Covered California Rate Increase of 13.2% Announced for 2017

by Wendy Barnett

On Tuesday July 19, 2016, Covered California announced that its subscribers will experience an average rate increase of 13.2% for 2017.  This is quite a jump from the last 2 years, when Covered CA members only received an average rate increase of around 4%.

Peter Lee, Executive director of Covered CA, emphasized that when you average the Covered California rate increase over the last 3 years you get a 7% increase which is still dramatically lower than before the Affordable Care Act (ACA) when double digit increases were normal in the individual market. He also reassured that rate increases were due to medical costs rising and not padding insurance carrier’s pockets who on average had a profit margin of 1.5% for Covered CA plans.

Area Summary:

Covered CA has divided California up into 19 pricing regions. The following highlights notable regions:

  • 28.6% is the highest rate increase by region in Monterey, San Benito, and Santa Cruz counties
  • 8.4% is the lowest rate increase by region in Mariposa, Merced, San Joaquin, Stanislaus and Tulare counties
  • 13.9% – 16.4% increases will be seen in Los Angeles counties
  • 14.8% increases will be seen in San Francisco county

Carrier Preview:

  • Blue Shield plans will have the highest rate increase which will average 19.9%
  • Anthem Blue Cross will have an average rate increase of 17%
  • Kaiser Permanente will have an average increase of only 6%

Reasons for the High Rate Increase

  • Overall medical costs are still rising, especially specialty drugs
  • Two Federal programs that helped insurers offset higher costs and moderate rate increases during the first 3 years of the Exchange are expiring at the end of this year
  • Insurers have reported that lax rules for Special Enrollment consumers have caused higher costs due to higher usage by these subscribers who may have enrolled only after needing care
  • Repressed demand for medical services is now being accessed by those who were previously unable to gain coverage during pre- ACA laws due to pre-existing conditions

Peter Lee stresses to Covered CA members the importance of “shopping around” this coming year as he maintains that 80% of consumers could pay less or keep their rate increase to under 5% by doing so.  This means that if people are willing to change carriers and or plans, they could save significantly. While premiums rise, the tax credits which approximately 90% of current enrollees receive will rise also. This should help absorb some of the rate hikes that consumers will face.