Why Some Are Seeing Premiums Go Up As Affordable Care Act Goes Into Effect

(Getty Images)

(Getty Images)

In late September, Peter Lee, the executive director of Covered California — the state’s health insurance marketplace — was a guest on KQED’s Forum. It was just days until the Oct. 1 opening of the exchange. Lee touted the benefits of the Affordable Care Act, saying that many people would pay less for health insurance, but he cautioned that for some people, “rates may go up a little bit.”

Pretty soon Mark Brown of San Jose called the show to say his premiums were going up — and much more than a little bit. Brown, who buys health insurance for himself and his wife, said his premiums were going up a whopping 90 percent.

When I heard Brown on the air, I hurried to the control room to get his phone number and later got his full details:

  • In 2013, Brown’s plan with Kaiser has a $5,000 deductible and a $6,000 out-of-pocket maximum. It costs him $272 a month.
  • In 2014, Kaiser offered him a plan with a $4,500 deductible and a $6,350 out-of-pocket max. But the premium is $519 a month.

It’s very similar coverage for almost double the cost.

Brown’s story was so astonishing that Glenn Melnick, a health economist at the University of Southern California, simply didn’t believe it when I called him to ask how this big of a rate increase could be happening. “A 90 percent increase just doesn’t make sense to me,” he said.

Melnick encouraged me to double-check the facts, saying that there must be something Brown was missing. But Brown provided his documents from Kaiser, I reviewed them and forwarded them to Melnick, who confirmed that Brown’s analysis — a 90.9 percent increase for similar coverage — checked out.

“You’ve got my attention,” Melnick said.

In fairness to Kaiser, the other plans available on Covered California to Brown were roughly the same cost and since all plans on the marketplace must offer the same benefits, the coverage for any other plan would be equivalent. Brown says he does not qualify for a subsidy, so he and his wife will be paying for the entire premium themselves.

Brown, 56, said he supports the Affordable Care Act and assessed his situation somewhat philosophically. “Everybody should have medical coverage,” he said, “and there are going to be winners and losers whenever they deploy something like this, and I’m in the loser category at this point.”

The big question right now is how many people are in that category with him. At the end of the week after Covered California opened, I wrote about another person whose premiums were going up, and that post is now filled with comments from other frustrated people who are experiencing premium increases.

In that post, Larry Levitt of the Kaiser Family Foundation attributed the increases to the cost of adding people with pre-existing conditions to the pool. But how and why that happens is an interesting look at California’s individual market now and the one expected to take shape as we move into 2014.

Before we get there, a bit of background. Of California’s 38 million people:

  • Roughly 80 percent have either employer-based insurance or are covered by a public program such as Medicare or Medi-Cal, the state’s version of Medicaid. They are largely not affected by the rollout of the ACA.
  • Another 14 percent of Californians lack health insurance. That’s more than 5.5 million people.
  • And 6 percent of Californians — or about 2 million people — buy insurance for themselves, on the individual market.

Bear with me here for a few more numbers:

Of those 2 million people who currently buy their own insurance, somewhere between 37 percent and 51 percent (depending on whose numbers you choose) will pay less for their coverage in 2014 because of the subsidies available under the Affordable Care Act. (Subsidies are available to people with incomes up to 400 percent of poverty — capping out at $46,000 for an individual or $94,200 for a family of four.)

So that leaves roughly 1 million people whose premiums are potentially subject to change under Obamacare. The questions are: in what direction and by how much? It’ll be awhile before we have global numbers. So for now we’re left with anecdotes.

Premiums up for some, down for others

Kevin Knauss, an insurance broker in the Sacramento area, analyzed a small sample of his clientele and found that about a quarter of them were seeing their premiums go down. And, no, these people were not eligible for the ACA subsidies, he said. So, for at least some people the ACA is saving them money.

But what about Mark Brown and others who are seeing significant increases? What are the drivers?

An extensive report back in March from Milliman, a global actuarial firm, has some answers. It got widespread media attention at the time. Remember that this report came out well before Covered California announced its 2014 plans and premiums, at a time when there was concern of significant rate shock, that premiums would skyrocket for everyone due to Obamacare. The report found that many people would pay significantly less, largely due to subsidies. But the report included estimates that premiums would go up, on average, 20 percent for people who earn too much to qualify for subsidies. In other words, some people will pay less, some people will pay the same and some people — like Brown — will pay much more.

[Related: San Francisco Obama Supporters, Cancelled by Obamacare]

Part of that increase — about 9 percent — would have happened anyway, the report said. That’s because health care costs keep rising. But much of the rest of the increase, the report shows, is because those 2 million people in the individual insurance pool have tended to be healthier (and therefore less expensive to insure) than the average population. The makeup of those in the individual pool is likely to change under the Affordable Care Act, as the uninsured gain insurance. Covered California hopes to enroll 1 million people by the end of 2014, increasing the individual insurance pool by 50 percent.

Individual insurance pool in California a healthier group

Why is the current pool healthier? Because in California, like many other states, insurers offered products based on your health history, or medical underwriting, in the industry parlance. People in good health generally pay less than those with worse health. Most people have heard the stories of individuals being denied coverage — at any cost — because of pre-existing health conditions. So that means people who needed health care the most weren’t in the individual insurance pool. Now they will be.

“I know that people are going to feel like they are getting the short end of the stick because they are having to pay more for their health insurance. Unfortunately there are winners and losers under the ACA,” said Gerald Kominski at the UCLA Center for Health Policy Research, echoing Mark Brown. “When we weigh everything, the reforms benefit many more people than they harm, but these are the most disadvantaged in the marketplace.”

One of those people disadvantaged in the pre-ACA marketplace is Paul Cello of San Francisco. He has an essentially benign heart condition, but it left him uninsurable 10 years ago, after he left his job and his COBRA ran out. He did get into the state’s high-risk pool where his premiums are a little over $500 a month, he said, but benefits are capped at $75,000 annually. While Cello’s health costs have never approached $75,000, he was worried they could. “It always felt like if anything big happened, I was going to be in trouble,” he told me.

On the second day the Covered California was open, he enrolled in a Blue Shield plan with no lifetime maximum (as required by the ACA) and with more comprehensive benefits than his current plan. His premium has gone down slightly to $483 — plus Cello qualified for a subsidy, bringing his costs down further.

I could list more anecdotes, but it will be awhile before Milliman or other analysts can issue a new report. In the meantime, Kominski views the situation societally.

“It’s unfortunate that some people are going to have to pay more. Some people who currently have lower cost insurance will have to,” Kominski said. “On balance a lot more people will be better off, but there’s a small portion who would have been better off just keeping things as they are.”

Learn more: 

For you wonks out there, the California Health Care Foundation has a great explainer on actuarial value, which represents the share of health care expenses a plan covers for a typical group of enrollees. Most plans now have an actuarial value of 55 percent. Bronze level plans under the Affordable Care Act are at 60 percent. This is another driver of premium increase.

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  • putupjob

    this is all about supporting leeches.
    affordable means if you’re an obama leech, you don’t pay.
    that makes it “affordable”.
    this has all been a massive vote buying scheme that directly takes from one group and gives it to another.
    welfare, on steroids.

  • Irvine CA

    Obama lied. You bought the lie. And now Mark Brown of San Jose and millions of others are paying for the lie.

    • Alphabeta Beta

      Exactly and sprinkled through this article, is it’s “unfortunate” for those who will pay more, BUT……Maybe that 200 to 300 more a month is their food bill? Part of their house payment? Rent? Recreation? It’s their money. It’s their Health. Clearly helping the small number who had problems isn’t the goal of this takeover and redistribution. Otherwise, the great Federal Govt. would have directed assets and a solution for a test program, small program for those that needed it. Not complete takeover and the elimination of RIGHTS for the 90% whom had a plan. The rationale used is Karl Marx all the way, on Steroids. For those like the University Public Policy employee to the 26 year-old trying to save on an entry level job, why are your Rights trumped by someone else?

  • gthog61

    Govt radio supports govt boondoggles?
    What a shock!
    just like North Korea!

    • DAC21

      Off to the re-education camp for you!

  • Syntyr

    Um… Yeah name something that the government gets involved with that ends up costing LESS???

    • Syntyr’s Nemesis

      Roads, sidewalks, parks, memorials and green spaces, public transport, postal services, the Internet, peace & public safety (yes, you don’t have to pay the police or fire dept. every time you call, do you?), currency exchanges for international / cross-border / state-to-state transactions (yes, if the gov’t didn’t have a hand in distributing a national currency, you’d be paying out the ass for anything not in your currency zone), public education (not only K-12, but state/gov’t supported universities overwhelmingly cost less than private education anywhere)… just to name a few.

      • Alphabeta Beta

        Nope.

      • Fish

        Bravo — and I also enjoy all those snarky comments I hear about how anyone who thinks the government can run anything efficiently should just reflect on their last visit to the DMV (followed, typically, by a snarky chuckle). Whenever I hear that I always wonder who it is who’s actually going to the DMV since they’ve had well functioning online transactions for years. If you want to see the well oiled efficiency of the private sector perhaps you should give a call to the reservation line at United Airlines or maybe customer service at Microsoft.

      • dizzy

        All the things you mention are full of waste you have never seen a road crew with 1 guy working and 12 standing around. And some towns do have private fire companies and they save millions it cost $100 a year or you can pay as needed, so you are wrong and private schools are far superior and cost less per student. govt.=waste always.

  • Irvine CA

    And higher premiums, deductibles, and co-pay costs surprised Glenn Melnick, a “health economist at USC”. The ACA relies on millions of young healthy people paying into a system that redistributes health services to old, poor, and sick people while the government sets caps on premiums and mandates on service levels. And for those among us who try to avoid this ponzie scheme the IRS is put in charge of enforcement!

    USC needs to investigate Mr. Melnick’s credentials. I wouldn’t trust him to balance a checkbook.

  • Irvine CA

    Most of those are public services provided by local governments using property and sales taxes. All worthy. On the federal level, HHS paid $400 million for healthcare.gov which is a turd. They “gave” California $673 million to hire navigators to go out and sell the turd. HHS spent $488 million so the IRS could prepare for the implementation of the turd.

    Wake up and smell the turd.

  • guest

    Anthem Blue Cross health premiums for my family of 3 were $632/month for a high-deductible plan with an HSA. In late September Anthem sent a letter saying we didn’t have to do anything and could keep a similar policy in place for $1497/month! I nearly fainted. When I finally managed to get a quote on CoveredCA it was $1313 for the cheapest plan. Nowhere can I find information on what happens to Health Savings Accounts, which was good for those of us who are self-employed since we can use deposits into the HSA as a tax deduction. We do not qualify for any subsidy, but we certainly cannot afford to pay an additional $681/month for barebones insurance. More than a doubling! Why on earth doesn’t California have caps for increases in insurance costs?

    • mainlybacon

      The reason is that the Republican governor, Arnold S., vetoed single payer twice in 2006 and 2008 (as well as tripling the deficit in CA).

  • denny

    let’s go back to the 3d world basics–no Social Security, Medicare, Medicaid, unemployement insurance, disability insurance, nothing.

    • dizzy

      so you think america was third world before WW2.lol

      • John

        Great Depression? not 3rd world but if not for FDR…..pretty close.

  • Lee

    Is anything like this happening in other states?

  • Irvine CA

    Fish: there is no federal mandate requiring you to purchase from United Airlines or Microsoft. You have the liberty to buy from their competitors, or not purchase anything at all. And oh, if you don’t fly or use a PC the IRS will not enforce a penalty against you.

    Second, the DMV is a state operation that works quite well here in California with no federal subsidy or mandate. What you are missing is that most of what state and local government does, they do well. Most of what the federal government does in social areas turn into a turd.

  • Paul McM

    Mark Brown’s situation is NOT an anomaly. I am also late 50s, with Kaiser California. I currently pay $332/mo with a $3000 deductible and the cheapest 2014 ACA-compliant plan offered by Kaiser was $525, 58% higher (acc. to Kaiser notice), but that was with a $5000 deductible and severely reduced coverage. California Exchange plans started at $660/mo, with a $6000+ deductible! A plan with similar coverage and similar deductible (to what I’m paying) now, is $880, a 170% increase. Other middle class people in their 50s are facing similar huge price hikes in California. The media needs to report this.

    • Erin

      If you don’t like paying more then you are a racist. If you disagree with me you are a sexist too.

      • Carlos

        LOL. I almost couldn’t tell you apart from a liberal. I was initially shocked but thought it was legit at first. Well done!

  • Ryan Tippens

    LOL…I said at the very beginning I wanted to see the chaos this thing caused,been saying it for YEARS and here it is.I am NOT disappointed at all,this has been a hoot,its TOO much fun to watch those that voted for the O wake up..HAHAHA….you lost your freedom to NOT buy something and something is costing you more.SERVES YOUR RIGHT…LOL..oh man,dems,dont ever change,you are fun fun people… :)

  • Felicia

    I am a post county govt. worker in the Cal PERS retirement medical benefits system. I too received notice that my insurance plan was going up 28% beginning January 1, 2013. I am looking into some other plans thought The Affordable Health Care Act. I am extremely healthy and frustrated that I have to be strapped with additional costs due to the huge profit margins the insurance companies are configuring, thus…on my back. I am resentful of the insurance companies, not the new insurance options for us. Shame of them for manipulating the premiums that continue to hurt the lower middle class.

  • M_Young

    The problem is that the ACA was sold as a win-win-win for everyone. Somehow, creating a pseudo marketplace was going to wring inefficiencies out of the system and stick it to those greedy healthcare execs. Even now, whitehouse.gov says that ‘premiums will not go up’.

    All of this was a lie. It’s great for Paul Cello. Its bad for Mark Brown. It’s bad for me (40% increase and I bear more risk because of more than 20% higher out of pocket. My deductible is 10% lower, but I’d have preferred the lower max out of pocket).

    As for the subsidies — they have to come from somewhere, right? Higher taxes? Lower government revenue due to tax credits?

  • Small Business Owner

    Obamacare is socialized charitable giving! My insurance rates are going up 89% for a lesser plan (that only covers 40% of costs after the deductible is met vs. 100% under my current policy). What can we do about this?

  • mainlybacon

    A journalist would have contacted Kaiser directly for a comment, instead of cutting and pasting something from another blog. Kaiser has a standard schedule, which they publish. You could look that up, and publish it here. But you didn’t do that for some reason.

  • anon

    same here – higher premiums, higher out-of-pocket – not happy – it was supposed to go down – wtf

  • Leslie

    People over 30 who would have to pay more than 8% of their income for the lowest cost Bronze plan can buy the catastrophic plan! Based on my reading of the comments in this and many other web sites unfortunately this information doesn’t seem to be really getting out there. Here is the federal government link that describes this option and the Covered CA link that mentions it.

    Note: If you get an
    exemption because coverage is unaffordable based on your expected income, you
    may also qualify to buy catastrophic coverage through
    the Marketplace. This may be more affordable than your other options.

    https://www.healthcare.gov/can-i-buy-a-catastrophic-plan/

    It’s listed here under What is
    Affordable?

    If the lowest cost
    bronze is greater than 8% of a person’s income, the consumer is eligible for an
    exception certificate from the individual mandate or may purchase minimum
    coverage plan.

    https://www.coveredca.com/shopandcompare/#affordable

  • gbneal

    The biggest glitch with this article comes already at the start when
    saying the different prices of the 2 plans…they do not say what the
    person’s income is and what his subsidy toward the new plan would
    be…the maximum for anyone’s premiums is 8% of their income.

    • http://blogs.kqed.org/stateofhealth Lisa Aliferis, KQED

      Thanks for pointing this out. Brown does not qualify for a subsidy. I have added this information to the post.

      • mainlybacon

        Why don’t you publish the actual data? What is the agenda for encouraging unfair comparisons?

  • SeaShel

    Sorry, California, this did NOT go on behind you backs, (you voted for it!) but you fell for the progressive, liberal rhetoric hook, line and sinker! and now we may ALL have to swallow it! What a disaster! This is what we get from a community organizer, whom we know NOTHING else about; not his character, his past, his education, his idology, except that he is an un-vetted (except for Pelosi) democratic candidate for the Presidency of the USA! You didn’t speak out during the “Fast and Furious,” the bailout, the cash for clunkers, Sylendra, Lybia, Benghazi, ad infinitum, now it has hit your wallets (your most prized possession!) and it “HURTS!” Who cares if you fall off into the Pacific?

  • mainlybacon

    It used to be that if a newspaper, radio or TV station broadcast an enormous lie, that you could write in and get it retracted. No longer. This article is a very clever big lie, connecting the gouging of some insurance companies to the ACA.
    Fact: Insurance companies have been raising rates and gouging people for decades. The ACA is a good first step in stopping some of this longtime, widespread practice that has resulted in the highest rates in the world for mediocre care.
    Fact: the ACA does not make them raise their rates, the Insurance Companies could still make tons of money. They just wanted to gouge their customers.
    Fact: the ACA, or Obamacare, does not move over the cost to others because the companies are still well over the profit line. They could lower rates and still make money *but* they choose to *gouge* the customers.
    I do not expect a retraction, after all, in America you can buy anything.