Calif. Individual Policyholders Could Face Higher Premiums Under ACA

Hundreds of thousands of California residents could face higher premiums as the Affordable Care Act takes effect, the Los Angeles Times reports.

Experts say that the increases could diminish public support for the law, according to the Times.

Cancellation of Current Coverage

Last month, Blue Shield of California sent notices to 119,000 policyholders whose current health plans will be canceled because they do not meet the ACA's minimum coverage levels. Blue Shield said about two-thirds of such policyholders will pay higher premiums for a new plan.

In addition, Kaiser Permanente sent cancellation notices to 160,000 policyholders.

However, about half of state residents who have policies through the individual market will not be affected by the law because they have "grandfathered" plans that were purchased before March 2010.

Reasons for Cancellations

Many plan cancellations were required by Covered California to ensure that insurers do not keep the healthiest individuals out of the state insurance exchange.

Peter Lee, executive director of Covered California, said, "People could have kept their cheaper, bad coverage, and those people wouldn't have been part of the common risk pool," adding, "We are better off all being in this together. We are transforming the individual market and making it better."

Lee also said that consumers can shop for cheaper insurance through the exchange and that rate hikes could be offset by:

• Smaller deductibles; and
• Lower out-of-pocket costs.

Details of Premium Increases

Middle-income Californians in the individual market could face a 30% rate increase on average when they sign up for new plans, according to the Times.

Bob Cosway -- a principal and consulting actuary at Milliman -- estimated that the guaranteed coverage requirements under the ACA will be responsible for a 27% increase in individual premiums.

According to the Times, premium increases also could result from an adjustment in how rates are set by consumers' ages.

In addition, Milliman found that premiums next year likely will increase by 9% regardless of the ACA, resulting from higher health care costs and increased provider reimbursement rates.

Reaction

Some consumer advocacy groups say that insurers could be using the law as an excuse to raise prices.

Jamie Court, president of Consumer Watchdog, said, "We believe the prices are higher than they should be," adding that the rate increases are "giving a bad name to the Affordable Care Act."

However, Lee said the increased premiums are "what it takes to pay the claims and deliver the health care," adding, "The rates aren't going up because insurance companies are pocketing more money" (Terhune, Los Angeles Times, 10/26).