Molina, WellPoint Join California’s Health Exchange

Health insurance premiums may not increase for California residents by as much as state officials projected after a new government-run marketplace opens this fall under the the Affordable Care Act.

WellPoint Inc., Molina Healthcare Inc. and Health Net Inc. were among 13 insurers selected to participate in the most-populous U.S. state’s health exchange, which begins enrollment Oct. 1. While the rates the companies will charge vary widely depending on a person’s circumstance, the director of the exchange said that premium increases will be less than the 30 percent jump forecast by consulting company Milliman Inc.

“There have been predictions across the board that rates were going to skyrocket,” Peter Lee, the executive director in charge of the Covered California health exchange, said yesterday on a conference call. “Rates are going up at far lower than the best estimate Milliman thought might happen and way below the worst estimates of doom and gloom.”

Around the country, insurance premiums in the exchanges appear to be short of worst-case predictions. Aetna Inc. CEO Mark Bertolini warned of “rate shock” when customers shop for plans in exchanges, citing health-law policies that mandate better benefits and prohibit the companies from refusing to cover the sick or charging older people more than three times as much as young adults. Aetna, along with UnitedHealth Group Inc. and Cigna Corp., three of the four-largest U.S. health insurers, chose not to join the California exchange.

Average Increases

People who currently buy coverage for themselves or their families from Blue Shield of California, a nonprofit that is one of the largest insurers in the state, will see average rate increases of about 13 percent when they renew their coverage in the exchange, Paul Markovich, the company’s president, said on the call with Lee. Federal subsidies can greatly reduce the cost. Blue Shield rates would have gone up 8 percent next year without the health law, Markovich said.

“There’s a relatively small percentage increase going on at the same time the market is becoming dramatically more inclusive and the insurance policies themselves are getting more comprehensive than they traditionally have been,” said Sarah Lueck, a senior analyst at the nonprofit Center on Budget and Policy Priorities in Washington. “You’re getting a lot more for your money, and the additional money doesn’t even sound like it’s going to be that much.”

About 5.3 million Californians will be eligible to purchase coverage through the new exchange and about half may be eligible for the subsidies, according to the report.

Competitive Rates

Lee said individuals can expect to pay as much as 29 percent less than what small businesses now pay for coverage, though that estimate doesn’t provide a direct comparison to today’s costs to individuals.

“We think the premiums you’re going to see are competitive,” Lee said.

Premiums in other state exchanges have come in close to the average rates paid by individuals now, according to a May 20 report compiled by Democratic staff of the U.S. House of Representatives Energy and Commerce Committee. Insurance industry officials warn that some people with especially low-premium plans today may see bigger increases.

“Simply looking at averages doesn’t show the wide variation in impact that’s likely to occur based on the wide variation in what people are purchasing,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington trade group. “What matters is what will a specific person be paying, and how does that compare to what they’re paying today. That will determine whether they choose to purchase coverage.”

Required Marketplaces

President Barack Obama’s 2010 health-care system overhaul called for the implementation next year of health-insurance marketplaces in every state to sell coverage to people who don’t get it at work, often with government subsidies to reduce the cost. The health law will also expand some state Medicaid programs, which provide insurance for people living in or near poverty.

In Los Angeles County, rates will be as low as $117 a month, before federal subsidies, for a 25-year-old buying a high-deductible plan intended to cover only “catastrophic” health costs, according to a report by Covered California.

Milliman, the Seattle-based consulting company, said in March that Californians who make too much money to qualify for subsidies may pay as much as 30 percent more for insurance as a result of the law.

Adjustment Period

Wade Overgaard, a senior vice president in charge of California health plans at Oakland, California-based Kaiser Permanente, said insurers will adjust their rates as they learn more about the exchanges and the people who use them.

“Each plan is trying to analyze and anticipate costs with new products, new members, in essentially an entirely new market that hasn’t existed before,” he said in a statement. “The most important rates will actually be those for the renewal years, once those in the exchange choose and use their plans -- and we are all smarter about who has enrolled.”

Lee said Covered California hasn’t yet conducted an apples-to-apples study of how exchange rates for individuals will compare to current rates available to individuals. He used a comparison to rates in the small business market because California law prohibits insurers from refusing coverage to people employed at small firms, just as the federal law will require for individuals starting next year.

For the Blue Shield plans, a 40-year-old in north Los Angeles, earning less than $17,000 a year who buys individual coverage would pay $57 a month after subsidies, according to the report. Without subsidies, the plan would cost $252 a month.

The plan would cover about 70 percent of her medical costs, a level of coverage the law calls “silver.” Bronze-level coverage that pays 60 percent of costs, the minimum allowed under the law, would cost an average of $1 a month for the same 40-year-old, after subsidies.

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