NOTE (11/10/2017): The premiums cited in this blog have been updated to reflect the surcharge that was placed on 2018 silver plans due to the Trump Administration’s decision to end federal payments for cost-sharing reductions. The premiums highlighted here are representative examples only. If you are shopping for a plan, visit the Covered California website.
Open enrollment for Covered California is underway. While Covered California consumers can choose plans from a variety of “metal tiers” with different costs and benefit structures, the second-lowest-cost silver plan is particularly important because it serves as the benchmark by which federal premium subsidies are determined. Overall, 65% of Covered California consumers choose silver plans.
Some highlights from our data:
Total Benchmark Premiums Continue to Vary Widely by Region
In this example, the map on the left shows total benchmark plan premiums in 2018 for a 40-year-old before premium subsidies are taken into account. These total monthly premiums range from $325 in Los Angeles (Region 15) to $579 in Contra Costa County (Region 5). (Premiums would also vary based on age, although the ACA limits the amount of variation.)
Monthly Total Premiums Excluding Premium Subsidies for Benchmark Silver Plans, 2018, for 40-Year-Old, by Region
Premium Subsidies Protect Consumers
Nearly 90% of Covered California enrollees — 1.1 million people — receive a premium subsidy. These subsidies will be available in 2018 on a sliding scale to consumers who earn between 139% and 400% of the federal poverty level (FPL), or $16,643 to $48,240 for an individual and $33,948 to $98,400 for a family of four.
The amount these consumers are required to contribute toward premiums is capped at a percentage of income (“individual share” in the chart below) with the premium subsidy (“government share”) covering the rest. This example of a consumer in Sacramento shows how the individual and the government share the premium cost based on a consumer’s income.
Sliding-Scale Premium Subsidies, by Income Level, 2018, for 40-Year-Old, Sacramento
Because the individual’s share of the benchmark plan is tied to a percentage of income, subsidized consumers at the same income level will pay the same amount for the benchmark plan regardless of total premium. The next graphic shows that consumers earning 150% of FPL will pay the same amount toward their benchmark silver premium ($61 a month) regardless of the total premium in their region.
Breakdown of Monthly Premium for Benchmark Plan, 2018, for 40-Year-Old Earning 150% of Federal Poverty Level, by Region
The formula protects most subsidized enrollees from large premium increases over time provided they select the benchmark silver plan or any Covered California plan with a lower premium. If they choose a plan that costs more than the benchmark, they pay the difference out of pocket.
The final graphic illustrates how a person in Alameda County earning 200% of FPL has continued to pay roughly the same amount, $121 to $127 every year, while subsidies have increased on pace with premiums.
Breakdown of Monthly Premium for Benchmark Plan, 2014-2018, for 40-Year-Old in Alameda County Earning 200% of Federal Poverty Level
Who must absorb a full premium increase? In most cases, they are the Covered California consumers who earn more than 400% of FPL or who have chosen plans with premiums that exceed those of the benchmark plan.
The Impact of the Trump Administration’s Decision to Stop Funding Cost-Sharing Reductions
The total premiums in the ACA 411 interactive map reflect the federal government’s decision to stop payments for cost-sharing reductions (CSRs). These payments reimburse insurers for providing enhanced silver plans with reduced coinsurance, copays, and deductibles for lower-income enrollees. In response, Covered California announced alternative 2018 rates. These rates include an average 12.4% “CSR surcharge” on silver plan premiums. As discussed in the “Premium Subsidies Protect Consumers” section, most enrollees receiving a premium subsidy would be protected from the CSR surcharge and would see no premium increase. And Covered California has adopted policy changes so that consumers not eligible for subsidies can avoid the CSR surcharge by switching to nonsilver plans or by purchasing nearly identical silver plans without the CSR surcharge that are offered in the individual market outside of Covered California.
As in every open enrollment period, it is imperative for Covered California consumers to shop around and explore their options.
Katherine Wilson is an independent consultant specializing in health insurance markets and health care costs. She is the author of numerous publications and reports, including CHCF’s series of reports on California health insurers.