Amid anxiety over rising costs from the federal healthcare law, California received better-than-expected insurance rates for a new state-run marketplace, but many consumers still won't be spared from sharply higher premiums.
Three years after President Obama's landmark law was passed, the state unveiled the first details Thursday on what many Californians can expect to pay for coverage from 13 health plans offering policies in the state's exchange, in which as many as 5 million people will shop for coverage next year.
Developments in California are being watched carefully around the country as an important indicator of whether the healthcare law can deliver on its promise to expand health coverage at an affordable price. Many Republicans, insurance executives and other critics of the law have been warning that consumers are in for a shock next year when insurance companies raise rates to comply with the law's many new requirements.
Supporters were upbeat after an initial look at the proposed premiums, while critics remain unimpressed.
"These rates are way below the worst-case gloom-and-doom scenarios we have heard," said Peter Lee, executive director of Covered California, the state agency implementing the healthcare law. "But let's be clear, some consumers will have prices that go up. There may be some sticker shock."
The new government-run market is aimed at many of the state's uninsured and at Californians who already purchase their own health insurance. The majority of Californians receive health coverage from their employers and are not among those targeted for enrollment.
The health plans selected by the state will sell uniform benefits, each offering four broad categories of coverage called Platinum, Gold, Silver and Bronze.
Platinum policies will offer the most comprehensive benefits and carry the highest prices, followed by Gold, Silver and Bronze. The Bronze package will have the lowest premiums, but people would be on the hook for a greater share of their medical bills. The rates revealed Thursday still must be reviewed by state regulators.
Within each of those four benefit categories, plans will have the same co-pays, deductibles and limits on out-of-pocket medical expenses.
As a result, consumers will be able to compare insurance prices in their regions more easily, once these rates are finalized by July.
Consumers shopping in the exchange will have three to six health insurance plans to choose from in each of the state's 19 regions.
In the south Los Angeles County region, for instance, rates for a 40-year-old purchasing a Silver plan ranged from $242 a month through Health Net Inc. to $325 a month through Kaiser Permanente. Overall, Los Angeles County had the lowest premiums statewide for the Silver plans.
The average premium for individual plans sold through EHealthInsurance in California last year was $177 a month. Covered California said the average premium for the three lowest Silver plans statewide was $321 a month, albeit for more comprehensive benefits.
Overall, state officials said they can't estimate yet how much rates will rise on average. Blue Shield of California, one of the winning bidders in the exchange, said its existing individual policyholders would pay about 13% more, on average, for coverage in the state marketplace.
These rates "came in below what people legitimately expected them to be," said Paul Markovich, Blue Shield's chief executive.
Comparing the proposed rates for next year with current premiums is difficult, officials and experts agree, because the healthcare law mandates next year's plans to offer richer benefits and to limit consumers' out-of-pocket expenses.
Democrats in Washington were quick to hold up California's announcement as a sign that the federal healthcare law is working and bringing a healthy dose of competition to a dysfunctional insurance market in which millions of people have been denied coverage because of their medical history or subjected to punishing rate hikes year after year.
Most Republican-led states have resisted the healthcare law and declined to set up their own state exchanges. Instead, they have opted for the federal government to step in.
Starting in January, most Americans must have health insurance or pay a penalty under the federal law.
Some industry experts said California's outlook on rates remains far too optimistic in light of the hefty increases some consumers will see.
"California has no right to declare victory on rates," said Robert Laszewski, a healthcare consultant in Virginia. He said the sample premiums released by Covered California were about 50% higher than rates for the most commonly sold health plans in the individual market primarily because of increased benefit requirements. "If rates come in higher, it speaks to the sustainability of the Affordable Care Act."
Federal premium subsidies will ease the bite on many people's wallets. In California, individuals earning less than about $16,000 a year will qualify for an expansion of Medi-Cal, the state's Medicaid program for the poor. Above that threshold, individuals making less than $46,000 a year and families earning below $94,000 annually will qualify for federal subsidies.
One of the bigger risks is that high premiums turn off healthier, middle-income households that aren't eligible for that federal assistance and have to pay the full premium. Rates could skyrocket if the exchange fails to enroll enough of those people to offset the higher costs of sicker, poorer policyholders.
Katharine King, 59 and a self-employed concert and event producer in Santa Monica, already pays $497 a month for her individual health insurance from Anthem Blue Cross. She wouldn't qualify for federal premium help based on her income. Using the state's online calculator, which doesn't yet reflect the final rates, her premiums could shoot up to nearly $600 a month next year.
"The Affordable Care Act is still not all that affordable unless you qualify for a federal subsidy, which I will not," King said. "It will likely be another case of the middle class kind of getting screwed."
Alfredo Ceron, 44, an uninsured painter in Los Angeles, has less to worry about with these rates. He said he earns about $100 a day when he has work, which means the federal government would pick up most of the tab for him and his two adult children who still live at home.
"I'd like to get my family covered," he said while waiting in line at a recent downtown festival to get more information about the new insurance options.
The 13 health plans selected by the state include all four of California's largest insurance companies. They are Kaiser Permanente, Anthem Blue Cross, Blue Shield and Health Net.
The other nine health plans selected were smaller regional players and insurers that have traditionally served lower-income and Medi-Cal patients. They are Alameda Alliance for Health, Chinese Community Health Plan, Contra Costa Health Services, L.A. Care Health Plan, Molina Healthcare, Sharp Health Plan, Valley Health Plan, Ventura County Health Care Plan and Western Health Advantage.
In Los Angeles County, which was divided into two regions, six companies will compete for policyholders. They are Anthem Blue Cross, Blue Shield, Health Net, Kaiser Permanente, L.A. Care and Molina.
California Insurance Commissioner Dave Jones said he was troubled by the lack of choice in some markets. "There are only three statewide health insurers selling in Covered California," Jones said, "which means less statewide competition than we'd hoped to see in the new marketplace."