Facing higher premiums and the loss of federal subsidies, 374,000 people with health insurance from the state marketplace known as Covered California canceled their coverage in the first three months of the year, according to government statistics.
The cancellations amount to 19% of those who had renewed their policies on the state marketplace during open enrollment, state officials said. Those cancellations are higher than in the past three years when they ranged from 13% to 15% of those who renewed.
Jessica Altman, executive director of Covered California, attributed the jump in cancellations to the expiration of enhanced federal subsidies that caused the cost of a plan to leap for most middle-class Californians.
“We expect coverage losses to increase through the year,” she said.
Overall, Covered California had 1.8 million enrollees in February, down from 1.94 million the year before — a decline of 7%.
Altman said monthly enrollment numbers are delayed because consumers have a three-month grace period to resume their premium payments before the insurance carriers end their coverage for nonpayment.
This year, many middle-class Californians who depend on the state-run insurance marketplace created under the Affordable Care Act faced annual costs that were hundreds of dollars higher than last year because of the end of enhanced federal subsidies that began during the COVID-19 pandemic.
In 2021, Congress voted to temporarily boost the amount of subsidies Americans could receive for an ACA plan.
The law also expanded the program to families who had more money. Before that 2021 vote, only Americans with incomes below 400% of the federal poverty level — currently $62,600 a year for a single person or $128,600 for a family of four — were eligible for ACA subsidies. The 2021 vote eliminated the income cap and limited the cost of premiums for those higher-earning families to no more than 8.5% of their income.
On top of the loss of the enhanced federal subsidies, the average premium charged by insurers this year for a Covered California plan rose by more than 10% because of fast-rising medical costs.
The decline in ACA plan enrollees, however, has been greater in some other states. California has tried to keep people insured by using state tax money to fill in the gap for lower-income families.
This year, the state budgeted $190 million for premium subsidies for people with incomes of up to 165% of the federal poverty level.
In his budget plan, Gov. Gavin Newsom proposed spending $300 million on those state subsidies in 2027. That would expand the subsidies to enrollees with incomes up to 200% of the federal poverty level, or $31,920 for an individual or $66,000 for a family of four.
“We may actually see a number of Covered California enrollees paying less in 2027” because of the additional state subsidies, Altman said.
In May, Newsom also proposed in his budget that an additional $27 million in state money be used to help enrollees pay for the cost of gender-affirming care. That amount is an increase to the $30 million that he earlier proposed be spent this year and next to defray those costs for Covered California enrollees, according to state officials.
Last year, federal health officials enacted a rule that said the federally subsidized ACA plans could no longer cover gender-affirming care because it was no longer considered an “essential health benefit.”
Newsom’s proposed budget still faces debate in Sacramento and approval by the state Legislature.
The state marketplaces, created by the Affordable Care Act, also known as Obamacare, were meant to help those who don’t have access to an employer’s health insurance plan and have incomes too high to qualify for Medi-Cal, the government-paid insurance for the poor and disabled.
Because of the higher cost this year, more people are choosing the lower-priced Bronze plans. Those plans have higher co-pays and deductibles than the more expensive plans.
“We’re very concerned with the large shift to Bronze,” Altman said. “When you have higher cost-sharing, you’re more likely to defer care.”
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