Exchange Rates Make ‘Great Day For California’

Covered California, the state’s health benefit exchange, yesterday announced a rate structure for its health insurance plans that came in at a much more affordable price than first projected.

That was great news for exchange officials and it accounted for much of the pomp around that rare circumstance during yesterday’s announcement.

“This is really a great day for California,” said Diana Dooley, secretary of the state’s Health and Human Services agency and chair of the Covered California board. “We have come a long way and we have a long way to go,” she said. “We are moving to make Californians healthier and give them the financial security they need.”

At the same time, the exchange also needed to announce that premiums would increase for many people who don’t qualify for federal subsidies. In the case of Blue Shield of California, the average base rate will increase 8% and the overall rate increase will total 13%, according to Blue Shield’s president and COO, Paul Markovich.

“People are going to have a change in rates,” Markovich said. “On average, our members will experience an 8% increase. That’s an 8% core cost. Including fees and taxes and higher benefits, that becomes 13%. That’s a Blue Shield-specific number.”

That left exchange officials in a somewhat awkward spot, needing to announce that premiums would rise but as much as expected.

“We looked a lot at the rates. And all the predictions have been that rates are going to skyrocket,” said Peter Lee, executive director of Covered California. Rates are going up at a far lower rate than the Milliman study predicted they would, Lee said, referring to a study commissioned by the exchange board, in part, to estimate premium cost.

“What we’ve heard again and again is that Californians want to protect their families.”

That’s where possibly the greatest benefit of the exchange comes in: Not  only will the number of covered people rise and include Californians with pre-existing conditions, but the level of essential benefits is much higher than it has been in the individual and small-group markets.

“No marketplace has been more dysfunctional than this [individual and small-group health insurance] market,” said Betsy Imholz, director of the West Coast office at Consumers Union. “With all of the exclusions and gimmicks and gotcha’s, to date I would say it’s been a pretty messy marketplace.”

That now has changed, Imholz said.

“This is a significant step toward fixing that problem,” Imholz said. “By Oct. 1, consumers can shop around and see what all of the options are. If there’s one takeaway message here, it’s that people now know they can come to Covered California and get affordable, quality health insurance. … So consumers don’t have to dread the prospect of getting health insurance.”

“Across the nation, we’ve heard the gloom and doom pronouncements, of how premiums were going to rise dramatically,” Lee said. “But the big news today is, we’ve hit a home run for California consumers … to offer high-quality health insurance at affordable rates for Californians.”

Lee said Covered California would announce health plans and rates for the small business market sometime in June.