California Individual Health Insurance Rates to Rise 0.8% Next Year — Smallest Increase in 5 Years
People who buy their own health insurance in California next year will see their rates increase by less than 1%, the lowest jump in five years that state officials attribute to a new law that taxes most people who refuse to buy coverage.
Rates will increase an average of 0.8% percent next year, according to Peter Lee, executive director of Covered California, the state-run health insurance marketplace. Specific rates charged by companies still must be approved by state regulators.
Most people in California — with nearly 40 million people — purchase their health insurance through their employer.
But about 2.2 million people purchase insurance on the individual market. Rates for those people have increased an average of nearly 8% every year since 2014, the first year former President Barack Obama’s health care law went into effect.
Two things are happening in 2020 that state officials say will keep the rates in check: California will tax people who refuse to purchase insurance, and they will use the money they get from that tax to help middle-income people pay their monthly insurance premiums.
State officials believe the changes mean an additional 229,000 people will get health insurance coverage next year. More people having insurance lowers the risk for insurers, who can then lower rates, Lee said.
“It really is a win-win,” Lee said.
The federal Affordable Care Act required everyone, with some exceptions, to purchase insurance or pay a penalty. The U.S. Supreme Court upheld that law, ruling the penalty was a tax. In 2017, Republicans in Congress eliminated the tax beginning this year.
Last month, Democratic Gov. Gavin Newsom signed a law to reinstate the tax in California, joining Massachusetts, New Jersey, Vermont and Washington, D.C., next year as the only governments in the U.S. to penalize people who don’t buy health insurance.
But the tax has not always meant lower premiums. In 2018, when the federal tax was still in place, rates jumped 12.5% in California. Covered California spokesman James Scullary said other federal decisions contributed to higher rates that year, including eliminating cost-sharing reductions.
Republicans in the California Legislature opposed the plan, arguing it was not fair to tax people for not buying insurance while the state also expanded taxpayer-funded health coverage to people who live in the country illegally.
“It didn’t change anything. They were paying it. They’ve been paying it for years,” Newsom said Tuesday about taxing people who don’t buy health insurance. “We can see premiums continue to skyrocket for everybody or we can stabilize the market.”
California will become the first state to offer subsidies to people who earn up to six times the federal poverty level — or about $150,000 a year for a family of four. State officials expect about 235,000 people will be eligible to get an average of $172 per month, which will lower their existing monthly premiums by an average of 23%.
Another factor helping keep costs low is more choices for consumers. Anthem Blue Cross, which only sells plans in Northern California, Santa Clara County and the Central Valley, announced Tuesday it would begin selling plans next year in Los Angeles County and elsewhere.
The expansion means 99.6% of Californians will have at least two companies to choose from, while 87 percent will have three choices.
“Health plans know that consumers that have a choice choose the best value for them,” Lee said. “That’s a key element in this premium increase being so small.”