Opinion: Insurance report shows premiums increased, but ignores policy changes

State Insurance Commissioner Dave Jones fired the first shot Tuesday in his campaign for more authority over health insurance premiums, releasing a report that showed a giant increase in premiums from 2013 to 2014 for those not covered by employer-sponsored plans.

The only problem is that, unlike the usual analysis from Jones’ office, it didn’t look at how much insurers raised the prices of individual policies. It looked at how much more the most popular policies available in 2014 cost than the most popular ones in 2013, without trying to control for the differences.

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FOR THE RECORD

An earlier version of this story said that subsidies were available to more than 60% of those who enrolled in Silver plans and more than 25% of those who obtained Bronze plans through Covered California. The actual figures are considerably higher, according to the exchange: more than 93% and more than 82%, respectively.

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Still, Jones’ report seemed to confirm the complaints uttered by Californians who couldn’t renew their policies for 2014 because they didn’t meet the new requirements set by the 2010 Patient Protection and Affordable Care Act (better known as Obamacare). The average premiums for policies bought in 2014 were 22% to 88% higher than the most popular ones bought last year, depending on the buyer’s age and location, the report states.

Jones said in an interview that he was trying to rebut the notion -- advanced by officials at the state’s new insurance exchange, Covered California, as well as some Obamacare proponents -- that premiums in the individual market didn’t go up all that much. “The rate of increase between 2013 and 2014 was quite large, contrary to what some have been saying,” Jones said.

Yet it’s misleading to say that insurers raised the premiums for policies in the individual market by 22% to 88% on average, as the report implies. “It’s a different pool [of customers], it’s a different product,” Tom Epstein, a vice president at Blue Shield of California, said of the 2014 plans. “You just can’t do that straight apples-to-apples comparison.”

Among the most important differences affecting the 2014 plans: insurers had to sell policies to anyone who applied, paying no attention to preexisting medical conditions; the plans’ coverage was standardized and, for all but the lowest tiers, made more comprehensive; annual and lifetime limits on payments were prohibited; and new limits were imposed on how much higher insurers could set the premiums of smokers and older customers.

All of these rules were designed to bring more people under the insurance umbrella and spread costs and risks more broadly. The predictable result was higher premiums, especially for younger, healthier people who opt for a more comprehensive plan. The 22% to 88% figure cited by Jones’ report comes from comparing last year’s most popular policies to this year’s “Silver” plans, which cover 70% of projected medical expenses. By contrast, “Bronze” plans sold in 2014, which cover 60% of the projected expenses, cost anywhere from 6% less to 45% more than the most popular plans purchased last year.

Nor does the report factor in the subsidies the ACA provides for those earning less than four times the federal poverty level. Subsidies were available to more than 93% of those who enrolled in Silver plans and more than 82% of those who obtained Bronze plans through Covered California, according to an exchange spokeswoman.

Bear in mind that Jones is a strong proponent of Proposition 45, an initiative on the November ballot that would give his office the power to deny increases in health insurance premiums that he deemed excessive. To sell the initiative to the public, it helps to be able to show that insurers have massively increased their premiums this past year, despite the efforts of Covered California to negotiate affordable rates.

Jones is also a strong supporter of the Affordable Care Act, and he took pains not to blame it for the higher premiums. Instead, he said the increase resulted from profit-taking by dominant insurers, their efforts to adapt to a bigger risk pool and “the inability of anybody to negotiate better rates.” That’s a not-so-veiled reference to Covered California, whose leaders oppose Proposition 45 on the grounds that it would interfere with their ability to bargain with insurers.

Considering how much the individual insurance market changed on Jan. 1, a better way to gauge Covered California’s negotiating ability will be to watch how much premiums go up next year for the policies being offered today. As it happens, the exchange is expected to announce next year’s premiums later this week.

Jones tried Tuesday to deny Covered California credit should the increase prove to be modest. He told reporters that he expected insurers to keep the increases low to avoid rallying voters behind Proposition 45. “There would be a huge public outcry and the public would respond at the ballot box,” my colleague Stuart Pfeifer quoted Jones saying. “I have no question that what we’re going to see ... will be much lower than would otherwise occur.”

Follow Healey’s intermittent Twitter feed: @jcahealey