Middle class to pay more for health insurance, state study shows

by Jim Sanders, Sacramento Bee

Middle class Californians counting on federal health-care reform to lower their insurance premiums are in for a double-digit shock next year, a new state study shows.

People or families who buy insurance for themselves could see rate increases of up to 30 percent. Milliman consulting group performed the analysis, but scope was limited to the individual market, meaning about 5 million Californians who do not receive insurance through their employer.

Millions of low-income Californians will see their costs plummet while costs rise for households where incomes exceed about $46,000 for an individual or $94,000 for a family of four, the study concluded.

Comparisons are skewed somewhat by stiffer coverage requirements for next year’s plans, but the bottom line is that the poor are likely to pay significantly less than they do now while middle-class families dig deeper into pocketbooks.

"Our top priority is to provide Californians with affordable health insurance options, and we are pleased that most individuals will pay lower rates and receive better coverage," said Peter V. Lee, director of the state’s health-care exchange, which commissioned the study.

Assemblyman Dan Logue, a Marysville Republican who serves as vice chairman of the Assembly Health Committee, said the Milliman study discredits vows by health-care supporters that premiums would fall.

"It’s a perfect example of a reform measure that in my mind is falling apart," Logue said. "I don’t think it’s sustainable. It’s going to be a drag on our economy and standard of living. Health-care costs will rise and the quality will go down."

Under federal health-care reform, nearly all Californians must purchase health insurance or pay a penalty of $95 or 1 percent of their income, whichever is higher.

A variety of health plans will be offered next year, varying in costs and deductibles, but all must cover "essential benefits" ranging from preventive care to emergency services, lab services, maternity care, vision care and prescription drugs.

Lee emphasized that the study is based on estimates and assumptions that can change as strategies are developed for lowering costs.

Of the 30 percent increase in premiums for middle-class families next year, about one-third is due to hikes that would have occurred without health-care reform, the study showed.

Even middle-class families whose premiums rise stand to benefit next year because health-care reform limits out-of-pocket expenses and guarantees coverage even to people with pre-existing health conditions.

No longer will families risk bankruptcy because of a catastrophic illness or accident, Lee said.

"That’s a game changer," he said.

Age, geography and the type of coverage purchased also can raise or lower rates for a California individual or family.

To show how premiums will differ based on income, the Millman study contained a comparison of costs for a single individual to buy a basic level of health insurance coverage, the "bronze plan," with relatively high deductibles.

The lower the income, the higher the federal subsidy for purchasing insurance, with individuals having to foot the bill entirely once their annual income exceeds roughly 400 percent of the federal poverty level, about $46,000.

For the bronze plan, estimated at $385 per month, individuals would pay nothing if their annual income was below about $11,500; $56 per month if their income was less than about $23,000; and $300 per month if their income was about $46,000.

Patrick Johnston, president of the California Association of Health Plans, said that federal health-care reform will improve access to health care and help families avoid financially crippling treatment costs — but not necessarily for free.

"A small percentage of Californians will purchase their insurance through the exchange, and most will have the benefit of more predictable and comprehensive coverage, as well as subsidies to help pay for that coverage," Johnston said in a prepared statement. "But this report shows that lower cost sharing, richer benefits and more predictable coverage will come at a cost for some."