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Covered California announces sharp rate hike



July 21, 2016
Area(s) of Interest: Payor Contracting Payor Issues and Reimbursement 

Covered California has announced an average 13.2 percent hike in insurance premiums for 2017, a sharp increase that is likely to reverberate nationwide in an election year. The California Medical Association (CMA) is concerned the premium increases may hinder the ability of some patients to obtain insurance and access necessary medical treatment.


The rise in Covered California premium rates was driven largely by its two biggest insurers, which account for about half of its enrollment. Blue Shield of California said its average rate hike is 19.9 percent, the biggest statewide increase. Anthem, the nation’s second-largest health insurer, said it will be raising rates by an average of 17.2 percent for its Covered California plans.


For the past two years, Covered California negotiated rate increases of around 4 percent for its 1.4 million enrollees. But that feat won’t be repeated for 2017, as overall medical costs continue to climb, and the two federal programs that help insurers with expensive claims are set to expire this year.


The rate increases reinforce CMA’s concerns about market concentration and the further consolidation of some of the country’s largest health insurance providers — mergers we believe would only lead to less competition and higher costs for health insurance consumers. While we are encouraged by the expansion of some existing Covered California plans into additional California markets, we remain concerned that a few plans still control a majority of the Covered California market.


CMA has cautioned that premium increases could leave patients without timely access to affordable care, particularly if higher premiums force them to switch to less expensive plans with higher out-of-pocket charges and narrower provider networks. The incentive to switch plans also raises concerns about the ability of patients to maintain continuity of care, as they may have to change physicians.


Extraordinarily high premiums may also give some Californians, particularly those who are young and healthy, an incentive to leave Covered California and instead pay the federal tax penalty. This would result in a Covered California risk pool composed of sicker individuals, which could result in higher health costs and create a disincentive for health plans to participate in Covered California in future years.


Keeping medical costs low requires a statewide effort, and CMA will continue to pursue solutions that promote access to affordable health care for all Californians.

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