Low Covered Calif. Rate Hikes Bode Well for Not-for-Profit Hospitals
The recently announced 2015 premium rates for health plans sold through Covered California could have a positive effect on not-for-profit hospitals in the state, but it is unclear what effect they will have on insurers, according to a report by Fitch Ratings, the Bond Buyer reports (Chin, Bond Buyer, 8/11).
Covered California is the state's health insurance exchange, created under the Affordable Care Act.
On Aug. 1, Covered California officials announced that the average premium for health plans offered on the exchange will increase by an average of 4.2% for the coming year.
Covered California Executive Director Peter Lee said several factors kept the rate increases across the state low, including:
- A larger-than-predicted number of sign-ups during the first open enrollment period;
- A surge in healthier individuals signing up for health plans at the end of the first open enrollment period; and
- The ACA's medical-loss ratio rule, which requires insurers to dedicate at least 80% of premiums to health care costs (California Healthline, 8/1).
Effect of Low Premium Rate Increases
The "relatively small increase" in premium rates could lead to a higher rate of insured patients at not-for-profit hospitals, according to a Fitch release (Fitch release, 8/8).
Analysts noted the small rate increase also could attract new and healthier consumers to the exchange, leading to improved risk characteristics for Covered California.
However, Fitch said the effect of the rates on insurers is uncertain because the average premium increase is low when compared with "medical inflation and historical trends" (Bond Buyer, 8/11).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.