California’s Health Insurance Exchange Premiums May Spike 13%

July 21, 2016 - Premium rates on the state health insurance exchanges are expected to continue rising over the next year due to some of the provisions of the Affordable Care Act (ACA). Since the ACA has brought more coverage options and a greater number of covered lives within the health insurance market, payers have been adopting strategies that would ensure their profits are stable.

The Affordable Care Act has changed the risk pools that payers are working with due to the exclusion of the pre-existing conditions clause, the requirement of keeping young adults on their parents’ health plans, and the requirement for payers to fully cover the costs of preventive care.

The results have led to a rise in premium prices. Kaiser Health News reports that the health insurance exchange in California will have a 13.2 percent increase in their premium costs next year. This significant spike in premium prices will likely be seen in other state health insurance exchanges as well.

There have been more opposition seen from the GOP against the Affordable Care Act and its health insurance exchanges in recent months, as House Speaker Paul Ryan announced a replacement plan for the Patient Protection and Affordable Care Act.

Over the past two years, California was able to see much better results by negotiating rate increases that averaged 4 percent among payers operating through its health insurance exchange. With the cost of medical care continually rising around the nation, this low rate increase was impossible to achieve for the California exchange next year.

"The rising trend of health-care costs remains a constant driving factor in health-care premiums," Peter Lee, executive director of Covered California, told the news source.

This past year, Gold Plans sold on the health insurance exchanges had the highest premium increase at 13.8 percent on average. Essentially, premium costs have been rising ever since the ACA’s exchanges began operating. Deductible costs have also been increasing in certain states.

Health insurance rates have gone up since the ACA was implemented because health payers must now cover the costs of care among the sickest populations. Medicaid expansion under the ACA, however, has ensured that hospitals and providers no longer have nearly as much uncompensated care as before.

Due to the increase in spending that payers have seen, many health insurance companies have created narrow provider networks and higher deductibles as well as premiums. Some major payers have also looked to consolidate and take part in mergers in order to cover the increased spending among larger and more diverse patient populations.

Many critics of the ACA have stressed how rising health insurance rates pose problems for consumers and may point the way toward a repeal of the landmark healthcare law. Nonetheless, the Obama administration has been quick to stress that the majority of consumers purchasing plans through health insurance exchanges receive subsidies and are, therefore, free from the financial impact of these premium increases.

Last week, President Barack Obama noted the progress seen after the Affordable Care Act was implemented in a piece for the The Journal of the American Medical Association (JAMA). The ACA has brought health coverage to an additional 20 million Americans and brought better population health outcomes by eliminating out-of-pocket costs for preventive services.

“Early evidence indicates that expanded coverage is improving access to treatment, financial security, and health for the newly insured. Following the expansion through early 2015, nonelderly adults experienced substantial improvements in the share of individuals who have a personal physician (increase of 3.5 percentage points) and easy access to medicine (increase of 2.4 percentage points) and substantial decreases in the share who are unable to afford care (decrease of 5.5 percentage points) and reporting fair or poor health (decrease of 3.4 percentage points) relative to the pre-ACA trend,” Obama wrote in the report.

“Similarly, research has found that Medicaid expansion improves the financial security of the newly insured (for example, by reducing the amount of debt sent to a collection agency by an estimated $600-$1000 per person gaining Medicaid coverage). Greater insurance coverage appears to have been achieved without negative effects on the labor market, despite widespread predictions that the law would be a ‘job killer.’ Private-sector employment has increased in every month since the ACA became law, and rigorous comparisons of Medicaid expansion and nonexpansion states show no negative effects on employment in expansion states,” Obama continued.

“The law has also greatly improved health insurance coverage for people who already had it. Coverage offered on the individual market or to small businesses must now include a core set of health care services, including maternity care and treatment for mental health and substance use disorders, services that were sometimes not covered at all previously. Most private insurance plans must now cover recommended preventive services without cost-sharing, an important step in light of evidence demonstrating that many preventive services were underused,” concluded Obama.

While premium costs may be rising for the nation’s health insurance exchanges and California may be hit hard next year, the number of uninsured individuals in California dropped to as little as 8.1 percent by the end of 2015. Before the ACA, the uninsured rate was as high as 17 percent.

The future of the Affordable Care Act and its health insurance exchanges will also depend upon the next presidential election. If the Republican Party was to take over the White House, the ACA may not continue in its present state and may even be repealed. If the Democrats gain the White House, however, the ACA will likely only expand further.

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