California health insurance premiums to rise an average of nearly 9% in 2019

The roughly 2.3 million Californians who buy their health insurance on the individual market — either through the state exchange Covered California, or directly from insurance companies — will see their premiums rise an average of 8.7 percent in 2019, officials announced Thursday.

It is the fifth straight year that premiums are rising for such health plans. The increase applies to the 1.1 million lower-income Californians who receive federal financial assistance to buy plans on Covered California, as well as the 1.2 million residents who buy plans without subsidies.

The rate increases will be felt most acutely by those who earn too much to qualify for subsidies. They pay an average of $500 a month in premiums, compared with an average $123 a month paid by people who do qualify for subsidies.

The overall cost of health care is rising 5 to 7 percent each year. Covered California officials said they factored in an additional 3.5 percent due to the end of the Affordable Care Act’s requirement to buy insurance. The requirement, known as the individual mandate, imposes a tax penalty on those who do not buy insurance. But the mandate was repealed by the Republican-led Congress in December and will no longer be in effect starting in 2019. The change is expected to lead to fewer people, especially younger and healthier people, buying insurance.

An estimated 260,000 people in California are expected to drop health coverage in 2019, said Peter Lee, Covered California’s executive director. That includes about 160,000 people who buy insurance on Covered California, and 100,000 people who buy directly from insurers.

The elimination of the mandate is likely to affect the employer health insurance market as well. The cost of employer-sponsored coverage in California could rise 2 to 4 percent more than it would without the mandate’s repeal in 2019, according to an analysis released in May by PWC for Covered California. That is largely because uncompensated care at California hospitals is projected to grow between $420 million and $1 billion in 2019, as the newly uninsured population seeks medical care at hospitals, the analysis found.

California’s nearly 9 percent jump is less drastic than those in some other states. In Maryland, for instance, insurers requested 30 percent rate increases. In New York and Washington, D.C., average rates are expected to rise 15 percent and 24 percent, respectively, according to the Kaiser Family Foundation.

“It is unfortunate when a rate change of nearly 9 percent is generally viewed as good news, when the rate change could — and should — have been much lower,” Lee said.

In California, all 11 health insurers that sell plans on the exchange will return in 2019.

This year, Covered California rates were up 12.5 percent compared with 2017.

Covered California, whose budget comes from fees collected from insurance carriers, has largely been shielded from budget cuts the Trump administration has made recently to the federal exchange Healthcare.gov, which is used in 39 states.

The California exchange plans to spend $100 million over the next several months to promote its products, roughly the same as last year, whereas states that use the federal exchange saw marketing dollars slashed by 90 percent. Similarly, Covered California will boost spending on so-called navigators — distributing $6.7 million in grants to nonprofits that help consumers enroll in health plans — whereas states that use Healthcare.gov will see navigator dollars reduced by 70 percent.

Monica Tracht, an insurance agent in San Francisco’s Mission District, said she expects the vast majority of her clients — most of whom qualify for financial assistance — to continue buying insurance. A few, though, will probably drop coverage once they no longer have to pay the tax penalty, she said.

“Ninety-eight percent of my clients are willing to pay the little extra,” she said.

The new rates still must be approved by state insurance regulators in September.