About 5 million Californians got a first glimpse at what they might pay next year under the federal healthcare law. For many, that coverage will come with a hefty price tag.
Compared with what individual policies cost now, premiums are expected to rise an average of 30% for many middle-income residents who don't get their insurance through their employers.
Alternatively, lower-income consumers will reap the biggest savings and are projected to save as much as 84% off their coverage thanks to federal subsidies.
The figures were released Thursday by Covered California, the state agency charged with implementing the federal Affordable Care Act. They underscore the harsh reality that costs for some consumers will have to rise in order to carry out the biggest healthcare expansion in half a century.
"It's hard to design any change of this scale where everybody is a winner and no one is worse off," said Gerald Kominski, director of the UCLA Center for Health Policy Research and an expert on health insurance. "Some people will feel they are being unfairly targeted or penalized."
The threat of higher costs could alienate many of the policyholders the state needs to keep in the fold in order to offset the increased costs of covering sicker, poorer people who have been shut out of the system for years.
According to the state, about 1.3 million people who are middle-income or higher and already have coverage not through an employer will bear the brunt of the higher costs. These are individuals making more than $46,000 and families earning more than $94,000 annually. People below those income levels qualify for federal subsidies.
An estimated 3.6 million Californians who are either uninsured or low-income will benefit the most from these changes. They will gain from guaranteed access to health insurance for the first time, regardless of their medical history. And they will no longer face financial ruin from enormous medical bills.
The actual premiums people will pay aren't known yet. Next week, health insurers will submit their proposed rates to the state for coverage starting Jan. 1. Covered California plans to select certain companies for the state-run insurance exchange and negotiate rates by mid-May.
California consumers weary from years of double-digit rate hikes in the current market said they would welcome some relief.
Erin McCoy, a single mother with two sons, said her family's Anthem Blue Cross premiums have shot up 28% in the last year to $820 a month. Next year, the Hermosa Beach resident may qualify for premium subsidies that could lower her costs substantially.
"I'm hoping Obamacare will help me," said McCoy, 48, a self-employed advertising executive.
Chris Peterson of Santa Clarita fears she could end up paying more under the revamped insurance system. A 58-year-old widow, she pays about $1,100 a month for an HMO plan to cover her and her 22-year-old son. She said she doesn't expect to qualify for federal assistance and worries about government taking a bigger role in healthcare.
"I have a feeling things will get worse," she said. "The benefits I have right now aren't so bad."
Insurance industry officials said they support the state's efforts to expand and improve health coverage. But they warn that somebody has to pay more.
"These richer benefits, more predictable coverage and subsidies come at a cost," said Patrick Johnston, president of the California Assn. of Health Plans. "All these expansions add to the already increasing cost of care."
Age is another dividing line. Younger people will generally see higher premiums under the federal overhaul, while older consumers could reap some of the biggest savings. Still, the state said, many younger consumers will qualify for subsidies because they earn less, helping to mitigate higher rates.
State officials are eager to quell mounting worries over potential rate shock. Even supporters of the federal law have expressed concern that the new government requirements will drive up premiums too high.
"It is critical for us to understand the true financial impact on Californians as we move toward 2014, and this is an important step in determining strategies to help protect consumers from cost increases," said Peter Lee, executive director of Covered California. "There may be increases in premiums depending on what product people buy."
Starting next year, income will drive what most consumers ultimately end up paying for their coverage in the individual market.
For instance, a family of four earning $50,000 annually would qualify for a subsidy that would lower its premiums to $280 a month, according to state estimates. In contrast, a family earning $100,000 annually would not qualify for a federal subsidy and would be charged the full premium of $1,149.
The state said federal subsidies and lower out-of-pocket medical expenses are likely to offset the higher premiums for most people buying their own coverage.
In California, individuals earning less than about $16,000 will qualify for an expansion of Medi-Cal, the state's Medicaid program for the poor and disabled.
Thursday's report was written by Milliman Inc., a Seattle consulting firm hired by the state to analyze the effect of the federal law.
Milliman said the federal law's guarantee of coverage for all applicants, including sicker patients and those with preexisting conditions, was a major factor in driving up overall costs.
Also adding to the price tag are new federal rules that require policies to cover a wider array of healthcare services and pay a bigger portion of patients' medical bills than currently required.
Even without the federal overhaul, Milliman said individual premiums in California would increase an average of 9% in 2014 because of rising medical costs and other factors.
In January, most Americans must purchase health insurance or pay a penalty. Those annual penalties start at $95 per adult or 1% of household income, whichever is greater. The penalties will increase over time.
Consumer advocates are urging state officials to wring even lower rates out of private insurers during upcoming negotiations.
"There is more we can do through negotiation to make things more affordable," said Anthony Wright, executive director of Health Access, a consumer advocacy group.
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