Rising insurance costs expected for many
By Victoria Colliver
HEALTH INSURANCE PREMIUMS FOR middle-class Californians who buy coverage under the federal health care law could soar by 30 percent next year when insurers are required to offer broader benefits and cover people regardless of their pre-existing medical conditions, according to a report released Thursday.
The federal health law may be called the Affordable Care Act, but affordability has been one of the biggest questions about what is considered the largest change to our country's health system since Medicare for seniors was introduced more than 40 years ago.
The law, dubbed Obamacare, extends health coverage to millions of Americans who do not have coverage through an employer or other source in two main ways: It expands state-run Medicaid programs for the poor. And those who make too much money to qualify for Medicaid will be required to buy coverage in state or federal "exchanges," virtual marketplaces that will sell private insurance to those who need it, often with the help of federal subsidies.
Starting Jan. 1, 2014, the biggest provisions of the law will go into place, including the requirement that most Americans have health insurance or face a financial penalty.
Thursday's report offers the first in-depth look at how the new law will affect premiums for individual policyholders in California, or the 2 million residents who do not get their insurance through their work or other group and have to buy it on their own.
"It is critical for us to understand the true financial impact on Californians as we move toward 2014, and this is an important step in determining strategies to help protect consumers from cost increases," said Peter Lee, executive director of Covered California, the state exchange where people will go to buy coverage from private insurers offering standardized levels of cost and coverage.
Big changes for insurers
Health insurers will also be subject to major changes come January. They will no longer be able to reject or charge exorbitantly high rates to those with pre-existing health conditions and will be limited in how much they can raise rates based on age.
Exactly how much premiums will cost won't be known for a few months, but health insurers have warned that rates could skyrocket for many consumers. California's individual policyholders have already been hit with double-digit increases from many of the state's largest carriers, and health insurers nationwide have projected rates will rise because of the law as well as growing medical costs.
Thursday's report estimated various changes in the law could boost total individual health-insurance premium rates in California by 14 percent. The authors noted rates would have increased by 9 percent because of market forces that have nothing to do with the law.
But the report also offered insight into how much those rates could vary among the more than 5 million residents who could be eligible to buy insurance through Covered California.
Those who make the most money and don't qualify for any federal subsidies will probably experience some of the biggest increases in premiums, according to the report, which calculated premium changes based on estimates of what people would pay in today's market.
Wealthy to pay more
Californians who earn more than 400 percent of the federal poverty level - about $94,000 a year for a family of four - could see their premiums jump 30 percent next year, according to the report. Those increases could be mitigated in part by choosing lower-benefit plans.
Conversely, the report found, a family of four making $59,000 a year could see premiums drop by 46 to 85 percent because of subsidies and other factors.
Younger, healthier people will have to pay considerably more next year for coverage than what they could buy now because they will be thrown into a pool of older, sicker people who may have been rejected by insurers or charged prohibitively high rates.
"Health insurance will become relatively less expensive for people with chronic conditions and relatively more expensive for people who are healthier," said Robert Cosway, principal with Milliman, an actuarial consulting firm that conducted the research.
The report found the youngest Californians - those from 21 to 24 years old - could see their rates rise as much as 30 percent, while those in their 60s could see their premiums rise about 10 percent. Covered California officials said these estimates do not include the potential effect of subsidies, for which many young people will qualify, and a special bare-bones plan for the 30-and-younger set.
The law may help some people, but it's "not good and rosy for the entire population," said Marian Mulkey, a program director with the California HealthCare Foundation, a philanthropy based in Oakland.
Trying to stay competitive
The report's projected increased rates as a result of the law were no surprise to insurers, who have feared uncertainties of the new law as well as the potential influx of older, sicker consumers.
"It's clear when you provide richer benefits to enrollees and when you have older, less healthy people buying coverage with lower cost-sharing and increased taxes, that's going to increase premiums," said Charles Bacchi, executive vice president of the California Association of Health Plans, which represents the state's health insurers.
Bacchi said insurers also have incentive to attract new customers. "They want to price their products as affordably as possible and want to make sure they will be competitive," he said.
Covered California's Lee noted that the benefits of the coverage cannot be calculated solely in terms of premiums. He said the law offers standardized benefits and protects consumers from gaps in coverage and eliminates caps that have led to medical bankruptcies.
"All Californians that buy coverage through the individual market will know they will never go bankrupt," he said. "That's a game changer."
Victoria Colliver is a San Francisco Chronicle staff writer. E-mail: firstname.lastname@example.org