigger threat — the possibility that the Trump administration kills certain Obamacare subsidies — would increase rates by another 12.4 percent, he said, though Covered California has a work-around plan to avoid that scenario.
“We were hopeful that this year we would be back to normal,” Lee told reporters during a Tuesday morning press call. But, “uncertainty in Washington is affecting consumers today.”
Lee also noted that while all of exchange’s 11 health insurance companies will return to the market in 2018, Anthem Blue Cross of California will leave markets that comprise about half of its enrollment — except for Santa Clara County, the Central Valley and certain Northern California counties.
That means 153,00 of those enrolled in Anthem plans through the exchange today will need to select a new plan for 2018.
Lee tried to soften the blow, saying that 84 percent of doctors who contract with Anthem are available in another health plan offered through the exchange.
But that did not mollify some Bay Area insurance agents, who are alarmed by both the rate hike and Anthem’s retreat.
“Make no mistake: insurance companies are cutting back their coverage areas and raising rates so much in response to the uncertainty coming out of Washington,” said Jonathan Greer, an Oakland-based independent health insurance broker.
While he said it’s fortunate that every region of Northern California will have at least two carriers offering coverage, “it’s a big blow that Anthem Blue Cross has pulled out of the Bay Area,” except for Santa Clara County.
Once again, the highest average rate hike in the greater Bay Area continues to hit consumers along the Central Coast in Santa Cruz, Monterey and San Benito counties, whose rate hike matches the statewide figure of 12.5 percent.
The next highest is Santa Clara County, which will see an average rate hike of 10.4 percent, followed by Alameda County at 8.3 percent and Contra Costa County at 8.2 percent.
Average increases for Marin, Napa, Solano and Sonoma counties will be 7.4 percent, followed by San Francisco County: 6.6 percent and San Mateo County at 4.3 percent.
Experts say the costs are steep around the Bay Area compared to some parts of the state because of the high cost of living, less hospital competition and a largely unionized workforce.
By comparison, the 2017 average rate shot up 13 percent, mostly because two federal programs created to cushion insurers from losing money on policies under the Affordable Care Act expired in 2017.
The Affordable Care Act’s generous subsidies should help lessen the pain for most Covered California enrollees, who earn between 139 percent and 400 percent of the federal poverty
But anyone who earns between 139 percent and 250 percent of the poverty threshold — between $34,200 and $61,500 for a family of four — also is eligible for additional subsidies called “cost-sharing reductions,” which lower out-of-pocket costs such as co-pays and deductibles.
About 7 million Americans, including roughly 650,000 Californians, receive those extra subsidies. And the federal government reimburses insurers on the exchanges about $7 billion to reduce the cost of the co-pays and deductibles for low-income people.
In 2014, however, House Republicans sued the Obama administration, saying that Congress never appropriated funding to give insurers that money. A federal judge ruled in the Republicans’ favor and ordered that payments be stopped. But the ruling was appealed by the administration, and the payments were allowed to continue on a month-to-month basis, pending the appeal.
Already furious that the U.S. Senate could not pass a “skinny repeal’’ of Obamacare on Friday, Trump could decide to end those subsidies — a move that could send many premiums soaring because health insurers would have to pick up those costs themselves, and many companies would also likely flee the markets, experts say.
In anticipation of such a move, Covered California has devised a fall-back. For 2018, the exchange will allow health insurance companies to artificially inflate their popular “Silver” plan rates to cover the cost of cost-sharing reductions.
But consumers enrolled in moderately priced “Silver” plans whose rates are inflated should not be adversely impacted because their monthly subsidy — paid by the federal government — also would increase, Lee said.
Covered California officials also say that exchange enrollees with unsubsidized Silver-tier coverage will have an option to purchase comparable Silver-tier coverage off-exchange without facing a steep increase in their price, even if the cost-sharing reductions are killed.
Still, the uncertainty over whether or not the federal government will continue the cost-sharing payments to low-income people led Covered California to ask all of its plans to submit two sets of 2018 rates.
Covered California has sent another letter to the Trump administration asking for clarification about its intentions regarding the cost sharing payments.
AVERAGE PROPOSED RATES INCREASES FOR 2018
San Benito, Santa Cruz and Monterey counties: 12.5 percent
Santa Clara County: 10.4 percent
Alameda County: 8.3 percent
Contra Costa County: 8.2 percent
Marin, Napa, Solano and Sonoma counties: 7.4 percent
San Francisco County: 6.6 percent
San Mateo County: 4.3 percent
Source: Covered California