“Rising premiums” has been the rallying cry for Republicans looking to repeal the Affordable Care Act (ACA). Lawmakers pointed to 2018 premium hikes as a big reason to repeal and replace current health law. Some insurance companies are requesting especially high rates for 2018 ACA plans, as high as 30 percent or more in some states.
In California, statewide premiums will rise 12.5 percent, and some northern counties will see a 33 percent increase. But most California residents could avoid the soaring premiums rates, as they’ve done in the past, by shopping smart. That’s easier to do than in a lot of other states, because California is helping make their health care shopping simple.
“Consumers are price-sensitive,” senior fellow with NORC at the University of Chicago Jon Gabel told ThinkProgress. “Consumers search for lower-cost plans, and tend to move from high-cost to low-cost plans.”
Gabel is the author of a recent study by The Commonwealth Fund that found California residents on average pay less for insurance than advertised rates suggest. He and other researchers tracked premiums for ACA plans offered versus plans purchased. Using enrollment data between 2014-2016, the study found customers respond to price increases by switching to cheaper plans.
“For example, just like ordinary grocery shopping, customers will likely purchase green apples when the price for red apples goes up,” Gabel said. It’s economics 101, he inferred.
In 2014, Californians paid 11.6 percent less than the advertised premiums and by 2016, they paid 15.2 percent less. Consumers were able to mitigate the full impact of reported premium hikes, and it’s likely they’ll do this again in 2018, Gabel said. The state’s ACA exchange, dubbed Covered California, cited the study when it announced preliminary rates last week, signalling to consumers that they could purchase cheaper plans if they choose wisely.
“It’s never great when rates increase,” Anthony Wright, executive director of the California health consumer advocacy group Health Access, told ThinkProgress. “But the ACA provides a framework to deal with those rate increases.”
The ACA subsidizes premiums and out-of-pocket costs so costumers don’t feel the brunt of rising insurance costs. Eighty-six percent of Cover California enrollees receive tax credits to help pay for premiums. In other words, the federal government picks up the bulk of the tab when insurers raise prices.
“For those who do not qualify for subsidies, they have the ability to shop and switch for a better deal,” said Wright. The California exchange echoed this point, citing that almost 55 percent of consumers will either be able to pay less or see a rate go up by no more than 5 percent if consumers switch plans.
Covered California does a better job at simplifying the shopping experience than most states. California is among three states that helps customers shop smart by only offering standardized options for plans offered in each metal tier. Standardization plans have fixed out-of-pocket limits and benefits. This allows costumers to make apples-to-apples comparisons when they are shopping around for a plan in each metal tier. The Centers for Medicare and Medicaid Services (CMS) advises insurers to create standardized options for sale but does not require them.
Gabel attributes Covered California’s easy-to-understand exchange as a driving force behind consumers purchasing lower-premium plans. Given the study limitations, it’s difficult to determine if Californians shops more than other states because of how its exchange is set up. An Avalere study suggests that only about one third of enrollees who purchased health care on the federal marketplace in 2016 kept their same plan from 2015. (Twenty-eight states use the federally-facilitated marketplace.)
Wright did acknowledge that changing plans could mean changing a provider. “This might not be an option for someone committed to provider or network,” he said, “specifically someone undergoing specific treatment.”
Additionally while consumers look to sidestep high premium costs, they passed on other subsidies. Another recent study led by Harvard Medical School showed that nearly one-third of California enrollees signed up for bronze plans, which have cheaper premiums, instead of silver plans, which is the only metal plan that offers cost-sharing subsidies. Wright said when Covered California became privy to this, Health Access went out of their way to inform consumers of their eligibility.
With the onus on the consumers, there are bound to be missteps along the way despite best efforts to streamline the process — but for now California could offer a lesson to other states.