Analysis: What’s Really Happening with California’s #RateShock

May 31, 2013

WASHINGTON, DC – In recent weeks, the Energy and Commerce Committee has explored the looming rate shock that will hit when the president’s health care law takes full effect. Despite widespread evidence that significant price spikes are expected, reports from the state of California claiming potential price reductions created many new questions. After Covered California announced insurance premium rates would remain steady if not decrease in 2014, a number of analyses emerged that poked holes in the state’s announcement and suggested the state was “comparing apples to oranges to grapefruit.” Rather than provide a clear assessment of what consumers pay for their current plan and compare it to the loaded government-approved plans they will be required to purchase under the health care law, California compared the cost to provide more expensive options now versus what the same plan will cost in 2014. The problem? Washington Examiner editorialist Philip Klein explained:

What this means is that the federal government is now requiring all individuals to carry insurance policies that offer a slew of benefits dictated by the secretary of Health and Human Services, regardless of whether they would prefer to purchase policies with lower premiums and fewer benefits — or to go without insurance altogether. California, essentially, is saying that the exchanges will give participants more benefits for their money so the cost of the new offerings should be compared to more comprehensive plans. But what if individuals don’t want more coverage? For many young and healthy individuals, insurance on the exchanges will be a much more costly option than what they have now."

Hoover Institute’s Lanhee Chen commented, “To put it simply: Covered California is trying to make consumers think they’re getting more for less when, in fact, they’re just getting the same while paying more.”

The AP also recently reported that state insurance regulators are sending “cancellation notices because their policies aren’t up to the basic standards of President Barack Obama’s overhaul.” According to internal documents obtained by the Energy and Commerce Committee from some of the nation’s top insurers, these new “basic standards,” mandates, taxes and fees will force premiums to dramatically increase.

Looks like the picture in California isn’t so rosy after all.

Read more from news outlets covering the California confusion including this one, or this one, or this one.

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