Written by Donald A. Promnitz
With the projected increase in Covered California premiums, health care and insurance providers alike are weighing in on what this will mean for companies and customers throughout the Central Valley.
Covered California announced earlier this month that monthly premiums for plans sold under the Affordable Care Act are expected to rise an average of 12.5 percent in 2018. Approximately 1.5 million people in the state have purchased plans through Covered California, including a sizeable number of Valley buyers.
According to Covered California’s open enrollment plan selection profile, in Fresno County, an estimated 7,260 people have selected Covered California plans during the 2017 enrollment period. In Tulare County, approximately 3,060 people have enrolled and in Kings County, that number is about 800. To the north, Madera County saw approximately 1,110 people enroll.
Those who qualify for subsidies under the Affordable Care Act will be shielded from this cost in varying amounts, but those who are unsubsidized will have to pay the full brunt of the premium rise. In order to qualify for a subsidy, an individual must earn an income of less than $47,080 a year. For a family of four, the amount is $97,000/year.
Peter Lee, executive director for Covered California, has said that the primary reason for the rising premiums is due to the increased cost of providing care. This point was agreed upon by Fresno insurance agent Marshawn Govan of MKG Insurance Agency.
“Hospitals are operating at a higher cost as well,” Govan said. “Because now they have to care for more people that are without insurance and can’t turn down anybody without a preexisting condition, so they’re having to do a lot of ‘charity care,’ and it’s in the millions and millions of dollars where that’s got to be a write-off for them. And they have to look at their operating spaces as well.”
Nonetheless, Lee asserted that despite the cost, Covered California remains stable.
“We still have a very competitive environment in California,” Lee said. “82 percent of Californians, enrolled through Covered California, will have three or more health plans to choose. Many of them four, five, even six plans.”
Covered California is considered perhaps the most stable Affordable Care Act program in the country, with the most insurance companies statewide to choose from.
Anthem Blue Cross, however, will be ending its coverage of individual health and family plans in most of the state, including the Central Valley (with the exception of Tulare County). Of the 411,710 new enrollments in the 2017 period, approximately 54,180 people received their plans (subsidized and unsubsidized) through Blue Cross.
“These insurance companies [are] planning for the future. You have to understand that an insurance company can not go bankrupt—they can not go out of business,” said independent insurance agent Shann Conner of Lumen Insurance Solutions Inc. “We all lose, and they can’t procure enough in monthly premiums to pay for medical care.”
An increased number of unhealthy clients, said Der Manouel Insurance Group Vice President Victor Gunderson, have led to companies like Blue Cross being weighed down.
“They can’t make any money—they’re losing money. Most businesses are excited, or strive, to make a 15 to 20 percent profit margin. Health insurance companies are doing well if they’re at 3 to 4 percent,” Gunderson said. “And if you can’t get the pricing models correct and you’re upside-down and the mandates that you have everybody—no matter what their heath [is], and they can’t get enough healthy people in it, they can’t make any money at it.”
“We have so many regulations that require them to spend 80 cents of every premium dollar collected on medical care,” Conner said. “That means only 20 cents on every dollar can be spent on administrative costs—paying for salaries of customer service reps, paying for commissions of the agents who work on their behalf to sign people up and take care of the customers, so there’s no one out there making a ton of money.”
Customers with Blue Cross in Fresno have the options of Saint Agnes Medical Center, Clovis Community Medical Center and Community Regional Medical Center, along with a variety of doctors. A pullout will mean fewer options for these clients.
With Blue Cross pulling out, the company’s clients will have to choose between Blue Shield, Kaiser Permanente and Health Net, with Conner predicting that Blue Shield will get the vast majority of the customers. As Saint Agnes Medical Center is the only hospital covered on Blue Shield, this will lead to a sharp increase in time in the waiting room.
Blue Cross will continue to cover employer group plans, Medicare, Medi-Cal and Veterans Affairs plans. The effect of the pullout, Conner said, will have the greatest impact on small business owners, part-time workers who don’t qualify for employer coverage, and full-time workers without group benefits.
Conner also predicted that while Blue Cross has withdrawn, they will return when there is a healthier pool of customers, saying that such patterns are common with insurance companies.
“So right now, Anthem has pulled out of a lot of the counties—that’s telling me that they’re losing business in those counties,” she said. “So either the contracts are too high with the medical providers or the hospitals in the areas for them to continue to operate in the area, so they pull out for a while until whatever they have left on the books becomes a healthy ratio, and then you’ll see them come back on the marketplace.”
With the uncertainty of the market in California, however, insurers and healthcare providers alike are encouraging consumers to know their options at all times.
“I think if that increase does go through, I would advise any and all recipients to look at their plans and see what subsidies they qualify for,” said Madera Community Hospital CEO Evan Rayner. “It’s important to know their options and what opportunities there are for them.”