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Covered California Premiums Could Increase 8% Next Year

By Doug Desjardins  
   May 23, 2016

The projected 8% rate hikes are estimates; final premium increase for 2017 won't be released until July.

This article was originally published on California Healthfax.

Covered California premiums could increase as much as 8% in the coming year, nearly double the average increase of 4.1% in the past two years.

The projected increase was included in Covered California's proposed annual budget for 2016–2017. The budget summary suggested that several one-time factors will come into play and drive premiums up in 2017 but that projected hikes for 2018–2020 will average about 5%.

"All models reflect the same trend assumptions for gross health insurance premiums, which are projected to increase by 8% in 2017 and 5% each year through 2020," the report states.

"The projected increase in 2017 is driven by the assumed impact of the sunset of the Transitional Reinsurance Program and the Risk Corridors Program, temporary federally sponsored high-claimant risk- mitigation programs. The termination of these federal programs will put a one- time, upward pressure on health insurance gross premiums."

Funds for the Transitional Reinsurance Program come from fees assessed to all private health insurance coverage while the Risk Corridors Program collects fees from health insurers. The programs were designed to keep premium increases at a minimum during the early years of the health insurance exchanges.

After 2017, the report suggests that premiums "are forecast to increase at 5% each year, driven by annual cost increases in hospital services, professional medical services, and pharmaceuticals." The budget also projects individual market medical revenues of $244 million for Covered California in 2016–2017, $300.9 million in 2017–2018, and $319 million in 2018–2019.

The report estimates Covered California's current enrollment at 1.4 million and calculates that 2.5 million people have been enrolled for coverage on the exchange over the past three years, noting that "Covered California's churn reflects the movement of its enrollees through different types of coverage."

Covered California spokesperson James Scullary said the projected 8% rate hikes are still estimates and that the final premium increase for 2017 won't be released until July. But he added that premium increases are likely to be higher this year than in fiscal years 2015 and 2016.

"It's important to note that the premium figures in the budget are just projections at this point," said Scullary. "The rate change may end up being higher than it has been in the past two years (4.2% in 2015 and 4% in 2016) because two federal programs aimed at stabilizing rates are coming to an end. But an 8% increase would still be below the double-digit increases that consumers saw before the Affordable Care Act."

In a related matter, a new survey from the Centers for Disease Control and Prevention (CDC) estimates that the rate of uninsured residents in California dropped to an all-time low of 8.1% in December 2015. The rate is one percentage point lower than the national rate of 9.1%. Broken down by age group, the uninsured rate for children 17 and under is 3.6% in the state and the rate among adults aged 18–64 is 11.1%. The rate for people aged 65 and under is 9.1%. All rates by age category are below national averages.

"California is succeeding in this new era of healthcare by using all the tools of the Affordable Care Act—expanding Medi-Cal and launching a state- based exchange that brings quality and value to our consumers," said Covered California executive director Peter Lee.

According to a CDC report from August 2015, the uninsured rate in the first quarter of 2015 was 9.2%. The slight decrease in the national uninsured rate from 9.2% in the first quarter to 9.1% in December may indicate the rate is starting to flatten out after several years of sharp declines. The CDC estimates the national uninsured rate declined from 14.4% in 2013 to 11.5% in 2014.

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