Covered California, soon to be the nation's largest state insurance exchange, is touting the relatively low premium rates tentatively secured for individual health plans -- but HIX officials are comparing those to existing small group market rates, which isn't entirely apt.
Selecting 13 insurers out of 33 that applied, Covered California put the model of "active purchasing" to work, negotiating rates on behalf of consumers and, in turn, compelling insurers to negotiate with hospitals and health systems.
At a press conference, Covered California executive director Peter Lee, a former Centers for Medicare & Medicaid Services official, said there will be no "rate shock" and if anything, the rates will be surprisingly low with new essential health benefits.
Without any subsidies, an average 40-year-old Californian buying a silver tier plan in the exchange will pay an average of $321 in monthly premiums. Those silver plans for a 40-year-old will have premiums ranging from around $220 to $375 -- and could be as much as "29 percent lower than comparable plans provided on today's small group market," Covered California said in it's report.
But why compare individual health plan rates to the small group market? Avalere Health VP of health reform Caroline Pearson noted that doing so is not exactly an apples to apples comparison.
On one hand, comparing individual rates to the small group market does account for some of the expanded health benefits that'll be mandated in individual plans for 2014. But it also masks some of the increases from current individual plans that are largely inevitable.
"By comparing them to the small group market, the percent increases -- or in this case the decreases -- will be lower; the price impact is reduced," Pearson said.
To offer a sense of how much individual plan prices will be changing, Covered California, she said, could "either compare the new 2014 rates to average individual rates in 2013, or compare them to individual rates for younger, healthier people, like a healthy 35-year-old."
At the same time, current individual plans for a 40-year-old Californian are not necessarily all that much more affordable than the rates tentatively set for 2014.
Searching on eHealthInsurance.com for a 40-year-old male non-smoker in central Los Angeles yields a range of plans, many with out-of-pocket cost rules that are going to be simplified or limited next year: $204 per month for a Blue Cross PPO with a $6,000 deductible; $283 per month for an Anthem Blue Cross PPO with a $2,000 deducitble and 30 percent coinsurance for outpatient and emergency services; $290 per month for a Kaiser Permanente HMO plan with $2,000 deductible; and $142 per month for a Health Net HMO with a $7,500 deductible (a plan that will be increasingly scarce for all but 20-somethings when all of the Affordable Care Act's rules take effect).
Covered California's geographic rating, though, might leave some consumers scratching their heads, if not frustrated -- if they actually end up seeing the differences.
In northern Los Angeles County, one of 19 rating regions, a 40-year-old consumer looking for a silver plan would have the choice of eight health plans (with Health Net offering an HMO and PPO) that would range from Health Net's $222-per-month HMO to Kaiser's $294-per-month HMO.
In the southern LA County region, a 40-year-old would have similar silver plan options -- although on average a bit higher, ranging from $242, from Health Net, to $325, from Kaiser Permanente. In San Francisco, meanwhile, a 40-year-old consumer would have the choice of five silver plans, ranging from $306, offered by Chinese Community Health Plan, to $392, from Health Net.
A minimum of two plans will be available in all of the 19 designated rating regions. Large markets like Los Angeles and San Diego will have as many as six different issuers, Lee said, but rural parts of northern and eastern California may only have a few.
Lee said that after the 33 insurers came in with bids to sell individual plans on the exchange, some dropped out "because they've not been willing to be the active partners we will want and need," others weren't selected "because their rates were too high" and some changed their networks and pricing.
Covered California also negotiated a bit with insurers on profit margins, chipping them down by two or three percent and elsewhere in the market seeking to lower provider reimbursements, Lee said. Generally, he said, the rates secured by Covered California are a "homerun" for consumers.
"Some consumers will have prices go up, depending on their age, their current coverage and what they want to choose. But all consumers are going to have high-quality affordable options that can give them peace of mind," he said.
Many eyes are on Covered California as a barometer for the success of the ACA's national potential for the individual mandate and premium subsidies. Covered California is set to announce small market rates in June, and meanwhile is spending about $100 million on advertising and a small army of navigators and consumer helpers, with a target population for enrollment of 5.3 million, about half likely eligible for subsidies.