Covered California on Thursday announced proposed health insurance rates for 2019 that will average single digits. The comparatively modest 8.7 percent average rate change, which some healthcare analysts expected to be in the high double-digits, is a testament to vigorous rate negotiations with insurance companies and a mix of healthy enrollees in the Covered California exchange, said the agency’s Executive Director, Peter V. Lee.
“Covered California continues to benefit millions of people in our state by giving them access to high-quality, affordable health coverage,” Lee said. “It is unfortunate when a rate change of nearly 9 percent is generally viewed as good news, when the rate change could — and should — have been much lower.”
Lee said many enrollees will be able to mitigate the impact if they shop and switch to the lowest-cost plan in the same metal tier. The exchange also described how the recent federal decision to eliminate the penalty for the individual mandate will raise costs for the federal government and all consumers in the individual and employer-sponsored markets.
Consumers in both Covered California and off-exchange in the individual market will see an overall average statewide rate increase of 8.7 percent to their gross premiums if they renew coverage in the same plan for 2019.
The proposed rates, subject to a final review by state regulators, mean those who receive a subsidy to help purchase coverage will pay an average of 6 percent more if they renew in the same plan next year, which translates to an estimated monthly premium of $123 after tax credits. Subsidized consumers account for 88 percent of Covered California’s enrollment, and those subsidies rise along with rates to help offset any increases.
Consumers, both on and off the exchange, will continue to benefit from Covered California’s competitive marketplace, which allows them to shop for the best value and save money if they switch plans. The average rate change for consumers who shop and switch to the lowest-cost plan in the same metal tier is -0.7 percent, which means that many Californians can pay the same rate as they do now in 2018, or a little less, if they shop and switch.
All 11 insurers currently serving Covered California will return for the 2019 coverage year. Covered California’s competitive marketplace continues to promote choice, with 96 percent of consumers being able to choose from two insurers or more and 82 percent of consumers having three or more choices.
Lee said the elimination of the penalty for those who choose not to buy health insurance had a negative impact on rates for 2019. Carriers added between 2.5 and 6 percent to their rates, with an average of 3.5 percent, due to concerns that the removal of the penalty will lead to a less healthy and costlier consumer pool.
While subsidized consumers will be protected from this increase, since the amount of financial help they receive will also increase, the federal government will end up paying an estimated $250 million more in higher tax credits. Unsubsidized consumers on- and off-exchange will bear the full brunt of the increase.
“The cost of the penalty removal will manifest for unsubsidized consumers in higher rates. While subsidized people will not bear the full costs, taxpayers will,” Lee said. “The additional losers from this policy change will be those who decide to roll the dice, go without coverage, and end up with hundreds of thousands of dollars in medical bills.”