Premiums for health plans sold on Covered California, the insurance exchange created under the Affordable Care Act, could spike nearly 50 percent if the federal government stops enforcing two of the law’s key provisions that have been put in question under President Trump, according to a new analysis by Covered California and PricewaterhouseCoopers.
The projected increase would apply to all health plans in California’s individual insurance market, which includes 1.3 million people who buy plans through Covered California as well as 1.1 million people who buy plans directly from insurers outside of the exchange.
The latter group would bear the brunt of the premium spike, because those people do not receive financial assistance to buy plans, whereas the vast majority of people who buy on Covered California do.
The analysis, released Thursday, found that if the federal government stops enforcing the individual mandate to buy insurance and halts the payment of subsidies — a $7 billion stream of money that currently goes to insurers to lower co-pays and deductibles for poor Americans — premiums on the state exchange would rise 28 to 49 percent in 2018.
The study also found that up to 350,000 Californians would no longer buy insurance if the federal government stopped enforcing the two provisions.
Both provisions face an uncertain future under the Trump administration.
Enforcement of the individual mandate, which requires people to buy insurance or face a tax penalty, has been loosened. The IRS said this year that it will not reject tax returns that do not indicate whether the taxpayer bought insurance.
The fate of the subsidies also remains unclear. The White House on Wednesday indicated it will continue funding the payments, but did not say for how long.
Insurance companies, which in California face a May 1 deadline to notify regulators about their plans and rates for 2018, need more long-term assurance that the payments will continue, said Peter Lee, executive director of Covered California.
“We haven’t heard clear, emphatic indication that they’ll be funded in 2018 and 2019,” Lee said. “Health plans need more certainty than, ‘It’s not going away tomorrow.’”
Roughly 700,000 Californians benefit from the subsidies in question. They essentially reimburse insurers, which under the ACA must provide higher-quality plans to poor Americans who otherwise would not be able to afford them.
Several large insurers, including California’s Molina Healthcare and Anthem, say that without the subsidies, they would have to raise premiums as much as 20 percent. Molina went a step further Thursday, saying in a letter to congressional leaders that the company would immediately exit all state health insurance exchanges if the subsidies are not funded. The company sells in nine states, including California.
“We will have no choice but to send a notice of default informing the government that we are dropping our contracts for their failure to pay premiums and seek to withdraw from the marketplace immediately,” Molina wrote.
Sen. Dianne Feinstein, D-Calif., called the projected consequences in the analysis “devastating.”
“As public servants, our job is to solve problems, not make them worse,” Feinstein said in an email. “It’s outrageous that the Trump administration would consider hurting Americans to advance a political argument by sabotaging the individual health insurance market nationwide.”