The death spiral of California’s individual health insurance market appears to be speeding up. The market segment — which covers about eight percent of working age Californians — has been plagued by adverse selection as relatively healthy people drop coverage. That in turn forces managed care plans and insurers to boost premiums to make up for the lost dollars when healthier people pull out of the pool and to cover the costs incurred by the less healthy who feel they must keep their coverage in place. Exacerbating the problem, payers attempt to staunch claims with strict medical underwriting guidelines that reject relatively healthy individuals whose premiums could bolster the solvency of the pool. As premiums keep rising, even more people question the value of paying the higher rates. Or can’t afford them even if they want coverage as monthly premiums equal the size of modest home mortgage payments. As the state’s individual market fails, self-employment is becoming synonymous with being medically self-insured.
Take for example, the Libresco family of San Rafael, California, mentioned in this recent Los Angeles Times story on the latest round of rate increases by the state’s largest individual market payer, Anthem Blue Cross:
Last month, Anthem notified Josh Libresco, a 57-year-old marketing researcher in San Rafael, that his family’s monthly premium would increase 29% to $1,636, effective May 1. This is after Anthem raised the deductible for the family of four to $5,900 from $5,000 last fall as well as increasing co-payments for doctor visits and prescription drugs.
“I don’t know how people can afford these increases every year. We are about at our limit,” Libresco said. “Whether it’s 20% or 29%, it’s still an enormous number.”
It’s not hard to see why this family might be inclined to drop its coverage. Especially when they are essentially getting only catastrophic coverage but not at a price they would expect to pay for it.
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