Last week, Covered California announced a 6% preliminary average statewide premium rate increase for 2023, which will apply to the majority of the 2.3 million people enrolled in California’s individual market. This will include the over 1.7 million enrolled in health insurance through Covered California after this year’s open enrollment period, as well as those enrolled off of the exchange.
While this rate change is the largest in the last few years, Jessica Altman, Executive Director of Covered California, emphasized that the biggest factor that will impact what Californians pay for health coverage on Covered California in 2023 is whether or not Congress decides to extend the enhanced financial assistance made available through the American Rescue Plan Act (ARPA).
Covered California’s rate increase is below the national average increase of 10%. Kristof Stremikis, Director of Market Analysis and Insight at the California Health Care Foundation, told State of Reform that this 6% rate increase is consistent with what other markets are seeing as well, such as the California Public Employees’ Retirement System.
Altman explained that the largest portion of this rate increase (about 4 percentage points) is due to projected increases in the underlying price and quantity of health care services, such as visits to the doctor and the cost of prescription drugs, that are delivered within the system, which are largely returning to pre-pandemic levels after more than 2 years of lower-than-normal utilization.
She added that the continued uncertainty surrounding ARPA extensions added about half a percentage point to this year’s rate change.
“The expiration of ARPA could result in premiums doubling for low income consumers,” she stated. “Middle income families would lose all federal financial help and a projected 220,000 Californians could be priced out of coverage. And that is of course in the backdrop of high inflation [due to] other economic factors that are increasing costs for household necessities, like food and gas, at a time when we know California’s families are already facing difficult kitchen table decisions.
Now Covered California stands ready to move mountains, whatever we need to do if Congress elects to extend the ARPA subsidies and deliver that affordability to our consumers. But every day matters, and open enrollment is really just around the corner, so the longer we go without a decision, the harder it will be to implement a new subsidy structure and avoid consumer confusion and disruption.”
This 6% increase in premium rates puts “enormous pressure” on Californians and their families, according to Stremikis.
“Unfortunately, this is another increase after years of increases across the market,” he said. “Over the last 10 years, premiums and out-of-pocket costs have dramatically eclipsed any increased corporate wages and overall economic growth.”
Stremikis also highlighted that most health plans are predicting some upward effect on the premiums they charge to everyone in anticipation of enrollees dropping off insurance as premiums become unaffordable.
“From a consumer perspective, the expiration of subsidies directly impacts the ability of many people to afford health insurance premiums,” he said. “In the case of a health insurance marketplace, the expiration of subsidies is definitely going to lead to some people dropping coverage, which affects the overall risk profile of the health insurance pool, [which then will lead to modest upward increases in premium costs for everybody].”
He said, however, that while consumer subsidies are an important part of the equation, they do not entirely solve the issue of health care affordability.
“Health care is very, very expensive from the perspective of a Californian. [Californians] are now more worried about paying for health care than they are paying for housing, gas, or any other basic need. We consistently find out that subsidies certainly make a huge difference and make health care more affordable for individual consumers and their families. But these subsidies to consumers don’t do a lot in terms of lowering underlying costs within the system. If hospital stays and the cost of prescription drugs keep increasing, that’s going to keep making the underlying costs of care unaffordable.”