Adverse selection in California individual market leads to another round of rate increases in 2012

The Los Angeles Times reports on 2012 rate increases being taken by health plans and insurers in the Golden State’s individual market.  According to The Times, premiums are headed up on average between 8 and 14 percent.  The newspaper reported that outpaces the cost of medical care, citing federal government data showing the cost of goods and services associated with medical care increased by 3.6 percent over the past 12 months.

However, payers cite claims experience — and not underlying medical costs— to justify the rate hikes.  That’s consistent with the adverse selection that is gripping the state’s individual market.  Premiums increase to cover fewer and sicker people who keep their coverage, shrinking the pool as healthier people refuse to pay the higher premiums required to cover the claims costs of the former.  The accelerating adverse selection calls into question whether the state will have a viable individual health insurance marketplace to participate in the California Health Benefit Exchange when it opens for business in January 2014.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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Frederick Pilot

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