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California's Obamacare rates to rise average 4.2 percent

Obamacare customers in California will see average insurance premium rates rise by 4.2 percent next year, officials announced Thursday.

That average encompasses a very wide range of actual rates that 10 insurance companies will offer on the state's Obamacare marketplace, which this year sold plans to 1.4 million people.

But 87 percent of California Obamacare enrollees will see rate hikes of less than 8 percent, and 16 percent of them will see rate decreases.

And because all but 10 percent of enrollees receive some kind of subsidy to offset their coverage costs, the rate increases in many cases will amount to just several dollars per month.

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"For many consumers, any increase in premium will be offset by an increase in subsidy," Covered California said in a press release.

Covered California Executive Director Peter Lee at a press conference.
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Covered California Executive Director Peter Lee at a press conference.

The exchange's executive director, Peter Lee, said the "very low to moderate" rate increases are "good news" because they will keep insurance affordable for the marketplace's customers

"This is good news for Californians, it's good news for the Affordable Care Act," Lee said.

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"Health care is regional, it's local and it's personal. This means that the costs and options for each consumer in California are different," Lee said, noting that different areas of the state will have a different menu of plans and prices.

"The average rate going up only 4.2 percent means that for some it will go up more and for some less, but all consumers now have the ability to shop. Consumers are not locked in to one plan; they can stay with their plan or change and can often find a lower-priced option."

California's Obamacare rates are closely watched because the state represents nearly 12 percent of the population, and is considered a leader in implementation of the ACA, and has by far the most Obamacare enrollees of any state.

Covered California said the moderate rate increases were the result of the exchange being a so-called active purchaser of Obamacare plans. Under that model, an Obamacare exchange negotiates, often aggressively, over proposed rates by insurers.

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"Covered California's team of negotiators actively engaged in vigorous back-and-forth with insurance companies to keep increases at a minimum, deliver networks of doctors and hospitals that meet consumers' needs and give them meaningful choice when shopping for the plan that is the best fit," the exchange said in a press release.

However that model, and possible continued uncertainty about the risks and rewards of selling Obamacare plans, may have led to the fact that no new insurer will begin selling plans on Covered California next year.

The exchange announced that all 10 insurers who sold plans for 2014 will also sell plans for 2015. They include large insurers such as Anthem Blue Cross, Blue Shield and Kaiser Permanente, along with regional health plans like Chinese Community Health Plan. One insurer, Contra Costa, dropped off the exchange.

Lee said that every area of the state will have at least two insurers to choose from, and some areas will have five or six insurers to choose from.

According to prices released Thursday, the biggest single group of consumers, about 36 percent of the total, will have price hikes between 5 and 8 percent, Covered California said.

Another 35 percent will see rate increases of less than 5 percent.

Another 16 percent of customers will actually see a decrease in their current premiums, as much as a 14 percent drop in some cases.

On the other hand, 13 percent of customers will face premium hikes of more than 8 percent. Most of that group will not see hikes in the double digits. But a few consumers will be hit with 15 percent increases if they stay in their current plan.

By CNBC's Dan Mangan

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