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, state officials announced Tuesday, the smallest increase yet attributed in part to a surge of new signups during the coronavirus pandemic.
Former President Barack Obama’s health care law lets people who don’t have health insurance through their job to buy coverage from a marketplace. Most states let the federal government run their marketplace for them. But California runs its own marketplace, called 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.
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, California’s 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. More than 230,000 people have signed up for coverage since March 20, one day after Gov. Gavin Newsom issued a statewide stay-at-home order.
Covered California Executive Director Peter Lee says the new people who signed up were healthier, making them on average about 5% cheaper to cover. “That meant a substantial contributor to lower costs,” he said.
“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.
California also spends more on marketing and outreach than any other state, including the federal government. Last year, Covered California spent $121 million on marketing and outreach, including $47 million in TV ads. This year, Covered California plans to spend $150 million in marketing to during the coronavirus-caused recession, calling it the first economic downturn since the federal Affordable Care Act took effect.
“People that are losing their jobs, that are financially insecure, do not need to be health-care insecure,” Lee said. “We’re making the largest investment for this year and thinking next year we’re going to dial it back.”
The overall rate increase is just 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 increase was Anthem Blue Cross, whose rates will jump an average of 6% next year. The biggest drop was the LA Care Health Plan with an average decrease of 4.6%.