News Column

Health Plans Picked for Calif. Insurance Market

May 23, 2013
doctor with clipboard

After weeks of negotiations, California said it has selected 13 health plans for a new state-run insurance marketplace where as many as 5 million people will shop for coverage next year.

Officials at Covered California, the state agency implementing the federal Affordable Care Act, said Thursday that the winning bidders reflected a mix of large commercial insurers and smaller regional plans.

The state also released some sample rates, illustrating how premiums will vary across health plans in this new market.

In a southern Los Angeles County region, for instance, rates for a 40-year-old person purchasing a "Silver" plan ranged from $242 a month for Health Net Inc. to $325 per month for Kaiser Permanente. Blue Shield would charge $287 a month.

Each company must now file detailed rate filings with state regulators, and these proposed premiums are still subject to that review in the coming weeks.

Overall, Covered California said the rates submitted for next year's individual market ranged from 2% higher to 29% below the average premium now for small-employer plans in the state's biggest metro areas.

The agency said the winning health plans whittled their profit margins down to 2% to 3% and negotiated lower reimbursements for hospitals and doctors to help hold down premiums.

"This is a home run for consumers in every region of California," said Peter Lee, executive director of Covered California. These "plans include the largest current health insurers in the individual market, as well as new entrants, regional plans and local Medi-Cal plans that want to be part of making history."

Officials said consumers shopping in the state-run exchange will have five health insurance plans, on average, to choose from in most areas of the state. Rural areas may feature two to three plans. The exchange splits the state into 19 regions.

Each insurer will be selling uniform benefits across four broad categories of coverage called Platinum, Gold, Silver and Bronze. For the first time in the individual market, consumers will be able to make easy price comparisons among companies once rates are finalized by July.

Critics of the federal law have warned that premiums will be too high and that coverage will be out of reach for many residents shopping in the exchange, even with generous federal subsidies.

The state's four largest health insurers -- Kaiser Permanente, Anthem Blue Cross, Blue Shield of California and Health Net Inc. -- were all selected.

The other nine health plans include Alameda Alliance for Health, Chinese Community Health Plan, Contra Costa Health Services, L.A. Care Health Plan, Molina Healthcare, Sharp Health Plan, Valley Health Plan, Ventura County Health Care Plan and Western Health Advantage.

Los Angeles County is split into two regions, north and south. The same six companies represent both areas: Anthem Blue Cross, Blue Shield, Health Net, Kaiser Permanente, L.A. Care and Molina.

More than 32 health plans had initially expressed interest in the marketplace last fall, according to the state.

Three of the nation's largest health insurers, UnitedHealth Group Inc., Aetna Inc. and Cigna Corp., chose not to participate in the exchange next year.

"There has been a lot of uncertainty about how to price in the 2014 marketplace with such unprecedented changes," said Joel Ario, a managing director at Manatt Health Solutions and a former federal health official in charge of setting up exchanges. "I thought we would see some competitive bids in a market as big as California."

Anthony Wright, executive director of Health Access, a consumer advocacy group, said this overhaul of the individual health insurance market is "historic and revolutionary" because the government is negotiating on behalf of millions of consumers and eliminating many of the marketing gimmicks insurers have used for years to confuse policyholders.

"This is a huge step up from an individual market that's broken today," Wright said.

The four general plans of coverage vary primarily based on the level of out-of-pocket expenses that consumers are required to pay. A Platinum plan, the most expensive, would require policyholders to pay about 10% of the cost of care, while the Bronze plan, the least expensive, pegs the patient share at 40%.

California went a step beyond the federal healthcare law by setting uniform co-pays, deductibles and other benefits for each tier.

Many people will qualify for federal assistance toward their premiums based on their income.

In California, individuals earning less than about $16,000 a year will qualify for an expansion of Medi-Cal, the state's Medicaid program for the poor. Above that threshold, individuals making less than $46,000 a year and families earning below $94,000 annually will qualify for federal subsidies.

Starting in January 2014, most Americans will be required to have health insurance or face a penalty.

A number of factors are boosting premiums for next year. There is the federal law's guarantee of coverage for all applicants, including sicker patients and those with preexisting conditions. Also adding to the price tag are new federal rules that require policies to cover a wider array of healthcare services and pay a bigger portion of patients' medical bills than currently required.

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Source: Copyright Los Angeles Times 2013