Possible 8% hike for ACA premiums in California next year

The state’s health insurance exchange declared the estimated rate increase preliminary, calling 2017 “an adjustment year”

Insurance News

By Lyle Adriano

While proposing its annual budget, Covered California—California’s health insurance exchange—projected an on-average 8% premium rate increase for next year.

Covered California executive director Peter Lee emphasized that the estimate was preliminary, but noted that one-time factors under the Affordable Care Act (ACA) meant that next year would be “an adjustment year” for rates.
Insurers operating in the state have submitted their initial rates for 2017, but the final figures will not be disclosed until July, after state officials have conducted private negotiations.

"We shouldn't put too much focus on this 8% number when we will know the reality in two months," said Lee. There are a number of reasons 2017 will have higher rate increases than the last few years. But we believe in California we won't see the significant headwinds many other states are experiencing."

Lee added that two federal programs that have helped insurers offset costly medical claims and cover sick patients in general have expired this year, which would affect premium rates throughout the country. He also cited ever-increasing medical costs (particularly expensive specialty drugs) as another factor in the possible increase of premium rates next year.

CNN reported that the health exchange’s projection mirrors a trend sweeping the country as insurers reconsider their pricing and strategies under the ACA.

"[8%] is not a troubling rate increase," said health care consultant Robert Laszewski. "California is coming back toward the average. A bunch of states would die for just an 8% increase in 2017."

Laszewski shared that he is more worried about the federal exchange’s slowing enrollment growth. He underscored that California has one of the healthiest risk pools in America, which helped the state keep its lower-than-average-rate increases the past two years. While the exchange sees hundreds of thousands of new enrollees each year, many have also left the exchange for job-based coverage, Medicare, or Medicaid.

New signups are important to maintain a diverse mix of enrollees, spreading insurance costs fairly between healthy and sick policyholders.

The federal health insurance exchange is expecting more low-income policyholders from Medicaid to switch to their side following gradual increases to California’s minimum wage of $15 an hour. By 2020, Covered California anticipates an enrollment figure of 1.52 million.

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