By Anna Wilde Mathews
Average premiums in California's new online health-insurance
marketplace for consumers will not be as high as predicted by
actuaries, though they will vary widely, according to the agency
setting up the exchange.
Initial information about the new exchange was released Thursday
by Covered California, the exchange agency created by the state
government. "For plan after plan, we're getting the best-case
scenarios" on rates, with some "far lower" than had been projected
in an actuarial report commissioned by the agency, said Peter V.
Lee, executive director of Covered California. He said rates would
go up for some consumers, and down for others.
Blue Shield of California said its average premium for
preferred-provider-organization exchange plans in 2014 would be
around 13% higher than its current average for PPO plans, with
about 8 percentage points of the increase due to rising health-care
costs and the remainder tied to the effects of the federal law,
including mandates for relatively rich benefits and various taxes
and fees.
Actuarial consulting firm Milliman had projected that premiums
could go up 30% on average next year for people buying individual
plans whose income is too high to qualify for subsidies, with that
impact including both rising health spending and costs associated
with the federal law. The firm had also said that for those
receiving subsidies, there could be large decreases in what they
would owe toward premiums.
California's individual marketplace will include an array of
mostly local plans, with no presence for some of the biggest U.S.
insurers. Though the 13 insurers in the exchange include those that
have the biggest current presence in the state's individual
market--WellPoint Inc.'s (WLP) Anthem Blue Cross, Blue Shield of
California and Kaiser Permanente--they don't include the nation's
biggest insurer, UnitedHealth Group Inc. (UNH), or Aetna Inc.
(AET), Cigna Corp. (CI) or Humana Inc. (HUM).
Instead, the exchange will offer plans from a number of local
operators, many of them nonprofits and some associated with
health-care providers, as well as from carriers that have been
focused largely on Medicaid plans, such as Molina Healthcare Inc.
(MOH).
Major national health insurers had previously signaled that they
plan to participate in only a limited number of the new
marketplaces created by the health law. The health-care law
mandates the creation of health exchanges, or online insurance
marketplaces, in each state. The exchanges will sell insurance
plans to consumers and small businesses starting this fall. These
plans will take effect in 2014, when other major provisions of the
law are also slated to kick in.
California's exchange is the biggest to be operated by a state,
and it has the highest profile. The exchange agency has said an
estimated 2.3 million state residents will enroll in health plans
through the marketplace by 2017.
The plans in the California exchange will also highlight a
strategy that is expected to be common in the marketplaces around
the country: limited choices of hospitals and doctors, as insurers
try to hold down the costs of the plans. Kaiser Permanente, the big
nonprofit, has always relied on its own associated hospitals and
physicians, and a number of the local plans are built around arrays
of health-care providers concentrated in their regions.
Blue Shield of California said its exchange plans would include
around 36% of the doctors in its full broad PPO network and roughly
three-quarters of the hospitals. Anthem Blue Cross will also offer
a network of health-care providers smaller than its full PPO array,
with its exchange network including around half of all of its
primary-care physicians, the company said.
"Price is of paramount importance" for exchange plans, said Paul
Markovich, chief executive of Blue Shield, in an interview. "We
wanted to make it as accessible as we could." Anthem said in a
statement that it "is committed to working with Covered California
to improve health-care quality, lower costs and reduce health
disparities."
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