California announced Monday that the cost of individual health plans will increase about 4 percent for the second straight year, saying its strategy to force insurers to compete on price and value is controlling costs for consumers.
The average premium will rise 4 percent in 2016, a slight decrease from the 4.2 percent jump in 2015, said Peter Lee, executive director of Covered California.
The average increase in Southern California is 1.8 percent, for a total of $296 a month, compared to 7 percent, or a total of $384 a month, in Northern California. Southern Californians can get better rates because the region has more provider competition.
The exchange also added two new participants for the first time -- UnitedHealthcare, the nation's largest health insurer, and a New York startup called Oscar.
Lee said California's 2016 rates are proof that the Affordable Care Act is working in the state. He credited California's aggressive approach on haggling with insurers.
"The health plans know that if they price their products too high and consumers know it's too high, because it's an apples-to-apples comparison, they will not get enrollment," Lee said in an interview.
The announcement of low rate increases was applauded by consumer groups and health advocates.
"While any increase in premiums may be hard on family budgets, this relatively small jump means California made sound decisions in establishing the structure and powers of the exchange and requirement that all plans meet Affordable Care Act standards," said Betsy Imholz of Consumers Union, the advocacy arm of Consumer Reports.
Larry Levitt of the nonpartisan Kaiser Family Foundation said Covered California appears to be gaining momentum with several major insurers jockeying for market share and substantial enrollment. It's unclear how the rest of the private market will look yet, he said.
"This shows how a stable, competitive individual insurance market can work," Levitt said.
One of the main goals of President Barack Obama's health overhaul was to slow increases in health care costs and premiums.
There had been some concern that some insurers around the country were requesting rate increases above 10 percent, saying their new customers turned out to be sicker than expected.
California hopes competitive prices will translate to strong enrollment later this year. Covered California signed up more than 1.3 million people during the second enrollment season. That figure fell short of an initial 1.7 million target.
Nearly 90 percent of Covered California enrollees qualify for financial assistance.
For 2016, an individual making between $16,242 and $47,080 may qualify for subsidies, while a family of four making between $33,465 and $97,000 may also qualify. Those making less would be directed to the state's Medicaid program for the poor.
Levitt said signing up more people will be a key to keeping premiums down. He noted a huge variation in premium changes across state, ranging from a 10 percent drop to a 23 percent increase.
California is among the few states that set up exchanges as an active purchaser, which allows the state to negotiate with insurers. It also imposes standardized benefits for participating plans.
Lee said California goes further than other states by deciding which health plans get to participate in individual and small business markets.
The state also made a decision early on not to extend policies that did not comply with new Affordable Care Act requirements. Lee said the move helped the state establish one risk pool to negotiate better prices.
Covered California officials say Southern California consumers can save nearly 10 percent by moving to a lower-cost plan within the same benefit design. Meanwhile, a Northern California consumer can minimize their increase to 1 percent by doing the same.
California's 2016 rate increase appears to fall in line with individual markets in other states.
A June analysis of premium changes by the Kaiser Family Foundation, a clearinghouse for information on the health care system, says consumers buying individual coverage through exchanges can expect their 2016 premiums to go up an average 4.4 percent for mid-tier plans compared to 2015.