Covered California Premiums to Jump 17% when Fed Subsidies End

The Governing Board of Covered California will allow insurers to raise rates by an extra 15-17 percent if Trump eliminates illegal federal subsidies to cover out-of-pocket medical costs.

According to a report by Southern California Public Radio, the Obamacare exchange for the Golden State is requiring health care plans in California to continue to provide the same plan design and discounts on out-of-pocket costs as the current Covered California.

U.S. District Judge Rosemary M. Collyer on May 12, 2016 ruled in favor of Congress in United States House of Representatives v. Price ​(formerly House v. Burwell) in a finding that the Obama administration improperly amended the healthcare law in January 2014 to authorize a $7 billion annual cost-sharing subsidy, which was never approved by Congress.

The case was appealed by the Obama administration to the Court of Appeals for the District of Columbia Circuit, but the Trump administration on May 22 asked the U.S. Court of Appeals in DC for a 90-day continuance before the administration announces whether it would end support for the appeal.

If Trump drops the appeal and ends the illegal cost-sharing subsidies, Obamacare Silver Plan healthcare premiums will jump by 19 percent. But the national average for Obamacare Silver Plan patient deductibles would also more than quadruple from $709,to $3,064, according to the amicus brief filed by America’s largest hospital groups.

A recent study by Covered California estimated that premiums for the mid-level Silver Plans would need to jump by 16.6 percent if President Trump end the cost-sharing subsidies. Covered California in early June directed participating insurers to submit premium increase requests for 2018, if the federal subsidies are discontinued.

But with Covered California insurer bids due by June 30, its Board of Directors stated that insurers can request an additional 15 to 17 percent higher premiums than planned. Covered California Executive Director Peter Lee told SCPR that with half a million Southern California enjoying the subsidies, “This is the best-worst option.’ He added, “We need something that health plans can rely upon throughout 2018.”

The insurance industry and consumer advocates immediately voiced support for higher premiums. Both stated that some insurers would drop Covered California without higher premiums. Under Obamacare, insurance companies saw their stock prices triple.

Covered California’s Lee stated his staff is working with the U.S. Department of Health and Human Services on an alternative plan, if subsidies are discontinued. But if the federal government doesn’t settle the issue by the scheduled mid-August end of the continuance, California insurers are being directed to increase premiums.

Questions about whether or how Congress will repeal Obamacare have sent shudders throughout the insurance industry, as firms continue to pull out of some state insurance exchanges.

CNBC reported that Obamacare customers could face 2018 premium increases of 28 to 40 percent higher due to a combination of spiraling costs and the possibility of illegal subsidies coming to an end. But 42 percent of insurers participating in Obamacare exchanges said that they would drop coverage, if federal subsidies are ended.