Dan Diamond, California Healthline

(Getty Images)

No Aetna. No United.

No Cedars-Sinai.

Covered California’s list of participating health care providers and insurers is out, and it’s possibly more notable for who isn’t partaking in the state’s new health insurance exchange rather than for who is.

The reasons for the big-name absences are manifold, ranging from payer strategy to high hospital prices to even accusations of gamesmanship. And they help explain the caution that — despite news that premiums will be far lower than expected – the exchange transition may be bumpier than some early, optimistic reports suggest.

Why Top Payers are Absent

According to representatives for Aetna, United and Cigna, the firms are sitting out California’s exchange because they’re taking a wait-and-see approach.

“We are simply taking the time to carefully evaluate and better understand how the exchanges will work to ensure we are best prepared to participate meaningfully in their development,” a United spokesperson told Chad Terhune at the Los Angeles Times.

Top health plans have made similar moves in other states. For example, Regence BlueCross BlueShield — Oregon’s largest health plan, based on enrollment numbers — recently pulled out of that state’s insurance exchange. Anonymous observers groused to the Lund Report that by sitting out of Cover Oregon, Regence “is setting themselves up to compete by not participating in the exchange and not gamble on a risky population that they can’t predict.”

(According to Regence, the company instead wanted to launch a separate plan called BridgeSpan, which will be focused on serving the needs of individual consumers.)

United and Cigna are sitting out of Georgia’s health insurance exchange, too.

Bob Laszewski, president of Health Policy and Strategy Associates, thinks the payers’ absences are predictable.

“It’s absolutely no surprise,” that the national plans are sitting out of exchanges like Covered California, he told California Healthline.

Unlike the 2006 launch of Medicare Part D, “which was like the Oklahoma land rush,” Laszewski said, where national players felt they had “to get in and get share, because all these Medicare patients would be signing up on Day 1 — growth in the exchanges [is expected] to be very slow. There’s not a big upside to being in on Day 1.”

And that’s especially true given the probable downsides. The population that will likely seek initial coverage through the exchanges may be less healthy; if customers encounter administrative problems related to launch, insurers could face brushback; and national plans could strain their IT resources if they are trying to participate in multiple state exchanges. ”The big guys are limiting their involvement to the places where they feel they need to be for market share,” Laszewski concluded.

Why Some Top Providers Are MIA

At the same time, some premier provider networks also are absent from the exchange — although that decision may have been out of their hands.

Cedars-Sinai wasn’t included in any exchange plans, and UCLA Medical Center’s network also was mostly excluded, Terhune also reports.

The rationale for leaving the providers off many payers’ lists: They cost too much. Cedars-Sinai is among the most expensive hospitals in the nation, based on the list price of its procedures, and UCLA Medical Center’s charges also rank above average.

“If we want to keep costs down, something has to give,” said Betsy Imholz, special projects director for Consumers Union, told UPI.

Narrowing a provider network in hopes of controlling spending, and specifically excluding Cedars-Sinai and UCLA, isn’t a new trend; Anthem Blue Cross moved to cut both high-cost providers from a plan offered to Los Angeles city workers last year. And since 2008, thousands of California businesses and agencies have opted for narrow-network plans of their own in hopes of lowering health costs.

But will narrow networks work? And will consumers care?

Evidence from Massachusetts — which instituted its own health insurance mandate and exchange half-a-dozen years ago — suggests that the model can succeed “when plans contract with providers that are pursuing a low-cost strategy, rather than with those that are simply granting temporary discounts to pick up volume,” David E. Williams, president of the Health Business Group, told California Healthline.

For example, Williams cites Fallon Community Health Plan in Massachusetts, which “partners with Steward Health Care System to offer a narrow network product for about 20% less than comparable plans with broader networks.” The plan has been popular with certain individuals and employers who are purchasing coverage through the state’s Health Connector and can see side-by-side pricing, Williams adds.

Takeaways and Questions

Meanwhile, California officials have tried to stress that consumers won’t suffer for the absences of various payers and providers; for example, the 13 health insurers selected for the exchange — out of 33 applicants — will still offer access to roughly 80% of California health providers, the officials told Terhune.

And theoretically, the Golden State’s “active-purchaser” approach means that the plans in the exchange are “the cream of the crop,” Sarah Kliff writes at the Washington Post‘s “Wonkblog.” That helped to tamp down premiums to lower-than-expected levels.

But Laszewski thinks that the attempt to explain Covered California’s seemingly low-cost premiums relies on a comparison that isn’t apples-to-apples, but “a case of apples to oranges to grapefruit,” he writes at his blog, Health Care Policy and Marketplace Review.

For example, the Los Angeles Times notes that the average premium for individual plans sold through eHealthInsurance in California last year was $177 per month, whereas Covered California’s average premium for the three lowest Silver plans statewide will be about 81 percent higher at $321 per month, although with more comprehensive benefits.

“For those insured right now, and the estimated 40% that won’t be eligible for a federal premium subsidy, that sure looks like rate shock to me,” Laszewski writes. “For the 60% who will get a subsidy, this means the taxpayers are going to have to fork out lots more money.”

And for all the focus on Covered California, only a minority of state residents — about five million Californians, or roughly one-sixth of the Golden State’s population — are expected to gain coverage through the exchange.

So what about the other 13 million who get their health coverage through their employers and group plans? The key question, according to Chas Roades, the Advisory Board Company’s chief research officer, is the “impact of exchange plans on [employer-sponsored insurance]. My guess is we’ll see lower actuarial values and narrower networks quickly adopted.” (The Advisory Board Company publishes California Healthline.)

Joe Raedle/Getty Images)

The state’s health insurance exchange, Covered California, announced Thursday morning the plans and premiums that will be available to millions of Californians.

And what everyone wants to know is: how much will it cost. Experts had warned of “rate shock,” that premiums might skyrocket for all kinds of reasons. That has not happened.

Covered California says that individuals will pay an average premium of $321 per month for a “silver” plan. (More on silver plans below.) Many people will be eligible for subsidies to reduce that cost further.

Across the state, people who had been working toward this day seemed to heave a collective sigh of relief.

“This is a home run for consumers in every region of California,” said Peter Lee, executive director of Covered California, in a release to reporters. “Californians should be proud of how not only health plans in this state, but doctors, medical groups and hospitals have stepped up — creating a market that will allow millions of consumers to enroll in affordably priced products.”

The plans on the exchange are required to offer a standard set of comprehensive benefits. It’s hard to compare premiums next year to what’s in place this year, since there is no standard set of benefits at present. Covered California chose as the best comparison the average premium for a small business plan. The rates in Covered California range from 2 percent above to 29 percent below that benchmark.

“It’s nice to have a good news day in California,” said Daniel Zingale, senior vice president of The California Endowment. “It turns out there’s power in numbers when it comes to … health plans.”

13 Plans Selected for the Insurance Exchange

The selected plans and premiums are still subject to review by state regulators. Covered California has picked 13 plans, including Anthem Blue Cross, Blue Shield of California, Health Net and Kaiser as well as many regional plans and some country-sponsored health plans. Those include Alameda Alliance for Health, Chinese Community Health Plan, Contra Costa Health Services, L.A. Care Health Plan, Molina Helathcare, Sharp Health Paln, Valley Health Plan, Ventura County Health Care Plan and Western Health Advantage.  You can look up your own region and see what plans and premiums you can choose from.

The “silver” plan mentioned above is in the middle. It has the same standard set of benefits as the other plans, and has a $2,000 annual deductible. Still, preventive care and some other services are outside the deductible — people would pay only a co-pay when they see the doctor.

When setting an individual’s premium, insurance plans in the exchange may look at only three factors: age, where you live and family size. Insurance companies may no longer use your health condition or your health history to set premiums. People may no longer be turned down for pre-existing conditions.

Subsidies are available for people making from 138 to 400 percent of the federal poverty level – or about $15,500 to $45,000 for an individual or about $31,000 to $92,000 for a family of four.

Breakdown on Premiums, Before and After Subsidy

Covered California provided tables of average rates for a 21-year-old and a 40-year-old single person. For the 21-year-old buying the most affordable silver plan, the premium is $216 per month. But depending on income, the 21-year-old may get a subsidy, making the price that person would pay range from $44 per month to $216 per month.

The premium for a 40-year-old buying the most affordable silver plan will be $276. But depending on the subsidy, that 40-year-old will pay from $40 to the full $276.

Starting this fall, people will be able to go online and look up plans and rates across the board for themselves or their families.

“Everything will be quite standardized and literally charted out,” said Betsy Imholz, special projects director for Consumers Union. “So you can look across lines and compare plans.”

On average, people in the larger metropolitan areas in California will be able to choose from among five different plans. Covered California says that even in rural areas where options have typically been sparse, people will have two or three health plans to choose from.

“We were particularly concerned about Californians in rural parts of the state,” Zingale said. “So it’s a relief to see that they will have doctors, hospitals and health benefits available in those areas.”

But not everyone was delighted. Jay Nelson is a 33-year-old attorney who lives with his wife and three children in Oakland. Nelson does not have employer-based insurance, although his firm is looking into options. He has been unable to afford insurance for his family. Nelson said he was disappointed the premiums were not cheaper.

“We’re exactly in that income level that is essentially uninsurable,” he said. “We make too much money to qualify for any help, but we don’t make enough money to pay for this … comfortably.”

Bacchi acknowledged that while the Covered California premiums are generally “positive news,” that’s not the case for everyone. “The reality is that there are some people who will pay more than they currently pay. That’s because the Affordable Care Act requires increased benefits and it also imposes less cost sharing on the enrollee through deductibles and co-pays.”

Plans and premiums for Covered California’s small business exchange are expected to be announced in June, and a major education and outreach campaign will launch this summer.

Learn More:

Listen to a discussion of the new plans and premiums on KQED’s Forum:

Vermont may not see rate shock, but its insurance market is strikingly different from that in California. (herzog/Flickr)

After years of anticipation, Vermont became the first state Monday to publish proposed 2014 individual health insurance rates under the federal health law. Despite Republican and insurers’ predictions, there was no “rate shock” in the new premiums, according to the Vermont governor’s office and insurance representatives.

That state may not be the best barometer of the impact of the heath overhaul on premiums, however, because it already prohibits insurers from using health status to determine an individual’s premiums. It is one of only seven states in the country which have so-called community rating regulations.

Vermont also requires prices to be the same regardless of person’s age. Two of the health law’s biggest changes include prohibiting insurers from using health status to determine premiums and prohibiting insurers from charging older people more than three times the rates of younger people.

California is expected to implement both these provisions.

Blue Cross and Blue Shield of Vermont and MVP Health Care submitted plans to state regulators with monthly premiums that range from an average of $265 for catastrophic coverage for young adults to $609 for platinum coverage, which has the lowest cost-sharing among four categories of plans.

“We think this is a positive development for folks who were worried about what rates would look like in 2014,” said Kevin Goddard, spokesman for Blue Cross and Blue Shield of Vermont, which is the state’s dominant commercial carrier, controlling about two-thirds of the market. He confirmed rates are similar to what the company now offers.

“These rates are comparable to what’s on the market today and that’s good news,” said Robin Lunge, director of health reform in the Vermont governor’s office. She said it’s difficult to do an apples-to-apples comparison because of the many benefit changes required under President Barack Obama’s health overhaul.  These changes, which take effect Jan. 1, include an end to annual lifetime limits in policies and a prohibition on denying coverage to people with medical problems.

Insurance industry predictions of rate shock are more likely in the majority of states that currently allow insurers to set premiums based on an individual’s health status, Goddard said.

Starting Oct. 1, individual and small group coverage in the state will be sold on a new online health insurance marketplace as required under the Affordable Care Act. Health insurers nationwide have just begun submitting their pricing and benefit information to states and the federal government for policies which will be sold in the marketplaces, or exchanges. Most people who buy on the new marketplaces are expected to be eligible for government subsidies.

Vermont insurance regulators still must approve the insurers’ proposed rates. In January 2013, the state approved about a 10 percent rate increase on the individual market after carriers asked for about a 13 percent increase, Lunge said.

All the health plans in the new marketplaces are standardized into platinum, gold, silver and bronze categories depending on their actuarial value so consumers have an easier time comparing.

The Vermont 2014 annual premiums for bronze plans range from $4,200 to $4,440, compared to a Congressional Budget Office estimate of $4,500 for an individual, according to Carolyn Pearson of consulting firm Avalere Health.

Mary Eversole, executive director of the Vermont Insurance Agents Association, said she was surprised the rate increases were not higher. At first blush, she said the 2014 proposed rates appear to be about 10 percent higher than this year. Premiums for the gold and platinum  policies appear lower than similar products, but silver and bronze policies are higher.

Officials from MVP were not available for immediate comment.

Learn more:

The Confused Debate Over Obamacare and Insurance Premiums (Ezra Klein, Washington Post)

(Caroline_1: Flickr)

A major new analysis shows that hundreds of thousands of Californians will see their monthly insurance premiums fall an average 47 percent under President Obama’s health care overhaul, in large part due to tax credits and subsidies. It is the first detailed look at how health insurance premiums could change under President Obama’s Affordable Care Act, which goes into effect on Jan. 1, 2014.

Covered California, the agency charged with creating the state’s new health insurance marketplace, commissioned the analysis. The report looked at the individual market only and did not examine the small or large group market.

Under the ACA people with incomes up to four times the federal poverty level (about $94,000 for a family of four; $46,000 for an individual) will be eligible for subsidies from the federal government. That’s about 570,000 people, Covered California said.

Major findings from the study include:

• Individuals with incomes less than four times the poverty level are “likely to pay” 47 to 84 percent less for their monthly premium compared to this year
• Premiums would have increased 9 percent in 2014 because of health care inflation, even without the ACA

The analysis was conducted by Milliman, a large actuarial firm.

According to the non-partisan Kaiser Family Foundation, just over 2 million Californians buy insurance on the individual market. About 85 percent of Californians get insurance from their employer. Larry Levitt, senior vice president of the foundation, called the report a “complete and well done analysis.”

“Probably the most important thing this analysis did,” Levitt said, “was to help people understand that not everyone is going to be faced with higher premiums as a result of the Affordable Care Act.”

Still, some people will see higher premiums, in particular, people with incomes above 400 percent of the poverty level. More than a million of these middle and upper-income earners will likely experience an increase of 20 percent, the report found.

The Milliman analysis comes on the heels of another actuarial review completed this week. That one, from the Society of Actuaries, concluded costs would go up 32 percent under the ACA. But Levitt said that report was flawed, in part because it did not look across the ACA as a whole — or at the two primary ways people pay for health care: through premiums and through direct out-or-pocket costs such as deductibles and co-pays.

The Milliman report looked at both these fees to consumers. Because of anticipated benefits of the ACA, increased premium rates that some will pay could be partially offset by reduced out-of-pocket costs for health care, the study found.

In a release, Covered California Executive Director Peter Lee called the study “an important step in determining strategies to help protect” individuals from cost increases.

In California, people buying insurance on the individual market have experienced dramatic premium rate hikes over the last several years.

“Our top priority is to provide Californians with affordable health insurance options,” Lee said. “We are pleased that most individuals will pay lower rates and receive better coverage.”

The report also found that people in their 20s are likely to experience the biggest increase in monthly premiums (roughly 25 percent higher than the average increase for all ages), but in its release Covered California said many of these younger Californians are likely to be eligible for subsidies.

Levitt credited the study for estimating cost reductions due to competition expected under the Affordable Care Act. Right now on the individual market in California, it is very difficult for consumers to comparison shop. Often they cannot even find out what their premium will be until they fill out a detailed health questionnaire, Levitt said. The goal of the new insurance marketplace is to allow a more straightforward comparison of health insurance plans.

“Insurers will respond to that price competition by changing their cost structure,” Levitt said. The analysis found that this competition should bring costs down an average 6 percent.

The California Association of Health Plans reiterated the group’s overall support for the Affordable Care Act, but acknowledged the new competitive marketplace coming.

“These are completely different products in the individual market than what is sold today,” said Charles Bacchi, vice president of the group told KQED’s Mina Kim. “Health plans are going through the process of changing the way they provide coverage to this portion of the population, all on top of trying to price the products, deal with underlying health care costs and still remain competitive in the marketplace.”

Insurance companies are expected to submit plans to Covered California next month, to determine eligibility for the marketplace. Plans — and premiums — will be announced this summer. But this study is well-timed, Levitt said.

“People are forming impressions now about how this law will work and what it means to them,” he said. “So having accurate information out there about how people may be affected is really important.”

The new health insurance marketplace is scheduled to open to consumers on Oct. 1. Individuals will be able to shop for insurance that will take effect Jan. 1, 2014.

(Image: Kaiser Health News)

Health insurance premiums rose 4 percent for family coverage this year, well below last year’s increase and half the 8 percent average of the previous decade -– largely because people used less health care in an uncertain economy.

Family plan premiums hit $15,745 on average, while premiums for single employees rose to $5,615, according to a survey of employers released Tuesday by the Kaiser Family Foundation and the Health Research & Educational Trust. (KHN is an editorially independent program of the foundation.)

“We’re seeing people make more consumer-oriented decisions, going for less expensive treatments or deferring surgery,” said Julie Stone, senior consultant at Towers Watson, an employer benefit consulting firm that does its own survey. Still, hospitals and other medical providers “are not agreeing” to lower their prices,  she said.

Although the increase is less than half last year’s 9 percent spike, the Kaiser foundation’s survey results will likely be seen through the prism of election-year politics.  Premium increases are a big pocketbook issue for individuals and small businesses — something both sides have used to justify their positions on the 2010 health law. Democrats have said the federal health law is working to slow spending growth, while Republicans contend it will increase costs.

Many analysts say both sides are overplaying the law’s effect since many of its provisions are not yet in effect. Full implementation of the Affordable Care Act is January 1, 2014.

While the law’s opponents blamed it for last year’s 9 percent increase, policy analysts said the premiums rose mainly because insurers incorrectly assumed that use of medical care would rise as the economy recovered.

But Americans did not rush out to use medical services last year, nor has use jumped this year, helping hold down overall medical spending.

Weak Economy Kept Premium Increase Down

The historically moderate level of premium increase was “driven mostly by the weak economy that has caused some people to use less health care,” said Drew Altman, president and CEO of the foundation.

In addition, many employers continued efforts to limit premium growth by raising deductibles, among other benefit changes.  For example, 34 percent of covered workers had an annual deductible of at least $1,000 for employee-only coverage, up from 10 percent in 2006.

Low-wage workers were hit hardest, paying on average $1,000 more each year toward their premiums for family coverage than workers at higher-wage firms. They were also more likely to have high deductibles, according to the survey.

(tedeytan: Flickr)

The federal health law aims to tackle the problem of high health care costs by providing financial rewards to providers who do a better job coordinating patient care. But one shining example of that future has been here in California for decades. It’s Kaiser Permanente which is often touted as the nation’s best hope for bringing health care costs more in line with other developed nations.

Kaiser rose out of a utopian, industrialist dream. During the 1930s and 40s, Henry J. Kaiser wanted to make sure the workers at his Richmond shipyard were steady and strong.

George Halvorson, Kaiser’s CEO, draws a direct link between Henry Kaiser’s approach to building ships and his approach to designing a health system. “When Henry built things he tended to assemble an entire team to build all the parts,” he says. ”So when he started providing health care to his workers, he used that model which was to have a Kaiser hospital, Kaiser clinics.”

The strategy worked because it owned and operated its own hospitals and clinics and directly employed physicians.

But Mark Smith, head of the California Health Care Foundation, says Kaiser Permanente is no longer the bargain it used to be. “They got to where they are, in part, by being the cost leader in the market. And they no longer are.”

Indeed, health care researchers and Kaiser’s biggest customers, say the price gap between Kaiser and other insurance companies has narrowed or closed altogether. One of those big customers is CalPERS, the state agency that manages benefits for current and retired public employees. In recent years, CalPERS has negotiated premiums with Blue Shield that are less expensive than Kaiser, something nearly inconceivable in the past.

Smith says because Kaiser is both the insurer and the health care provider, the company hasn’t faced much competition. ”They’re not really pressed to be that much cheaper,” he says. “They’re kind of ‘shadow pricing,’ is what the economists would say. So if your competitor takes $4 to make a banana and it only takes you $2 to make a banana, you price your banana at $3.95 — and you pocket the rest.”

That’s a charge Halvorson vigorously denies.  ”We’re at least 10 percent better everywhere. Sometimes we’re 15-20 percent less expensive.”

Kaiser sets its rates, says Halvorson, based on how much it spends on patient care. It has nothing to do with what other insurers are charging. And he adds, Kaiser offers richer benefits than other plans. ”Everybody else is stripping their benefits package down. So they’re putting in higher and higher deductibles, and that’s just shifting the cost to the employee.”

Since negotiations between health plans and employers are largely confidential and each insurance plan offers different services, it’s difficult to discern just how Kaiser fares against other companies. In documents filed with state regulators, Kaiser Permanente says the cost of running its entire operation increases by about 5 percent each year.

But some of Kaiser’s biggest customers –- companies that are household names in California –- say their premiums have jumped much higher, in some cases 20 percent.

David Lansky heads the San Francisco-based Pacific Business Group on Health which represents large employers. ”Kaiser seems to have difficulty of explaining why their price is what it is,” Lansky says. “So they can’t explain it well to the benefits manager at a large company who then can’t explain it to his or her boss. Why should we keep Kaiser? Why is this price legitimate? If Kaiser can’t document their internal cost structure and pricing, then there’s a whole chain of mistrust that gets generated because of the lack of transparency and clarity.”

The frustration seems to stem in part from the very trait that makes Kaiser so good at taking care of patients: it doesn’t price out procedures, tests and doctor’s visits on a menu of fees. These so-called fee schedules are often arbitrary. A procedure can cost a thousand dollars at one hospital and 10-thousand dollars elsewhere.

“Fee schedules are a very primitive way to buy care,” Halvorson says, adding that Kaiser’s focus on patient outcomes is what matters. ”We have cut the rate of broken bones for our seniors by about 40 percent. And we do nine things for the seniors to cut the broken bones. Six of the nine things do not show up on the Medicare fee schedule.”

Still, large employers say because Kaiser doesn’t price out its services, it’s difficult to know why premiums rise every year. One large employer, who was not authorized to speak publically because negotiations are confidential, told me Kaiser’s rate increases don’t seem to reflect changes in the use of Kaiser services.

David Lansky says Kaiser is much more efficient than other insurers and providers. For example, patients can avoid unnecessary office visits by talking with doctors over email. But Lansky says employers — who pay the bills — aren’t yet seeing the savings.

“It’s a little bit of what we went through with the banks when they went to ATMs and stopped having tellers in the retail points of service. You’d think that would have lowered costs. Instead, we started seeing fees at the ATMs,” Lansky says. ”A lot of us in health policy land have scratched our heads a bit and said, ‘Well, why can’t Kaiser be a heck of a lot cheaper?’”

Bob Kocher, now a partner at the venture capital firm Venrock, served as a health care advisor to President Obama. Kocher is a big fan of Kaiser’s highly coordinated system. He says the Kaiser model was in the back of many policy makers minds when they pushed to include in the federal health law financial enticements for hospitals and doctors to essentially form Kaiser look-a-likes.

Still, Kocher says he hopes the Kaiser model would deliver steeper savings. “How do we unleash that sort of pressure on price, to have them not be compelled to raise their prices by nine to 10 percent a year?”

Kocher and other health policy experts suspect the pressure to compete might come when –- and if –- those Kaiser mini-me’s get off the ground.

Listen to the report: