Repeal of Affordable Care would increase health insurance costs

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In the tailwinds of Washington’s debate over repealing or replacing the Affordable Care Act, Covered California examined how these possible changes may affect premiums for health insurance in California.

Not only would repealing the ACA increase costs to individuals insured through Covered California, but the private insurance market also will feel the effects of these changes.

With no changes — neither the cost-sharing reduction (insurance subsidies for individuals and insurers) nor the enforcement of the individual mandate would be eliminated or altered — Covered Cal expects its total coverage to continue to grow, which would continue to reduce the number of uninsured Californians.

The premium increase in 2018 without any changes in the ACA was estimated to be 9 percent. Two percent of that is the result of the expiration of a tax holiday for insurers and the balance for increasing medical costs. About half the insured would receive subsidies.

However, eliminating the two major provisions of the ACA would likely create a premium-rate increase of another 30 percent in 2018. This could also raise the Silver Plan premiums another 16 percent to offset the loss of the cost-sharing reductions. The total increase from 2017 approaches 50 percent for Silver Plan enrollees.

Premium increases of this magnitude would likely result in some individuals again foregoing health-insurance coverage. The study estimated that the uninsured population would increase by 300,000 people.

If the cost-sharing reductions continued, but the requirement of individuals to obtain insurance was revoked, premiums also would increase. That’s because with fewer healthy individuals as members of the health pools, the cost to insurers would increase, resulting in higher premiums — perhaps about 17 percent higher than the base with no changes.

“Stopping the funding of CSR reimbursements, or even leaving the payments up in the air, would mean carriers would raise their prices to account for the uncertainty — costing the federal government billions in higher subsidy payments,” said Peter V. Lee, executive director of Covered California, in the press release announcing the study. “Even more important is the enforcement of the penalty, which boosts enrollment, builds a healthier pool of consumers and lowers premiums for everyone.”

According to the study, California has about 2.4 million individuals in this market, with 1.3 million getting their insurance through Covered California and 1.1 million purchasing directly from insurers “off exchange.”

Covered California contracted with PricewaterhouseCoopers for the analysis of the 2018 health insurance market for size and potential premiums. Although federal legislators failed in the attempt to repeal or revise the ACA in March, talks about changes continue and this is creating uncertainty in the health insurance marketplace.

The proposed rates for 2018 have to be submitted by June and preliminary proposals are due May 1 to the California Department of Insurance.

With the market uncertainty unlikely to be resolved soon, California’s Insurance Commissioner Dave Jones announced last week that he has authorized health insurers filing rates with the Department of Insurance to file two sets of rates.

Despite the likelihood that health insurers will have to increase rates due to Trump administration actions, Jones encouraged health insurers to file a second set of rates premised on continued enforcement of the ACA.

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