After years of double-digit rate hikes in health insurance premiums, California will see average increases of 4.2 percent in 2015 for people who purchase insurance through the Covered California exchange, the state’s Obamacare marketplace.
It’s good news for consumers, but two of the top insurance officials in the state disagree about why it’s happening.
Covered California’s executive director and other analysts pointed to specific factors for this moderate increase. For starters, enrollment was very strong in 2014, more than a million people. In addition, healthy people signed up, spreading the risk.
But the state’s insurance commissioner, Dave Jones, sees a different force in play. He believes that a statewide ballot measure, Proposition 45, has insurers scared.
“Health insurers have hit the pause button” on rate hikes, Jones said Thursday, just hours after Covered California announced its 2015 rates.
Proposition 45, which voters will consider in November, would give his office the authority to reject excessive rate hikes. Jones believes insurers held their fire on 2015 premium increases so as not to create a backlash from consumers and enable the passage of Prop. 45.
“There’s no guarantee insurers will continue to” keep rate increases low without Prop. 45, Jones said. “That’s authority we still need.”
Peter Lee dismissed the idea that 2015 premiums are artificially low, saying that he had been involved in “deep actuarial reviews” with insurers and said that “the last thing we want is rebound rate hikes” in future years.
As part of the rate review process, regulators at the Department of Managed Health Care and Jones’ Department of Insurance will review rates in the coming weeks to ensure they are neither too high, nor too low, Lee said. If premiums were set too low, an insurer might not have sufficient resources to cover the health care costs of its customers.
Jones confirmed that his staff would look at this issue, but said he “can’t imagine that these rates are inadequate.”
When rates were introduced in May 2013 for Covered California’s opening year many experts said they were surprisingly low and thought those low rates might be a “loss leader” strategy, said UCLA health policy professor Jerry Kominski. There was a concern that rates were low to get people into the market and then “jack up prices” later, he said.
“That didn’t happen,” Kominski said. He doesn’t think it’s happening now, either. “I don’t think the insurers are lying in wait, waiting to spring enormous increases on the public next year.”
Earlier this week, Jones released an analysis done by his staff, looking at 2014 vs. 2013 individual plan rates and found average increases of 22 to 88 percent for people who bought non-subsidized policies.
But those 2013 pre-ACA plans existed in a fundamentally different insurance market, Kominski argued. “In 2013, premiums were artificially lower, and prior to the ACA, premiums could be held down by excluding high-risk patients from the market and by offering skinny benefits.”
Covered California was created as an “active purchaser” and negotiates directly with insurers. Some officials have raised concerns that if Proposition 45 passes, its additional layer of rate review might create delays in approving plans for the exchange.