State health premiums to rise an average 12.5 percent in 2018

In this Nov. 13, 2013 file photo, Peter Lee, executive director of Covered California, the state's health insurance exchange, talks at a news conference in Sacramento, Calif. The insurance exchange announced an average 12.5 percent increase in premiums for 2018. less In this Nov. 13, 2013 file photo, Peter Lee, executive director of Covered California, the state's health insurance exchange, talks at a news conference in Sacramento, Calif. The insurance exchange announced an ... more Photo: Rich Pedroncelli, Associated Press Photo: Rich Pedroncelli, Associated Press Image 1 of / 18 Caption Close State health premiums to rise an average 12.5 percent in 2018 1 / 18 Back to Gallery

The roughly 1.4 million Californians who buy health insurance through the state Covered California exchange will see their premiums increase by an average of 12.5 percent next year.

Covered California, created under the Affordable Care Act and in its fourth year of operation, announced the proposed 2018 prices on Tuesday. Bay Area counties will see smaller increases than the 12.5 percent statewide rise. Rate increases will average 6.6 percent in San Francisco, 4.3 percent in San Mateo County, 8.2 percent in Contra Costa County, 10.4 percent in Santa Clara County and 8.3 percent in Alameda County. Marin, Solano, Sonoma and Napa counties are all part of the same pricing region, which will see an average increase of 7.4 percent overall.

Counties in the northern and central state would see far greater average increases of 33.2 percent and 24 percent, respectively. Experts said Bay Area rate increases are smaller in part because Kaiser, which dominates the region, generally had lower rate increases than other insurers.

For some consumers, the premium increases will be offset by larger federal subsidies, Covered California officials said.

California’s average premium increase is less drastic than those proposed for some other states’ insurance exchanges, including a 24 percent jump in New Jersey and a 38 percent spike in Idaho, but it is higher than Arizona’s proposed 7.2 percent increase, according to figures tracked by the popular health industry blog ACAsignups.net.

“Covered California and the many carriers we work with are in it for the long haul to make sure Californians have affordable care and coverage they deserve and can depend on,” said Peter Lee, executive director of Covered California.

Overall costs for medical services are rising 6 to 7 percent a year, Lee said. The 12.5 percent average premium hike is higher than that partly because it builds in two other factors. One is a 2.8 percent increase passed on to consumers because insurers must start paying an ACA tax in 2018 that they had previously been able to defer. The other is a 3 percent increase that was incorporated because of uncertainty over ACA implementation at the federal level. The Trump administration has signaled that it will not fully enforce elements of the ACA — like the mandate that everyone buy coverage. The mandate spreads the cost of health care among a bigger pool of people, and state officials say not enforcing it could increase costs for those who get coverage.

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In 2017, average rates in Covered California plans jumped 13.2 percent — a dramatic uptick compared with the 4 percent premium increases in 2016 and 2015. The rates released Tuesday are preliminary and must still receive final approval from state regulators.

Covered California is the state-run exchange through which consumers who are not covered by employer plans, Medicaid or Medicare coverage can find health insurance. Most people on the exchange received subsidies to buy coverage. All 11 insurance companies that sold plans on the exchange this year are returning in 2018, which is notable because insurers have been exiting exchanges in other states, leaving consumers in some counties without a single health-insurer option. However, one of the largest insurers on the California exchange, Anthem Blue Cross of California, will scale back its participation significantly — which means 153,000 consumers on Anthem plans will have to choose a new carrier in 2018. Anthem has been operating statewide; next year, it will remain only in northern counties, Santa Clara County and the Central Valley.

But HealthNet (owned by Centene), Oscar Health and Blue Shield are expanding into new regions or adding new plans in existing regions. Ninety-five percent of consumers will have at least two plans to choose from in 2018, and 82 percent will have three or more plans to choose from.

Some consumers expressed measured relief that despite the rate increases, Covered California would continue to exist at all, given that the stalled GOP repeal bills could have driven up premiums even more and reduced federal subsidies for many Americans.

“At this point, given everything else that’s happened, that’s not the worst thing I’ve heard,” said Robyn Adams, 48, an Oakland artist who buys a Kaiser plan through Covered California. “We’ve been sitting around trying to figure out if we were going to have health insurance at all.”

Oakland, in Alameda County, would see an average 8.3 percent increase in premiums.

“We’ll have to look at our budget and try to plan accordingly,” Adams said. “I hope that there’s some way they can change the system so we’re not dealing with such high deductibles all the time. But at least I know we’re covered.”

Covered California is considered one of the most stable exchanges in the country, due partly to the state’s size and its enthusiastic embrace of the Affordable Care Act. However, it is not immune to the uncertainty caused by the push by congressional Republicans and the Trump administration to repeal the ACA. The legislative repeal is stalled, but Trump has repeatedly said his administration may halt the payment of a critical stream of federal money that goes to insurance companies to reimburse them for the high cost of covering the lowest-income consumers. This money is known as cost-sharing subsidies, and it helps lower co-payments, deductibles and other out-of-pocket costs for poor consumers who buy plans on exchanges like Covered California.

On Saturday, Trump suggested on Twitter that he considers these subsidies to be “bailouts” for insurance companies and that the payments will end if Congress does not pass a health care bill. The legality of the payments is in dispute; a pending lawsuit filed by House Republicans says they are illegal because Congress never properly appropriated the money.

For the first time, Covered California — which negotiates directly with insurance companies to establish agreed-upon rates — is allowing insurers to propose two sets of rates for one of the most commonly bought health plans on the exchange, known as the silver plan. About half of Covered California enrollees, or 700,000 people, buy the silver plan; it is the only plan sold through the exchange that makes the cost-sharing subsidies available to consumers. The average rate increase for those plans would be an additional 12.4 percent if the Trump administration stops paying the cost-sharing subsidies. But that increase would be offset, for many people, by an increase in subsidies for premiums.

Catherine Ho is a San Francisco Chronicle staff writer. Email: CHo@sfchronicle.com Twitter: @Cat_Ho

Average rate increases for health plans in Covered California since its launch in 2014

2018: 12.5 percent

2017: 13.2 percent

2016: 4 percent

2015: 4.2 percent

Average rate increases for health plans in Covered California in the 9 Bay Area counties for 2018

San Francisco: 6.6%

San Mateo: 4.3%

Contra Costa: 8.2%

Alameda: 8.3%

Santa Clara: 10.4%

Marin, Solano, Sonoma and Napa (all part of the same pricing region): 7.4%