California Exchange Reports Average Premium Hike of 4%

Health insurance premiums will rise an average of 4% in 2016 for consumers shopping on California’s exchange, which is slightly less this year’s average of 4.2%. But there’s a lot of variation by region in that figure, with those in the northern part of the state enjoying less competition and savings than those in the south.

Covered California, the state’s insurance exchange set up under the Affordable Care Act, announced the average rates yesterday with much fanfare, saying that many consumers could actually see an increase of less than 5%--and some might see a decrease—if they shopped around within the same “metal” tier. Consumers are much better off than they were prior to the ACA, officials said, when double-digit annual increases were common in the individual market.

However, they noted, health insurance costs have a local flavor: weighted average increases for consumers who stay in their current plan were 7% in Northern California, compared with 1.8% in Southern California. The difference was attributed to less competition in the northern half of the state.

Peter V. Lee, executive director of Covered California, said the state’s role as an “active purchaser,” as well as the relative health of its population had allowed it to negotiate lower increases than those reported in other states. By “active purchaser,” California selects which plans participate in the exchange and negotiates the rates consumers pay.

According to data released yesterday, Covered California accounts for 1.3 million enrollees, or 12.3% of the 16 million people who have become insured since the ACA took effect. That level of market power has given state officials a lot work with, Lee said.

“The sheer numbers and overall health of our enrollees allowed us to sit down with the health insurance companies and negotiate rates downward, which will save our customers more than $200 million in premium,” Lee said in a statement.

State officials said the average premium will be $296 a month in Southern California, compared with $394 a month in Northern California.

UnitedHealthcare Benefits Plan and Oscar Health Plan will be entering some counties, increasing the level of competition in certain markets. The total number of companies on the exchange will be 12, but not all companies will be in all regions. In the first 2 years of the ACA, Covered California has been criticized for failing to offer consumers an adequate level of choice in certain markets.

Not every part of California’s ACA story has been easy, however. Enrollment in Medicaid, or Medi-Cal as it is called, is bursting at the seams; enrollment is past 12 million or 1 in 3 Californians. There have been many complaints about narrow managed care networks and difficulty in gaining access to care. While supporters say the expansion has injected billions into the state’s economy, others wonder about the long-term outlook of managing such a huge program.