Modest price hike for Covered California

Health insurance premiums for the roughly 2.2 million Californians who buy health plans on the individual market — either through the state insurance exchange Covered California or directly from insurers — will go up less than 1% in 2020, Covered California officials said Tuesday.

The average statewide premium increase will be 0.8% — the smallest annual average premium increase in Covered California’s sixyear history. In 2019, premiums increased nearly 9%.

Covered California Executive Director Peter Lee attributed next year’s modest rise to Gov. Gavin Newsom and state lawmakers’ budget deal, which will implement a new state individual mandate requiring Californians to have health insurance or pay a penalty. The penalty payments will fund new state subsidies for middleincome residents to help offset the cost of premiums. Both the mandate and the subsidies are scheduled to take effect in 2020.

About 229,000 more Californians will be newly eligible to receive the state subsidies, which officials hope will lead to roughly that many more people enrolling in insurance. The

income eligibility to receive the new state subsidies is between about $48,000 and $72,000 per person per year — higher than the income eligibility for the federal subsidies provided by the Affordable Care Act, which cuts off at $48,000 a year. The move is expected to benefit middleincome earners in highcost areas like San Francisco who struggle to afford insurance but don’t currently qualify for financial assistance from federal subsidies.

The state subsidies are projected to cost $429 million in 2020 and more each year after that. The subsidies will come out of the state’s general fund, and officials expect much of the amount — $317 million in 2020 — to come from new tax penalties paid by people who don’t have health insurance.

The tax penalty, to be paid to the Franchise Tax Board, will be $695 per person or 2.5% of household income, whichever is higher.

“I think it’s exciting this is the lowest rate increase we’ve seen in Covered California’s history,” said Laurel Lucia, a health policy analyst who leads the health care program at UC Berkeley’s Labor Center. “It is in line with the projections that bringing healthier enrollees into the individual market reduces premiums for everyone.”

The federal mandate that was previously put in place by the Affordable Care Act was repealed by congressional Republicans in late 2017; the repeal took effect in 2019. California is not the only state to impose its own individual mandate — Massachusetts had one before the Affordable Care Act, and Vermont, New Jersey and the District of Columbia have done so more recently.

“This is a huge win for all Californians,” Lee said. “It shows what happens when a state says, ‘Let’s take the Affordable Care Act and protect it and put it back to where it was before federal action, and build on it, and expand affordability.”

Covered California officials plan to release rates for each region next week.