California’s state health insurance agency announced a surcharge Wednesday to some insurance policies in its 2018 health plan.
Covered California added a 12.4 percent surcharge on its Silver plan, the second-least expensive plan, because the federal government did not indicate whether it would continue funding cost-sharing reduction reimbursements next year. Cost-sharing reductions are discounts insurers provide to low-income customers.
Under the Affordable Care Act, created by former President Barack Obama in 2010, the federal government reimbursed insurance companies that reduced health care costs for low-income customers.
The University of California Student Health Insurance Plan is compliant with Covered California and allows students who cannot afford health insurance to use the subsidy the Affordable Care Act provides.
The surcharge only applies to the Silver plan, which is the only plan subsidized by the federal government.
Ending cost-sharing reduction reimbursements would increase average health insurance premiums by 20 percent next year, according to a Congressional Budget Office report. The surcharge will be implemented at the beginning of 2018.
It will also increase the federal deficit by $194 billion over the next 10 years, according to the report.
Peter Lee, executive director of Covered California, said in a statement the federal commitment to funding cost-sharing reduction payments would lower premium rates and reduce the amount of federal financial help needed to help consumers pay for their health care coverage.