Comments on the Health Net Life Insurance Company Proposal to Submit New Plans, Effective 1 January, 2014.

State Tracking Number: HAO-2013-0108
Released by: CALPIRG Education Fund

Executive Summary 

In May 2013, Covered California - the state marketplace for individual insurance policies created by the Affordable Care Act (ACA) - announced the insurance coverage plans that it will offer in 2014.[1]  The new tiered policies include Bronze, Silver, Gold and Platinum—each providing different levels of out-of-pocket costs. The Platinum tier has the lowest deductibles and co-pays, but it comes with higher premiums. In contrast, the Bronze tier includes higher deductibles but significantly lower premiums.

An estimated five million Californians are eligible to buy health insurance from the exchange, including 2.6 million Californians who are eligible to receive subsidies, for the different “metal” (Platinum, Gold, Silver and Bronze) plans offered by the exchange. While premiums vary based on an individual’s age, where they live, household size and extent of coverage they want, for the first time consumers will be able to easily compare the different offers which all follow the same set of plan-guidelines. Specifically, all policies sold by Covered California must cover preventive care, prescription drugs, contraception, medical screenings such as mammograms, and other essential benefits including pediatric, mental health, maternity and rehabilitation services.

The California Public Interest Research Group (CALPIRG) Education Fund worked with the actuarial firm NovaRest Actuarial Consulting to analyze the rate filing with state tracking number HAO-2013-0108[2] submitted by Health Net Life Insurance Company to the California Department of Insurance. 

In this filing, Health Net submitted five individual PPO plans available both on and off the health care exchange to be effective 1 January, 2014. This filing is for a new product, therefore there are no previous rates to compare these plans to. Moreover, since these plans are tailored to the Affordable Care Act’s requirements that go into effect starting January 1, 2014, including the guaranteed issue requirement to offer insurance to everyone who applies, it is not possible to make a direct comparison of these rates to existing premiums in the commercial market.

Instead Health Net relied in its filing on claims experience from the Small Group market which is currently guaranteed issue. Health Net used an average medical and pharmacy trend of 7.7% based on Health Net’s Commercial book of business. However, it appears that overall Health Net’s assumptions about future costs – while sufficiently documented – tend to be higher than other health insurance providers. A comparison to competing rate proposals submitted to the California Department of Managed Health Care (DMHC) for plans for the same group of consumers, meeting the same Affordable Care Act requirements shows that Health Net’s proposed rates are higher. For example, comparing a Bronze PPO plan for a 30-year-old individual in two different regions, Health Net’s proposed rates are clearly higher.


Zone #4

Zone #15

Anthem Blue Cross[3]






Health Net[5]



Key Findings

  1. Health Net’s proposed rates appear to be unreasonably high. CALPIRG Education Fund worked with the actuarial firm NovaRest Actuarial Consulting to review Health Net’s filing and while we found it to be complete and with sufficient detail documenting the assumptions and methods used in setting proposed rates, overall the rates proposed appear to be unreasonably high when compared to identical products offered by competing health insurance providers.
  2. Health Net’s filing is based on higher than expected morbidity rates. In its filing, Health Net predicts that future patients will require medical treatment at a rate 71.4% higher than patients did in 2012.[6] While we recognize the contention surrounding efforts to predict future use of health care services, nonetheless this rate is high. For comparison, a Milliman report prepared for Covered California included a best estimate for the change in medical services used as 26.5%, with a maximum predicted increase of 40%[7] CALPIRG Education Fund is concerned that Health Net’s morbidity rates are nearly double of best estimates and may therefore be unreasonable.
  3. Subsidies may make Gold plans cheaper than lower rated plans. CALPIRG Education Fund found that in order to assess the real consumer cost of each of these plans, it is not enough to look at the “sticker price” noted by Health Net. Consumers must also take into account state and federal subsidies that change according to household income, age, and geographic location. The table below illustrates the impact of subsidies on different metal plans, based on changes in income for a 27-year-old individual living in Alameda County (area #6): 







FPL Level

Annual income

Plan cost

What you pay

Plan cost

What you pay

Plan cost

What you pay

What you pay




























* Not subsidized, and only available to people under 30 years old.

The above table illustrates that for an individual earning 150% of the Federal Poverty Level[8] (FPL) it is cheaper to purchase the more extensive “Gold” coverage than the limited “Catastrophic” plan, once federal and state subsidies and tax rebates are taken into account. Similarly, for an individual earning 250% of FPL the real premium difference between the “Silver” and “Bronze” plans is less than $30 per month. Consumers must therefore carefully consider their own circumstance, income, and location before choosing a health insurance plan via Covered California in order to get the most health insurance “bang” for their buck.




[1] Press Release: Covered California Announces Plans and Rates for 2014, Covered California, 23 May 2013. Available online at:

[3] Blue Cross of California, DMHC Individual On and Off Exchange, SERFF Tr Num: AWLP-129043539, P.9. Available online at:

[4] Kaiser Foundation Health Plan, Inc., KFHP Individual Plan HMO Rates Jan 2014,SERFF Tr Num: KHPI-129039751, Exhibit E-1 Att 2 FF2b KFHP Ind. HMO_5-30-13_Jan 2014. Available online at:

[5] Health Net Life Insurance Company, IFP PPO P30601 (CA 1/14) IEX, State Tr Num: HAO-2013-0108, p. 19 & 42. Available online at:

[6] Health Net Life Insurance Company, IFP PPO P30601 (CA 1/14) IEX, State Tr Num: HAO-2013-0108, p. 47. Available online at:

[7] Factors Affecting Individual Premium Rates in 2014 for California, March 28, 2013, Figure 11: Estimated

Premium Impact Due to Change Health Status Factor. Accessed online 1 July, 2013.

[8] The 2013 Poverty Guidelines for the 48 Contiguous States and the District of Columbia, accessed online at:

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