Health insurance premiums for the 1.5 million Californians who purchase coverage through the state marketplace will go up an average of 0.6% next year, officials announced Tuesday. It's the smallest increase yet and is attributed to a surge of new signups coupled with a decline in health care use during the coronavirus pandemic.
More than 230,000 people have signed up for coverage since March 20, the day after Gov. Gavin Newsom issued a statewide stay-at-home order. Meanwhile, fewer people are using their health insurance as hospitals delayed elective procedures and some people chose to stay away from doctor's offices.
“Insurers are really rolling in money right now because so many fewer people are using health care,” said Larry Levitt, executive vice president of health policy for the Kaiser Family Foundation.
Charles Bacchi, president and CEO of the California Association of Health Plans, said insurers can offer smaller increases because of new laws aimed at getting more healthier people to buy insurance.
“Californians can rest assured that health plans are dedicated to providing the affordable high quality healthcare they expect and deserve,” Bacchi said.
In general, the cost of health insurance premiums depends on who pays them. If only sick people buy them, they cost more. But the more healthy people who buy them brings down the cost for everyone.
From 2015 through 2019, monthly premiums in California’s marketplace increased an average of 8.5 percentage points per year. But since then, the Democratic-controlled Legislature and governor have passed laws aimed at getting more healthier people to buy coverage — including taxing people who refuse to buy health insurance and offering new subsidies to people who earn as much as six times the federal poverty level.
The result was an average premium increase of 0.8% in 2020. Next year’s increase is even lower, in part because of an increase in new people buying insurance during the coronavirus pandemic. Covered California Executive Director Peter Lee says the new people who signed up were healthier, making them on average about 5% cheaper to cover.
“We don’t want a vicious cycle. We want a virtuous cycle of more people enrolling, broadening the pool and making it cheaper for everybody,” said Anthony Wright, executive director of Health Access California, a health care consumer advocacy group.
Covered California premiums average about $587 a month for an individual. But about 90% of the people who buy coverage through Covered California receive state and federal subsidies of about $450 per month, lowering their premium to about $137 per month.
The state also spends more on marketing and outreach than any other state, including the federal government, buying TV ads and paying social media influencers to persuade people to buy coverage. This year, amid a coronavirus-induced recession, Covered California plans to spend $150 million in marketing, up from $121 million last year.
“People that are losing their jobs, that are financially insecure, do not need to be health-care insecure,” Covered California Executive Director Peter Lee said. “We're making the largest investment for this year and thinking next year we're going to dial it back.”
The health insurance rates announced Tuesday still must be approved by state regulators. The overall rate increase is a statewide average. How much people will actually pay depends on where they live and which insurance company they decide to purchase coverage from.
In Southern California, Lee said rates in general decreased up to 3% in some places. But in Northern California, including the counties surrounding the San Francisco Bay, rates increased an average of 1.4% because there is less competition from insurance companies.
The biggest projected increase is Valley Health Plan, whose rates will jump an average of 9% next year. The biggest projected drop is the LA Care Health Plan with an average decrease of 4.6%.
LA Care Health Plan CEO John Baackes said the biggest factor for their lower rates was an influx of younger people who purchased coverage to avoid paying a state tax. Most of those people purchased the cheapest plan and have rarely used their insurance, he said.
This story has been corrected to show that Valley Health Plan will have the largest average rate increase. A previous version of this story said the Anthem Blue Cross rate increase of 6% would have been the largest average rate increase.