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40% hike for health insurance premiums possible after coronavirus pandemic, Covered California warns

Covered California says there could be up to $251 billion in unexpected costs that commercial insurers will have to account for, and it could be passed to consumers.

CALIFORNIA, USA — Covered California is sounding an alarm for a potentially drastic premium hike on health insurance across the country due to the coronavirus [COVID-19] impact. 

The health insurance marketplace says, due to the pandemic, premiums could increase by 40% nationwide in 2021 without federal help. For comparison, the rate increase for Californians in 2020 was 0.8%.

The findings were released in their national projection of the coronavirus’ impact on people with employer or individual insurance plans, which covers about 170 million Americans.

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"Covered California’s analysis shows the impact of COVID-19 will be significant, and that absent federal action, consumers, employers and our entire health care system may be facing unforeseen costs that could exceed $251 billion," said Covered California Executive Director Peter V. Lee. "Consumers will feel these costs through higher out-of-pocket expenses and premiums, as well as the potential of employers dropping coverage or shifting more costs to employees."

While there is uncertainty with cost projections and the coronavirus, the study says one-year projected costs in the commercial market range from $34 billion to $251 billion for testing, treatment, and care related to the virus.

James Scullary, a spokesperson for Covered California, says the midpoint would be around $100 billion.

"It's important because these would be unanticipated costs," Scullary explained. "These are not costs that are baked into the current insurance premiums that people are paying throughout 2020. These would be on top of that."

Scullary said insurers set their rates between May and June, so federal action would be needed to impact the potential premium hike and protect both people and insurers.

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"If there's an extra $100 billion that [insurance companies] need to account for… there is the potential situation where they would try to pass that cost onto consumers in the form of higher premiums or higher cost sharing," Scullary said. "Really, while there is a lot of uncertainty, we know that this is a situation that will be very significant and expensive and, at those costs, were not planned for."

All in all, the problem is likely more than California alone can handle, which is part of the reason why Covered California's study covered the national market and not just the local market.

It wanted to get the attention of lawmakers in Washington D.C.

"This is not a situation where we're in our own little golden state of California [and] it doesn’t matter what happens to the rest of the country," Scullary said. "This is a national issue."

Madison Voss, spokesperson for California Insurance Commissioner Ricardo Lara, says the commissioner has department's actuaries to reviewing Covered California's study.

She says Lara will also work with leaders at the state and federal levels to decrease the impact of the coronavirus on health insurance rates.

"Congress needs to take immediate action by increasing tax credits and expanding subsidies to protect consumers from future rate increases," Voss said. "It is important to note that individual health insurance rates are already set for this year. With Covered California extending its special enrollment period, nothing should stop uninsured Californians from obtaining coverage now."

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According to Covered California, some of the possible mitigation efforts Congress could take include enhanced federal assistance for the individual market; a temporary program limiting coronavirus costs for health insurers, self-insured employers, and those they cover; and set up a national special-enrollment period for the individual market.

Otherwise, with the federal help,the increased costs could mean many people in commercial market losing coverage and going without needed care.

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