May 21, 2018

Obamacare: Covered California 2019 Premium Estimates? A Bunch Of Baloney, I say.

Covered California, the California health insurance exchange for Obamacare (Affordable Care Act) coverage, recently released it's state-wide estimated premium increase for policies sold on the exchange in 2019.

Covered California is currently negotiating 2019 rates with health insurance companies. Final 2019 rates are expected to be released in July.

And my opinion of the estimated state-wide premium increase for 2019?

I think its a bunch of baloney.  Here's why.

Covered California health insurance premiums, and the annual increase in premiums, can vary dramatically among California's 19 different "pricing regions" (this "pricing region" scheme is yet another head-shaking problem with Obamacare).  In 2018, the California state-wide average premium increase was 12.9%.   However, this average figure is very misleading, given the eye popping variations in premium increase from one pricing region to other.

Just how eye popping?  In 2018, the average Covered California health insurance premium increase in California's 19 pricing regions ranged from a low of 4.3% average premium increase in Pricing Region 8 (San Mateo county), to a jaw dropping 33.2% average premium increase in Pricing Region 1 (which consists of 22 counties in the most northern portion of the state).

That's simply crazy!  Nuts!

California's 19 Pricing Regions for
Covered California/Obamacare  Health Insurance

Fast forward to the recently released estimated state-wide average premium increase for 2019.  Covered California estimates that (1)  enrollment statewide will drop 12%, largely due to the removal of the individual mandate requiring health insurance, and (2) that on average, health insurance premiums for policies sold in the 19 Pricing Regions will increase by 11%.

Huh?

The anticipated 12% enrollment drop will likely consists of healthy people dropping health insurance coverage.  That will leave a smaller - and sicker - group of insureds who will require more health care, which in turn drives up costs for the health insurance companies selling the policies.

So we've got a smaller group of more expensive and sicker insureds, yet Covered California estimates that the state-wide average premium increase in 2019 - 11% - will actually be lower than the 2018 average state-wide premium increase of 12.9%??!!  That's crazy.

How can one possibly expect that a sicker and therefore more expensive group of insureds will lead to a lower premium increase that the preceding year?

More expensive does not equate to less cost.  Duh.

I'll post this summer when final 2019 Covered California/Obamacare premiums are released.  Until then, I wouldn't put too much faith in Covered California's current Guessing Game.

About Mary Rae Fouts, EA

Mary Rae Fouts, EA provides tax, insurance consulting, and expert witness services to clients who have technical or complex concerns.  For more information about Mary and her professional services visit FoutsFinancialGroup.com.

Mary Rae Fouts

3 comments:

  1. I wrote this post several days ago, and scheduled it to post today. Interestingly, also today a front page article about Obamacare/Covered California appeared in the San Francisco Chronicle.

    Oh, and the irony! Covered California's Executive Director Peter Lee - who currently makes $436,800 a year PLUS bonuses PLUS benefits PLUS a pension isn't even insured by an Obamacare/Covered California health insurance policy. He has health insurance through California's state employee health insurance plan!

    Yet other example of health insurance that's supposedly good enough for us common folk, yet it's not good enough for public employees and our elected politicians.

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  2. Why are prices so different through California shouldnt prices be the same in the state?

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    1. Good point, my husband mentioned the exact same thing early this morning. The Obamacare systems is set up like this in every state, various "pricing regions". Some regions are a single county, others contain multiple counties.

      Makes no sense. Now Obamacare/Covered California has to negotiate individually with each participating insurance company in each price region. This defeats the entire idea of Obamacare, in that the large pool of people will drive prices down and create affordable health insurance. Which clearly hasn't happened.

      Also, why should a person living a mile across the boundary from another Pricing Region have to sometimes pay a multiple times higher premium than someone living a mile away? Makes no sense.

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