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Shop Around for the Right Covered California Insurer and Policy for You

Covered California recently announced that, on average, health insurance premiums in California will increase in 2016 at the relatively modest rate of 4.0 percent. (See my blog entry "Covered California Announces New Health Insurance Rates for 2016," dated August 3, 2016). Given the fact that premium rates increased in 2015 (the first transition year under ObamaCare) by a slightly higher 4.5 percent, and the fact that for the most part rates increased in the years before the Affordable Care Act came into effect by double digits, this was good news.  

Nevertheless, if you currently are insured through a Covered California sponsored insurance plan, you should not merely shrug you shoulders and conclude that a 4.0 percent increase is the best you can do. By shopping around among the Covered California sponsored policies available in your area you should be able to beat that 4.0 percent average increase. In fact, buried in the data presented by Covered California in its announcement of 2016 rates is the assertion that the consumer who shops for the lowest cost plan while still maintaining the same general quality of coverage (that is, a policy in the same metal tier) will be able to REDUCE his or her monthly premiums by - on average - 4.5 percent. 

To understand how shopping around might be to your advantage, let me explain a bit about how the Covered California system works. 

          Participating Insurance Companies. In 2016 there will be twelve insurance companies that are permitted to provide health insurance policies in the Covered California marketplace. That is two more companies than were in the market in 2015. More insurers generally means more competition, both in price and in service.

          Pricing Regions. However, Covered California divides the state into 19 pricing regions or geographic zones, and not every insurer offers insurance plans throughout the state. In fact, only two companies, Anthem and Blue Shield, offer insurance policies in all 19 regions. Most insurers offer policies in only some of the 19 pricing regions. For example, Sharp Health Plan offers policies only in Region 19 (San Diego County). Other insurance companies offer plans in two or more regions. Since you can only purchase an insurance plan that is offered in the pricing region in which you live, the competition for your business is limited to those insurers who offer plans in your area. According to Covered California, more than 99.6 percent of the state will have three or more companies to choose from in 2016 -- up from 90.1 percent in 2015; and all enrollees through Covered California will have at least two companies to choose from.

          Metal Tiers.-- Standardized Policies. Covered California has created four classes of insurance policies that are available in the Covered California marketplace. The four classes (or tiers) are designated Platinum, Gold, Silver and Bronze. The metal tiers differ in the coverages available and the percentage of over-all medical costs that the consumer will be expected to bear. For example, a Bronze policy is designed to cover 60 percent of the average consumer's medical expenses (that is, co-pays, co-insurance, deductibles and annual out-of-pocket maximums). By contrast, Silver, Gold and Platinum policies are designed to cover 70, 80 and 90 percent of medical expenses, respectively. One of the major features of the Covered California system is that each of the insurance plans offered within each metal tier must contain essentially standardized coverage, no matter which insurance company offers the policy. Thus the consumer can be assured that no matter which, for example, Bronze policy she chooses (whether the insurer is Anthem, Blue Shield, Kaiser, Health Net or any of the other participating companies), that policy will contain the same fundamental coverage as other Bronze policies. If an insurer chooses to offer insurance in any pricing region, it must offer at least one insurance plan in each of the four metal tiers.

          Points of Competition. If the policies are are largely standardized within the metal tiers, you might ask: what distinguishes one insurer's policy from another insurer's policy? In general, insurers compete for your business based upon (1) the quality and scope of the network of doctors and hospitals that is offered under each plan, (2) the quality of the insurance administration (the administration and processing of claims and responsiveness to inquiries), (3) consumer tools and services offered under the plan (for example, tele-health access, digital platforms, web-based tools, mobile applications, etc,), and (4) premiums or price. For most consumers, the two most important points of competition among insurers are price and network.

With this information in mind, let's take a look at some of the insurance policies and prices that are available in San Mateo County (Pricing Region 8), where my home is located. There are five insurers competing for my business in San Mateo County: Anthem, Blue Shield, CCHP, Health Net and Kaiser Permanente. The overall weighted average increase for all policies (all insurers, all metal tiers) in San Mateo is 6.6 percent. However, the increase in the least expense Bronze policy is only 3.2 percent, and the cost of the least expensive Silver policy has actually gone down 1.1 percent since 2015. The costs of the Silver and Bronze policies are especially important because at present 56 percent of all policies issued in San Mateo County through Covered California are Silver plans and 32 percent are Bronze plans. Very few consumers choose the relatively more expensive Gold and Platinum Plans. This situation is not unique to San Mateo County. State-wide, 63 percent of consumers hold Silver plans and 26 percent hold Bronze plans.

Now let's look at the monthly premiums to be charged in 2016 by each of the insurers offering plans in San Mateo County. To simplify matters, we will look only at their Silver plans and only at the monthly premiums they would charge to a single 40 year old person.

                    Insurer                       Premium
                    Anthem                          419
                    Blue Shield                    463
                    CCHP                            380
                    Health Net                     471
                    Kaiser                            413

However, we should also keep in mind that the vast majority of consumers who have purchased insurance through Covered California have also received a subsidy for their premium payments in the form of federal tax credits. The amount of the premium is based on the consumer's income level. For purposes of our example, let's assume that our 40 year old person with no dependents on his/her policy earns about 200 percent of the Federal Poverty Level (FPL). That's about $23,450. In that case, the premium subsidy for that person would be $290 per month. (The amount of the subsidy for a person at that FPL, which is based upon the second least expensive silver policy premium in the applicable pricing region, will be the same for all policies in all tiers within a given pricing region. The subsidy will differ at different FPLs and for varying numbers of dependents). 

So now let's look at what a single 40 year old with income in the range of 200 percent of the FPL would actually pay for each of the Silver tier policies offered in San Mateo County. (The figures are rounded to the nearest dollar).

                    Insurer                     Premium              Subsidy        Consumer Pays 
                    Anthem                         419          -           290       =           130
                    Blue Shield                   463          -           290       =           173
                    CCHP                           380          -           290       =             91
                    Health Net                    471          -           290       =           182
                    Kaiser                           413          -           290       =           124

As you can see, although the product being sold - a Silver tiered health plan - is very largely standardized as a result of Covered California efforts to allow consumers to compare apples to apples, there is still a considerable price differential available to consumers in this category. In fact, the premiums for the lowest cost Silver-tiered policy are only one-half those for the highest cost Silver-tiered policy. (The two lowest price policies listed are for HMOs; the other three are PPOs or EPOs). In other words, you could save a lot of money by switching to the lowest cost Silver policy. However, as mentioned above, the insurers compete not only on the basis of price, but also based upon the quality and extent of their health networks - the general physicians, specialists and hospitals that are available to insureds. Price may not matter to you if you will only see your long-time physician, Dr. Smith, and Dr. Smith will see only Health Net patients in your region. In that case, you will go with Health Net, no matter what the cost. In addition, if, for example, you are satisfied with the networks provided by both Blue Shield and Health Net (which are close in price), but believe that one of the two handles claims more efficiently or perhaps has a tele-medicine program more suitable to your needs, you may choose your insurer on that basis.

The point is that you have options. You should not simply extend your 2015 policy into 2016 without considering what those options are. Take some time and look into the insurance policies offered in your region. 

Although you can begin comparing policies now, you will not be able to change policies until the open enrollment period begins in November 1, 2015. The price information given above is taken from data provided by Covered California. As prices have not yet been finally approved by the insurance regulators, It is possible that this information will change before November 1. But any such changes are likely to be minimal.

If you want to discuss your options with an independent insurance agent who is not beholden to any particular insurance company and who is thoroughly familiar with how Covered California works and is authorized by Covered California to sign you up, please contact me. But whether you call on me or not, please SHOP AROUND. Get the best deal for you and your family.

Alex Pfeifer
Pfeifer Insurance Brokers
650 762-8087
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