A 13.2% Obamacare Premium Increase Will Jolt Californians Next Year
Policy + Politics

A 13.2% Obamacare Premium Increase Will Jolt Californians Next Year


Californians have largely escaped big Obamacare premium increases during the past two years, with premium hikes weighing in at roughly 4 percent a year. But rising health care costs and mounting concern among major insurers about diminished profits have finally caught up to residents who will be hit with their first double-digit premium increase in the 2017 insurance season.

Officials of Covered California, the California version of the Affordable Care Act, announced on Tuesday that the premiums would rise an average of 13.2 percent next year for the 1.4 million taking part in the program, as the Los Angeles Times reported. The increase is startling to some because it is three times as much as the previous two years’ increase, yet it is well in line with analysts’ forecasts of substantial Obamacare premium increases throughout the country in the coming year.

Related: Obamacare Premiums Rising At Least 10 Percent Next Year

During a press briefing, Covered California officials largely blamed the rate increase on the rising costs nationwide of providing health care to subscribers, especially pricey specialty drugs such as Gilead Sciences’ Sovaldi and Harvoni, used to treat people with the Hepatitis-C virus that can cost as much as $1,000 a pill. What’s more, some of the state’s largest insurers have been struggling with disappointing revenues from Obamacare and are under pressure to either raise premiums or pull out of the market.

According to the Los Angeles Times, two of California’s biggest insurers – Blue Shield of California and Anthem Inc. -- sought and received approval for the biggest rate hikes of all in the state. Premium costs for health care coverage offered by Blue Shield will rise on average 19 percent next year while Anthem’s premiums will go up an average of more than 16 percent.

But that only tells part of the story. The premiums will vary significantly, depending on where the policy is sold in the state and the level of insurance a consumer purchases. California is divided into 19 price regions, with some of them likely to raise rates above the average while others will come in below the average. Moreover, rates can vary even with the same region.

In the Sacramento area of Northern California, for example, premium rates will rise an average of 13.4 percent overall, according to Kaiser Health News. Yet rate increases within the region have a greater swing -- from an average 5.8 percent for a Kaiser Permanente plan to 23.1 percent for a Blue Shield of California plan.

Related: UnitedHealth Makes Good on Threat to Pull Out of Obamacare

About 90 percent of all Obamacare participants are eligible for sliding-scale tax credits if they make no more than 400 percent of the federal poverty level, which reduces the overall cost of the health insurance. However, policies providing lower levels of coverage frequently have significant deductibles that add to a consumer’s overall costs. And all policies include certain out-of-pocket costs that affect the overall annual cost.

A recent preliminary Kaiser Family Foundation analysis of Obamacare insurance markets in roughly a third of all major metropolitan areas showed that premiums on the most popular subsidized plans would rise by an average of 10 percent next year. That is twice the rate of increase approved last fall.