Covered California on Tuesday announced that health insurance rates on the state’s health insurance exchange created under the Affordable Care Act will go up an average of 12.5 percent for 2018 plans.
Peter Lee, CEO of the exchange, said the increase normally would have been just under 10 percent but for the uncertainly surrounding a decision by the Trump administration to possibly slash certain subsidies that would help about half of Covered California’s 1.4 million enrollees pay for out-of-pocket medical expenses.
Last year’s average rate shot up 13 percent, mostly because two federal programs created to cushion insurers from losing money on the low-cost, high-risk policies under the Affordable Care Act expired in 2017.
What Lee had expected to be a return to a lower rate increase in 2018, however, got unexpectedly sidelined by the efforts of the majority-led Republican Congress to repeal and replace Obamacare, and threats by the Trump administration to kill certain subsidies.
“Uncertainty in Washington is affecting consumers today,” Lee told reporters during a Tuesday morning press call.
Lee also noted that while all of exchange’s 11 health insurance companies will return to the market in 2018, Anthem will leave markets that comprise about half of its enrollment — except for Santa Clara County, the Central Valley and certain Northern California counties.
The Affordable Care Act’s generous subsidies are available to any legal California resident earning between 139 percent and 400 percent of the federal poverty level.
But anyone who earns between 139 percent and 250 percent of the poverty threshold — between $34,200 and $61,500 for a family of four — also is eligible for additional subsidies called “cost-sharing reductions,” which lower out-of-pocket costs such as co-pays and deductibles.
About 7 million Americans, including roughly 650,000 Californians, receive those extra subsidies. And the federal government reimburses insurers on the exchanges about $7 billion to reduce the cost of the co-pays and deductibles for low-income people.
In 2014, however, House Republicans sued the Obama administration, saying that Congress never appropriated funding to give insurers that money. A federal judge ruled in the Republicans’ favor and ordered that payments be stopped. But the ruling was appealed by the administration, and the payments were allowed to continue pending the appeal.
Already furious that the U.S. Senate could not pass a “skinny repeal” of Obamacare on Friday, Trump could decide to end to those subsidies — a move that could send many premiums soaring because health insurers would have to pick up those costs themselves, and many companies would also likely flee the markets, experts say.
In anticipation of such a move, Covered California devised a work-around.
For 2018, the exchange will allow health insurance companies to artificially inflate their popular “Silver” plan rates to cover the cost of cost-sharing reductions.
But consumers enrolled in moderately priced “Silver” plans whose rates are inflated should not be adversely impacted because their monthly subsidy — paid by the federal government — also would increase, Lee said.
Last month, Covered California officials also said that exchange enrollees with unsubsidized Silver-tier coverage will have an option to purchase comparable Silver-tier coverage off-exchange without facing a steep increase in their price, even if the cost-sharing reductions are killed.
Still, the uncertainty over whether or not the federal government will continue the cost-sharing payments to low-income people led Covered California to ask all of its plans to submit two sets of 2018 rates.
One set assumes the subsidies will be removed; the other does not.
“I want to be really clear: This is not what we want to happen. It will confuse the consumer,” Lee told the Bay Area News Group last month.
“But we will be doing mountains of direct outreach and education with consumers through emails, voicemails and the (insurance) agent community” to make it work, he said.
