Covered California Rate Increases Expected to Hit Double Digits in 2017

by John Hansen

Leading experts in the California health insurance market including Jeff Smith, Vice President of Individual and Family Plans for Blue Shield of California, are predicting 2017 rate increases to be in the double digits. Rate increases will affect Obamacare California coverage through the Covered California Exchange as well as medical plans purchased direct through health insurance carriers like Anthem Blue Cross, Blue Shield and Kaiser Permanente.

In California, rate increases as of yet have been considerably modest. In year one of the Affordable Care Act (ACA), the golden state experienced increases in premiums of around 8%. In year two of Health Care Reform, California health insurance rates went up around 4-6 %.

Why are Covered California health insurance rates rising?

In other states, health insurance rates went up quite a bit more. 27 states in the US had rate hikes of over 12%. 20 states had rate increases of 20% or more. The top drivers of cost increases include:

  • In-patient care
  • Sepsis
  • Prescription Drugs

In patient-care has continued to be a big factor lending to rate increases. With more and more baby-boomers becoming senior citizens, ever more Californians are requiring hospital care. Hospitalization costs include room and board, medications, and care from nurses, doctors, specialists, other medical staff and facilities personnel.

According to Jim O’Brian, the Vice President of Quality and Patient Safety at the Ohio Health Riverside Methodist Hospital, “Sepsis is the most expensive reason for hospitalization. In 2011* (the most recent published data), the US spent $20.3 billion dollars on hospital care for patients with sepsis. This means we are spending $55,616,438 on sepsis care in US hospitals every day. ”

Also, the costs of prescription drugs continue to rise. New “wonder drugs” or “super drugs” are largely to blame. Medications like the new hepatitis C drugs are causing California health insurance carriers to consider raising rates and adjusting coverage for prescription drugs.

How will these rate increases affect Californians?

90% of those enrolled on-exchange through the Covered California Marketplace are on subsidized health insurance plans. Those individuals and families with high government tax credits won’t feel anything.

However, subsidized Californian’s in regions where the 2nd lowest silver plan changes could experience more dramatic shifts. Subsidies are calculated based on the price of the cheapest silver plan in each region. So in regions where there are shifts in the price of this plan, it can have a big impact on individuals receiving government tax credits.

Californian’s who do not receive subsidies will be hardest hit. This includes the middle and upper classes.

Pfuntner et al. Costs for Hospital Stays in the United States. HCUP Statistical Brief #168.