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Covered California Holds Down Premium Costs

Posted By on Jun 6, 2016 | 0 comments


According to a recent report in Health Affairs, Covered California has successfully kept rising premium costs to a minimum. This is great news in the wake of serious worries about rising premiums over the years immediately following the creation of the program.

How did they do it? Covered California is one of the few health insurance marketplaces (established after passage of the Affordable Care Act) that directly negotiates premiums with insurance companies.

Richard Sheffler, a professor of health economics and public policy at UC Berkeley, conducted a study measuring the growth of Covered California alongside the state of New York’s exchange from 2014 to 2015. While the New York exchange allows all insurers to join the marketplace, California selected 12 insurers to participate. Meanwhile, 20 insurers were rejected from Covered California. These participation decisions were based largely on rates, encouraging to offer competitive premiums.

Both states saw premium increases in areas with low hospital competition. However, in New York premiums grew faster in areas with less competition among insurance companies. In California, areas with lower insurer competition saw slower premium growth than in areas with more competition. The ability of Covered California to exclude insurers appears to give the program leverage, forcing insurers in concentrated markets to pass on savings to consumers.

The bottom line is that the increased regulation within Covered California allows the program to negotiate better health care prices for all of us. As the cost of health care (particularly insurance premiums) rises across the country, we’re expecting only a slight rise in health insurance premiums during the next year. That’s great news for Californians, whether or not you already participate in the Covered California marketplace.

Remember, Open Enrollment is closed for now, and will reopen in the fall. But if you experience a qualifying life event – such as a change in your household structure, income, or living situation – you might be eligible for a special enrollment period. If you have questions about health care coverage, or need to find out whether you can enroll in a plan now, give us a call. We can explain your options and help you choose a health care plan that fits your lifestyle and budget.

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