Why Covered California’s Rate Hikes Are Lower Than The Rest Of The U.S.

Starting Tuesday, Nov. 1, through Jan. 31, Californians who don’t have employer-based health insurance or Medicare can sign up for health insurance through the state’s marketplace, Covered California. That’s the easy news.

As Covered California launches its fourth annual sign-up season under the federal Affordable Care Act, health care coverage is as contentious as ever, both in presidential debates and in national headlines. Covered California has already posted average premium increases of 13.2 percent, compared with a nationwide average of 25 percent. Part of that jump is due to the end of “reinsurance” payments to cover insurers’ losses, but also because of pricier prescription drug and medical costs, as well as more unhealthy consumers signing up.

Ahead of the signup season, we talked last week with Peter Lee, Covered California’s executive director, about California’s rate hikes, the effect of presidential politics, and sign-ups among millennials. Here’s an excerpt:

Q: For 2017, Covered California’s average premiums went up by double digits for the first time. Is this the beginning of more rate hikes ahead?

A: Next year, we expect they will be down to single digits, more like the 4 percent increases we had the last two years. We’re very optimistic.

California as a state did two things that are part of why we have a rate increase that is half of the national increase. And why it’s very likely to be only a one-year adjustment. First, we expanded Medicaid eligibility. States that did not expand have bigger cost increases (in 2017). We also converted the entire individual market to ACA (Affordable Care Act) plans the first year. (Under Obamacare, states had until 2018 to make all of their plans ACA compliant, such as eliminating exclusions for pre-existing conditions.) We ripped the Band-Aid off the first year. In 2014, we had some unhappy consumers. They had to go out and buy new insurance plans. … The 30 states that didn’t do that for the last three years have had a bunch of citizens who were not part of the common risk pool. By definition, they were healthier. But health plans didn’t know who to price for. … (Insurers) did their best efforts to price right for 2016 and got it wrong. If you don’t know who you’re insuring, you can get it wrong. … In California, we do have a good risk mix, young and old and particularly healthy.

Q: What part has politics played?

A: A big part of where other states has floundered has been because of political opposition by state governments. They adopted policies like not expanding Medicaid (to enable more individuals to qualify for subsidies). In many states, the politicians who have been so against Obamacare have brought upon their own citizens the rate increases we’re seeing across the country. … In California, for four years running, we’ve put politics on the back burner. We’ve succeeded in not making consumers the political football that gets kicked in the name of national politics.

Q: What about folks who will pay more this year?

A: Averages are meaningless to a consumer who is facing a double-digit increase. … It’s absolutely the case that as plans raise their prices, consumers will shop. Those plans that are significantly higher priced will lose enrollment. That’s consumers driving the market.

This year, there are 11 carriers offering policies in California. Everyone will have at least two to choose from.

Q: Obamacare has been a contentious topic in this year’s presidential campaign. What’s the impact on Covered California?

A: We are not doing advertising between now and the election. We don’t want to be caught in the political fray. On Nov. 9, the day after the election, you’ll start seeing some really good ads.

Q: The federal Health.gov insurance market is teaming up with 17 companies – TaskRabbit, Lyft, DoorDash, Uber, etc. – to encourage sign-ups by freelancers. Is Covered California doing similar outreach?

A: We’ve been working with the Ubers of the world … the sharing economy. The vast majority of California residents have employer-based coverage or Medicare. But many Californians are in working environments that don’t offer health insurance. It’s people in between jobs, in transition or with an employer who doesn’t offer insurance; we’re the sweet spot for them.

Q: Nationally, some of the premium hikes have been blamed on insurance companies having sicker enrollees than expected and too few millennials or younger enrollees.

A: In our first year of open enrollment, the percentage of 18- to 34-year-olds was about 26 percent. In 2016, it was 38 percent. It’s gone up a lot. But the bigger issue is getting healthty people in. If you’re enrolling a 55-year-old who is healthy, they pay premiums at three times what a 19-year-old does. They help the risk pool more than a millennial.

Q: What’s the 2017 enrollment goal?

A: We have 1.3 million enrollees currently. We anticipate signing up 400,000 new people during open enrollment. … You go into Modesto, East L.A., Oakland, Palm Springs and you will see a storefront emblazoned with a Covered California logo. That’s not a government office; those are private, independent insurance agents beating the bushes to get people insured. We have 14,000 licensed insurance agents that are committed to selling Californians individual insurance on and off the exchange.