Health insurance rates through the Covered California insurance exchange will be rising 8.4 percent to 10.8 percent on average next year in the central San Joaquin Valley, the exchange announced Tuesday.
Covered California Executive Director Peter V. Lee said statewide rates for consumers in 2017 are going up 13.2 percent on average.
The increases for 2017 are significantly higher than the approximately 4 percent increases in each of the last two years, but Lee said a three-year average increase of 7 percent is lower than before the Affordable Care Act.
“For many consumers, they will see single-digit increases,” he said.
Rates in Fresno, Kings and Madera counties are increasing by 10.8 percent on average. Rates in Tulare, Merced and Mariposa counties are going up 8.4 percent on average. Rates through some health plans, though, will rise as much as 23 percent. The preliminary rates are subject to a 60-day public comment period and regulatory review by the California Department of Managed Health Care.
This isn’t about health plans making big buckets of money. This is about health care costs rising.
Peter V. Lee, Covered California executive director
The state Department of Insurance also will review a Health Net exclusive provider organization, or EPO plan. In an EPO plan, members can only use doctors and hospitals within the network and there are no out-of-network benefits. Health Net is proposing a 23 percent increase in EPO rates in Tulare.
Lee said some plans – Anthem Blue Cross and Blue Shield of California in particular – experienced higher than expected costs, which is driving up premium rates. Blue Shield is proposing a rate increase of 16.4 percent in Fresno County and 18.5 percent in Tulare. Anthem rates would go up 8.2 and 12 percent for two plans in Fresno and 8 percent in Tulare.
Kaiser Permanente is proposing a rate increase of 6 percent in Valley counties.
Bill Wehrle, Kaiser Permanente vice president of health insurance exchanges, said in an email Monday that the health plan is “committed to offering stable rates over the long term.”
Anthem spokesman Darrel Ng said in an email that changes in the company’s 2017 rate filings are a result of increased costs “and underscore the additional work that needs to be done to moderate the growth in health care costs.”
Blue Shield spokesman Clinton McGue said the rate hikes are needed in part because members used more health care services than expected and 2016 rates were underpriced.
The announcement on rate hikes Tuesday rankled some. Jamie Court, president of Consumer Watchdog, a nonprofit, nonpartisan consumer protection organization, said in an email that the 13.2% rise in health insurance premiums was outrageous and the consequence of the state not adopting health insurance premium regulation. Consumer Watchdog sponsored the rate regulation initiative Prop. 45 in 2014.
“When three health insurance companies control 90 percent of the market, there is no bargaining with them absent a hammer,” Court said. “Rate regulation is the hammer. California consumers cannot continue to pay more for very limited doctors and hospital networks. Rate regulation needs to move to the top of the Legislature’s list.”
Lee said many consumers will have lower co-payments to see primary-care doctors or to visit urgent care centers in 2017. “We’re making sure cost is not a barrier to consumers.”
Shopping is essential
Covered California consumers also will benefit from another change: All consumers, not just those in health maintenance organization plans, will have primary-care doctors that they’ve either chosen or ones that are provisionally assigned to them within 60 days of enrollment, Lee said. “We think this is a model for the nation,” he said.
Shopping for health plans will be essential for consumers in 2017, Lee said. “Almost 80 percent of our consumers will either be able to pay less than they are paying now or see their rates go up by no more than 5 percent, if they shop and buy the lowest-cost plan at their same benefit level,” he said.
For example, consumers choosing the lowest-price “bronze plan” will see an average premium increase statewide of just 3.9 percent, Lee said. Bronze plans, however, have a high deductible. “Silver” plans, which provide more benefits, have been the most popular with consumers. Whether rate increases will push more people into the lower-cost bronze plans remains to be seen. Lee said, “We don’t anticipate much movement from silver to bronze.”
However, Sean Herndon, a Fresno certified insurance agent for Covered California, said a shift to bronze plans already is happening. “It’s unfortunate because cost-wise, the silver plans are a really good fit for people,” he said. “They are really nice plans. I think they’re well-priced.”
Herndon also is concerned about consumers dropping coverage completely. “If you have healthy people dropping out of the plan because of cost increases, then you have more people in the pool who are sick.” And a pool with less-healthy people is costlier for health plans, he said.
Lee said most consumers will have help to pay increased premium rates. About 90 percent of people buying Covered California health plans get a federal tax credit that helps pay the cost of premiums, he said. “That’s real financial help that’s bringing health care within reach.”
Covered California’s 1.4 million consumers also benefit from competition among insurers, Lee said. California has 11 health plans.
This year, as we head into 2017, and we start planning for premiums, we’re seeing a return to more historical growth.
Charles Bacchi, president and CEO of the California Association of Health Plans
But not all of the plans are available statewide. And Valley consumers will be losing a health plan in 2017. United Healthcare, which entered the Covered California market in 2016, is leaving the exchange at the end of this year. Valley consumers will be able to choose from Anthem Blue Cross, Blue Shield of California, Health Net and Kaiser Permanente for coverage.
Charles Bacchi, president and chief executive officer of the California Association of Health Plans, said Californians have not experienced runaway premium increases since implementation of the Affordable Care Act in 2014. “This year, as we head into 2017, and we start planning for premiums, we’re seeing a return to more historical growth,” he said.
Bacchi cited four factors affecting the setting of premium rates in 2017: increased spending on medical care, skyrocketing cost for prescription drugs, the phase-out of two federal programs designed to stabilize the insurance market and consumers who “game the system” by signing up for coverage only when they need medical care.
According to the California Association of Health Plans, medical costs have increased as more people seek care, and prices for care have increased. The cost of a hospital admission has increased 76 percent since 2004, the association said.
But the cost of prescription drugs is the fastest-growing segment of health-care spending. Prices for new drugs are astronomical, and in addition “drug companies are raising prices of existing drugs by two- to threefold,” Bacchi said.
Lee said health plans are strictly monitored to make sure they are not overcharging customers. “This isn’t about health plans making big buckets of money. This is about health care costs rising.”
Health plans also are affected by the end of a federal program called “reinsurance” that provided support to health plans for high-cost claims, Lee said. The loss of the program could add 4 percent to 7 percent to premiums, he said.
Besides the loss of the federal reinsurance program, Bacchi also cited the loss of another federal program known as the “sunset corridor.” Both provisions of the Affordable Care Act helped spread costs more evenly for health plans, he said.
A large number of Californians also are signing up for health plans outside of open enrollment, the set time each year for people to pick health plans for the coming year, Bacchi said.
Health plans are concerned people are “gaming the system” by waiting until they are sick and then citing a special circumstance to get coverage, he said. By law, every American is required to have health insurance, but people can buy coverage outside of open enrollment when there is a change in circumstances, such as a move, a marriage or divorce.
California does not require validation of a change in circumstance, Bacchi said. “We just need to make sure they all have legitimate enrollment qualifying events and that there’s no funny business going on.”
Lee said Covered California recognizes the concern, and the federal government now requires that people demonstrate that they had affordable health coverage in the two months prior to a change in circumstance.
Proposed rate changes for Covered California health plans
Carriers in Fresno, Kings and Madera counties
Blue Shield PPO
Health Net HMO
Kaiser Permanente HMO
Carriers in Tulare, Merced, Mariposa counties
Blue Shield PPO
Health Net EPO
Kaiser Permanente HMO