State: Covered California premiums could soar.
Trump remains coy on subsidies
California’s health exchange said Wednesday it has ordered insurers to add a surcharge to certain policies next year because the Trump administration has yet to commit to paying a key set of consumer subsidies under the Affordable Care Act.
The decision to impose a 12.4 percent surcharge on silver-level health plans in 2018 means the total premium increase for them will average nearly 25 percent, according to Covered California. Taxpayers, not consumers, will bear the brunt of the extra rate hike because federal premium assistance for policyholders, which is pegged to the cost of coverage, will also increase.
Statewide, rate increases will vary by insurer and region. What consumers pay depends on where they live, their income, what level of coverage they want and which insurer they choose.
Californians can get their first look at next year’s health plan prices and options on the state’s rate calculator, released Wednesday.
The state’s open enrollment period, which is longer than that for the federal exchange, runs from Nov. 1 to Jan. 31. About 1.4 million Californians buy their own coverage through the state marketplace and nearly 90 percent receive financial assistance that reduces what they pay.
In August, Covered California announced that 2018 premiums would rise by 12.5 percent, on average, statewide. That ticked down slightly to 12.3 percent during regulatory review. But the exchange also warned that the additional increase, averaging 12.4 percent, would be added to the silver-tier plans if President Donald Trump failed to commit to continued funding for the so-called cost-sharing subsidies that help reduce some consumers’ out-of-pocket expenses. Those payouts total about $7 billion this year nationwide.
Trump has continued paying them on a monthto-month basis while repeatedly threatening to cut them off and repeal the entire health law. He has referred to the payments as “bailouts” for insurance companies.
Peter Lee, executive director of Covered California, said the surcharge is far from ideal but that the uncertainty in the nation’s capital left the state with no other option.
“Covered California worked hard to come up with a plan that ensures a stable market and protects as many consumers as possible from an unnecessary price hike,” Lee said in a statement Wednesday.
The exchange took several measures in an attempt to shield consumers from the effects of the surcharge. One of them was to create a new silver plan to be sold outside the exchange to individuals and families who make too much money to qualify for federal subsidies. The surcharge will not be applied to those plans, sparing unsubsidized consumers that extra cost.
The surcharge will apply only to the silver-level plans, the second-least expensive option among the exchange’s four tiers of coverage. That’s because only people enrolled in silver plans benefit from the cost-sharing subsidies that Trump has threatened to terminate.
Covered California said that 78 percent of subsidized consumers will see no change in what they pay or may pay even less despite the surcharge being imposed. The remaining 22 percent of consumers will see higher net premiums. About half of those consumers will get increases of less than $25 per month, according to the exchange.
In one scenario, the exchange said a 25-year-old in Los Angeles with a $20,000 annual income would see his silver plan rate rise next year from $227 per month to $270. That includes a regular rate increase of $13 plus a silver surcharge of $30.
But that person would only pay $13 more per month out of his own pocket, because the federal premium subsidy would increase from $160 to $190, fully offsetting the surcharge. Statewide, the surcharges on silver plans vary among health insurers from 8 to 27 percent.
John Baackes, chief executive of L.A. Care Health Plan, said his 2018 rates will be 11 percentage points higher because of the added surcharge — a 23 percent average increase instead of 12 percent. His health plan has about 26,000 exchange enrollees. He said the higher premiums would be “totally avoidable” if the Trump administration implemented the ACA.
In addition to higher rates, Covered California faces the loss of a major insurer across much of the state. In August, Anthem Blue Cross said it was pulling out from about half of California’s counties, forcing 153,000 customers to find new coverage.