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California health insurance  -   Health Reform in California  -   Rate Shock 

Rate Shock for California health insurance plans

California health insurance ratesThere's a new term going around at the carrier level as since Jan 1st 2014 Health Exchange plans came online.

Rate Shock.

Yes, it is as bad as it sounds.

Needless to say, this refers to the health insurance rates we'll pay in California for individual/family and small business coverage if we do not qualify for subsidies. 

The new dividing line that means $1000's of dollars is 400% of the Federal Poverty Level for tax credits.

If you're above that, you may be facing pretty large health premiums.

Let's look at what we can expect in terms of rates going forward.

Precursor rate increase moves by Anthem

The past years started off bad with the Anthem notification of their 2/1/2013 rate increase for Individual and Family health plans (also know as IFP in the industry). The average increase for most Anthem Blue Cross of California members is around 20% with increases up to 25%. 25% is a huge hit (believe me...my family was right there). Was this just a one off? After all, Blue Shield of California came out with all new plans July 1st, 2012 which were much higher than the plans they replaced. By the way, Blue Shield announced a rate increase March 2013 soon after.

The Rule (not the exception) on rate increases in California

Unfortunately, the Anthem rate increase was not an isolated incident.

The other major health insurance carriers have announced plans to increase rates as well for IFP in California including Aetna and Kaiser.

We don't expect them to raise again during 2013 since these plans are essentially temporary anyway for most Californians. Come Jan 1st, 2014, most IFP (and small business) members will have to change to one of the new California Health Exchange plans. Only grandfathered plans (those effective prior to 3/23/2010) can remain in force as long as they don't make changes. If you are on a grandfathered California health plan, there are more considerations before making any changes to your plan.

So what about this "Rate Shock" business?

The carriers are starting to get a feel of what will be required or "mandated" by the health reform bill both in and out of the Exchange.

Based on experience and the new rules, they are expecting California health insurance rates to be 30-50% higher on the new plans available Jan 1st (for comparable coverage).

The comparable coverage part is tough since the new plans will likely be richer than what's available on the market then and most people in the Exchange will likely go to the Bronze or Silver plan while most people out of the Exchange will go with the Bronze. In the Exchange, the expected subsidy will be based on the Silver plan. Outside the Exchange (not qualifying for a subsidy), it will be a race to the bottom or the Bronze plan.

Why are the health insurance rates going up?

There are a few different reasons. There is California health insurance rate compression or the new rule that the oldest member cannot have rates more than 3 times the youngest member.

Essentially, rates for people 45 and under will come up while older individuals (up to age 65) will go up but not as fast. The new plans are based on the Kaiser $30 Copay no deductible plan which is way out of whack with what people currently purchase on the market (generally a $3500+ deductible).

That alone can drive up the costs significantly. Also, you can expect the various mandates (maternity, 100% preventative, etc) to add to the increase.

Silver lining based on income

If you make under 400% of the Federal poverty level, you can expect health insurance subsidies for most cases which will offset the large increase. If you don't fall below 400% of poverty, expect to pay quite a bit more for health insurance or an increasing penalty for not purchasing it. In the meantime, run your instant quote to see what's available through www.calhealth.net  Of course, we're happy to walk through your options with you.
 

Important Pages:

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