In late September, Peter Lee, the executive director of Covered California — the state's health insurance marketplace — was a guest on KQED's Forum. It was just days until the Oct. 1 opening of the exchange. Lee touted the benefits of the Affordable Care Act, saying that many people would pay less for health insurance, but he cautioned that for some people, "rates may go up a little bit."
Pretty soon Mark Brown of San Jose called the show to say his premiums were going up -- and much more than a little bit. Brown, who buys health insurance for himself and his wife, said his premiums were going up a whopping 90 percent.
When I heard Brown on the air, I hurried to the control room to get his phone number and later got his full details:
- In 2013, Brown's plan with Kaiser has a $5,000 deductible and a $6,000 out-of-pocket maximum. It costs him $272 a month.
- In 2014, Kaiser offered him a plan with a $4,500 deductible and a $6,350 out-of-pocket max. But the premium is $519 a month.
It's very similar coverage for almost double the cost.
Brown's story was so astonishing that Glenn Melnick, a health economist at the University of Southern California, simply didn't believe it when I called him to ask how this big of a rate increase could be happening. "A 90 percent increase just doesn't make sense to me," he said.
Melnick encouraged me to double-check the facts, saying that there must be something Brown was missing. But Brown provided his documents from Kaiser, I reviewed them and forwarded them to Melnick, who confirmed that Brown's analysis — a 90.9 percent increase for similar coverage — checked out.
"You've got my attention," Melnick said.
In fairness to Kaiser, the other plans available on Covered California to Brown were roughly the same cost and since all plans on the marketplace must offer the same benefits, the coverage for any other plan would be equivalent. Brown says he does not qualify for a subsidy, so he and his wife will be paying for the entire premium themselves.
Brown, 56, said he supports the Affordable Care Act and assessed his situation somewhat philosophically. "Everybody should have medical coverage," he said, "and there are going to be winners and losers whenever they deploy something like this, and I'm in the loser category at this point."
The big question right now is how many people are in that category with him. At the end of the week after Covered California opened, I wrote about another person whose premiums were going up, and that post is now filled with comments from other frustrated people who are experiencing premium increases.
In that post, Larry Levitt of the Kaiser Family Foundation attributed the increases to the cost of adding people with pre-existing conditions to the pool. But how and why that happens is an interesting look at California's individual market now and the one expected to take shape as we move into 2014.
Before we get there, a bit of background. Of California's 38 million people:
- Roughly 80 percent have either employer-based insurance or are covered by a public program such as Medicare or Medi-Cal, the state's version of Medicaid. They are largely not affected by the rollout of the ACA.
- Another 14 percent of Californians lack health insurance. That's more than 5.5 million people.
- And 6 percent of Californians — or about 2 million people — buy insurance for themselves, on the individual market.
Bear with me here for a few more numbers:
Of those 2 million people who currently buy their own insurance, somewhere between 37 percent and 51 percent (depending on whose numbers you choose) will pay less for their coverage in 2014 because of the subsidies available under the Affordable Care Act. (Subsidies are available to people with incomes up to 400 percent of poverty — capping out at $46,000 for an individual or $94,200 for a family of four.)
So that leaves roughly 1 million people whose premiums are potentially subject to change under Obamacare. The questions are: in what direction and by how much? It'll be awhile before we have global numbers. So for now we're left with anecdotes.
Premiums up for some, down for others
Kevin Knauss, an insurance broker in the Sacramento area, analyzed a small sample of his clientele and found that about a quarter of them were seeing their premiums go down. And, no, these people were not eligible for the ACA subsidies, he said. So, for at least some people the ACA is saving them money.
But what about Mark Brown and others who are seeing significant increases? What are the drivers?
An extensive report back in March from Milliman, a global actuarial firm, has some answers. It got widespread media attention at the time. Remember that this report came out well before Covered California announced its 2014 plans and premiums, at a time when there was concern of significant rate shock, that premiums would skyrocket for everyone due to Obamacare. The report found that many people would pay significantly less, largely due to subsidies. But the report included estimates that premiums would go up, on average, 20 percent for people who earn too much to qualify for subsidies. In other words, some people will pay less, some people will pay the same and some people -- like Brown -- will pay much more.
Part of that increase — about 9 percent — would have happened anyway, the report said. That's because health care costs keep rising. But much of the rest of the increase, the report shows, is because those 2 million people in the individual insurance pool have tended to be healthier (and therefore less expensive to insure) than the average population. The makeup of those in the individual pool is likely to change under the Affordable Care Act, as the uninsured gain insurance. Covered California hopes to enroll 1 million people by the end of 2014, increasing the individual insurance pool by 50 percent.
Individual insurance pool in California a healthier group
Why is the current pool healthier? Because in California, like many other states, insurers offered products based on your health history, or medical underwriting, in the industry parlance. People in good health generally pay less than those with worse health. Most people have heard the stories of individuals being denied coverage -- at any cost -- because of pre-existing health conditions. So that means people who needed health care the most weren't in the individual insurance pool. Now they will be.
"I know that people are going to feel like they are getting the short end of the stick because they are having to pay more for their health insurance. Unfortunately there are winners and losers under the ACA," said Gerald Kominski at the UCLA Center for Health Policy Research, echoing Mark Brown. "When we weigh everything, the reforms benefit many more people than they harm, but these are the most disadvantaged in the marketplace."
One of those people disadvantaged in the pre-ACA marketplace is Paul Cello of San Francisco. He has an essentially benign heart condition, but it left him uninsurable 10 years ago, after he left his job and his COBRA ran out. He did get into the state's high-risk pool where his premiums are a little over $500 a month, he said, but benefits are capped at $75,000 annually. While Cello's health costs have never approached $75,000, he was worried they could. “It always felt like if anything big happened, I was going to be in trouble,” he told me.
On the second day the Covered California was open, he enrolled in a Blue Shield plan with no lifetime maximum (as required by the ACA) and with more comprehensive benefits than his current plan. His premium has gone down slightly to $483 -- plus Cello qualified for a subsidy, bringing his costs down further.
I could list more anecdotes, but it will be awhile before Milliman or other analysts can issue a new report. In the meantime, Kominski views the situation societally.
"It's unfortunate that some people are going to have to pay more. Some people who currently have lower cost insurance will have to," Kominski said. "On balance a lot more people will be better off, but there's a small portion who would have been better off just keeping things as they are."
For you wonks out there, the California Health Care Foundation has a great explainer on actuarial value, which represents the share of health care expenses a plan covers for a typical group of enrollees. Most plans now have an actuarial value of 55 percent. Bronze level plans under the Affordable Care Act are at 60 percent. This is another driver of premium increase.