This also comes as the health insurance landscape faces significant uncertainty, with premiums set to potentially skyrocket with the expiration of federal tax credits at the end of 2025.
Data from the nonpartisan Public Policy Institute of California suggests approximately 90% of Covered California enrollees receive some form of subsidies against higher health care costs, but health plans are now set to rise by more than 10% on average.
Covered California Executive Director Jessica Altman recently spoke with Insight Host Vicki Gonzalez about how the marketplace is navigating these uncertainties, and the resources are available for those looking to enroll.
This interview has been edited for length and clarity.
Interview highlights
How are this year's open enrollment numbers compared to last year's?
It's still going to be a while until we fully see the impact of these changing federal policies and the reduced affordability, but we are definitely seeing some warning signs in our data. New enrollment — people coming in this open enrollment to find a plan — is down about 30% compared to the same time last year. We're starting to see an uptick in people canceling plans that they've had in the past.
Some of that is normal, some of it is more than we see in normal years, and particularly among middle-income consumers who are hit the hardest by the federal changes. But we are also seeing people take advantage of the marketplace where they have options and they can shop and find plans that come with a lower monthly cost, and are able to meet their budget.
Help us visualize who most of Covered California’s enrollees are.
We are here to provide health insurance to people who need to buy it for themselves and their families. They are working, but they are working in a way that they don't have the privilege of an employer who's offering them coverage and those stable benefits. One in four of our enrollees are sole proprietors. We're talking about people in the gig economy, who retire before they're eligible for Medicare at 65, farmers and farmworkers, truckers, hairdressers.
If you really start to think about who you interact with in your daily life, you'll start to realize a lot of them [probably] don't have employer health insurance like you may have, and they'll need to look to a place like Covered California to get that coverage.
When it comes to the drop in enrollment, do you know what brackets these enrollees fall into?
We're seeing drops across the board, but interestingly, probably the clearest trend is the higher-income people are dropping at higher rates. What this has to do with is the way the federal government is changing the affordability structure. The tax credits that expired at the end of the year, we call them the Enhanced Premium Tax Credits because that's what they were, they took tax credits we had and made them more generous. Now we're going back to the tax credits that we had before which are still very generous for many people, even though they're less generous than they have been.
But then there's this group of middle income consumers, we're talking about someone making about $63,000 a year, who are not going to be eligible at all anymore for tax credits that lower the cost of coverage. Those premium increases are significant, and that's the group [where] we're starting to see the most troubling emerging trend of people dropping coverage.
This expanded eligibility stems from the pandemic, correct?
During the pandemic is when Congress passed legislation to create these enhanced tax credits. What I would say as someone who's been working on marketplaces and the Affordable Care Act since well before the pandemic, is the pandemic was really the catalyst to address affordability challenges that existed. No one really knew how the Affordable Care Act was going to work, how would people find it affordable? Many people did, but some people didn't.
So the pandemic, when health care was front of mind, brought this opportunity to enhance these tax credits, and they worked. Marketplace enrollment doubled nationally, uninsured rates across the country reached their lowest levels on record. It's pretty clear, just in the experience, that these more generous tax credits are the difference between many people having health insurance or being uninsured.
How is the expiration of these credits affecting health care costs in California?
We're talking about the two million Californians who rely on Covered California. And I'll give you two examples; you have one group of people, the vast majority of our enrollees will still be eligible for financial support but it'll be less generous. You're talking about a monthly payment of say, $30 going to $60, something like that.
But then you have that middle income group, where you're looking at an average increase of $500 per month in their coverage. This is because under the enhanced tax credits, the rule is no one should have to pay more than 8.5% of their household income for a benchmark plan on Covered California. That's generally what people are paying today. [Now we’re] moving to a world where the federal government has said, “above this income there's no more tax credits, and you're going to pay whatever the full premium is.” Some of those people are in high cost regions. Some are older. Some people are hit very very hard by this and it isn't a simple story across everybody. [It] really depends on your situation.
Premiums for health plans can vary depending on the region. Costs are lower in larger Southern California counties versus rural areas in the North State. Why is that?
Generally because health care is more expensive in those regions, particularly hospitals tend to have a lot of variation in what they charge even for the same service, and even for generally having the same outcomes. There are also some situations where people in certain regions are on average healthier or less healthy than another, use more health care services compared to another, but it often just comes down to the cost of health care in those regions.
And honestly, what the research shows is that it has to do with: is it a competitive market? Are there multiple hospitals people can choose from, competing on price, or do we have a situation where the hospital can effectively charge whatever it wants?
Are you seeing people downgrading their insurance plans because of rising premiums?
We're definitely seeing a trend in the data of consumers moving to plans with a lower monthly premium. Generally, though not always, the reason they have a lower premium is they're having a trade-off. A lower premium for higher deductible, higher co-pays, things like that.
I think the positive way of looking at this is people are staying covered. People in these plans — “bronze plans” is the term — they have free preventive services, they have catastrophic coverage if something happens and they end up in the hospital. But on the negative side [we] know high deductibles can have really negative impacts, deter people from getting care that they need and deserve.
Is the enrollment process different this year, due to changes at the federal level?
The process is not different this time, but it will be different as we head all the way forward to 2028. We did have H.R.1 that passed over the summer with sweeping changes to health care. Most of the conversation, rightfully so, has been about the massive cuts to Medicaid programs around the country, called Medi-Cal here in California.
But there are a number of provisions that impact Covered California and marketplace coverage around the country as well, including what we call these “red tape provisions” that are going to prevent us from automatically renewing people, require people to get all of their paperwork in and cleared before [they] can even get their coverage and get their tax credit. We're really thinking about these provisions even now two years out, and how we can improve our processes to not have consumers get stuck in that red tape.
California is facing its own budgetary challenges. Is the state stepping in and investing at all to help Covered California at this time?
Through the budget process, thanks to the governor and the Legislature, Covered California has $190 million this year that we are using to the extent possible to mitigate some of these premium hikes. The enhanced tax credits are $2.5 billion estimated a year for California. I'm not going to pretend this is going to protect everyone from increases, or make health insurance as affordable as every person on Covered California deserves it to be, but it is making a difference.
Nearly 400,000 of our lowest-income enrollees are currently benefiting from this program, but again, we're so lucky to have [this] in California, most states have nothing like that.
If someone is on the fence given the rising premiums and other challenges at this moment, what advice do you have for someone to navigate this properly?
If you're someone who's like, “I just can't even engage with this, this is overwhelming,” I understand that. Health insurance is stressful in a normal time, but with these headlines and premium increases out there, it can be incredibly daunting. Take two minutes, come to our website. You can use our shop-and-compare tool and get a quick quote. What tax credit are you eligible for? What plans are available in your area, and what are you going to pay for them?
Health insurance is about two things. It's about that investment in yourself, in your family. Preventative care is at no cost to the patient in every plan sold through Covered California, so you can make that investment. But it is also a financial protection. One night in the hospital in the State of California averages over $4,000. A lot of people in this country go into medical debt and even bankruptcy going without coverage and getting health care that is incredibly expensive. This is a fundamental protection for those circumstances.
You can listen to the full conversation, as well as hear from UC Davis professor Dr. Sergio Aguilar-Gaxiola, here.