It is counter-intuitive to imagine that when health insurance rates increase, your health insurance premium can decrease, but it is true for some regions of California. If the second lowest cost Silver plan increases more than your health plan, the subsidy is larger and you pay less.
Second Lowest Cost Silver Rate Increase can Reduce Monthly Premiums
Of course, not everyone will see their health insurance premiums decrease year over year. There are lots of inputs that will change your Covered California monthly premiums. However, an important factor is the cost of the second lowest Silver plan rate in your region. The second lowest cost Silver plan is the benchmark plan upon which the subsidies are calculated.
Covered California Rating Regions
First, we must recognize that California is broken up into 19 different rating regions. Some regions, like Region 1 in Northern California, is comprised of 22 different counties. Some of the counties only have two health plans offered. There are many regions that are a single county. Los Angeles is the only county that has two separate regions. All these regions can have different carriers as the second lowest cost Silver plan and each region have its own distinct rates.
Age Rate Increase Plus Inflation Increase
The nature of health insurance rates is they generally increase with age. The Affordable Care Act states that the highest rate for a 64-year-old can be no more than 300 percent that of a 21-year-old adult. The rate increase between those ages is not a straight line. Beginning in 40s, the year over rate increase in larger than in the younger years.
Discreet Age Rate Percentage Increases
The one year age change may be as little as 0 or .5 percent increase. Aging in your 50s will yield 4 percent increase in the premiums. The increases are weighted largest for individuals over 50 years of age. In other words, you are guaranteed a rate increase of 4 percent in your 50s just because you lived another year.
Every year, the carriers will layer on a rate increase across board on all plans for inflation. At a minimum, your health insurance premiums will increase because you are a year older and a bump for inflation. All of this is straight forward until the ACA Advance Premium Tax Credit (APTC) subsidies enter the picture.
Consumer Fair Share Responsibility Percentage
Covered California figures the monthly subsidy based on making the second lowest cost Silver plan a certain percentage of your household income. Your household income, for the purposes of calculating the subsidy, is a function of the federal poverty level. If your household income, for your household size, is 200 percent of the federal poverty level, based on the formula, you should pay no more than 2 percent of your household income to health insurance, IF you select the second lowest cost Silver or a plan with a lower health insurance premium.
If your household income is 400 percent or more of the federal poverty level, you should pay no more than 8.5 percent of the income on health insurance for the second lowest cost Silver plan. You don’t need to apply the subsidy to the second lowest cost Silver plan. You can apply it to any metal tier with any health plan offered to you.
The APTC subsidy is the amount of money sent to your selected health plan to lower your monthly premium to the consumer responsibility percentage based on your income. Through 2025, households with incomes over 400 percent of the federal poverty will continue to get subsidies to make the SLCSP no more than 8.5 percent of the income. If the annual premium for the SLCSP is less than 8.5 percent of the income, there is no subsidy offered.
2025 Covered California Income Table
Comparing Second Lowest Cost Silver Plans 2024 and 2025
Second Lowest Cost Silver Plan comparison uses a single individual who was 40 years old in 2024, 41 in 2025 to account for the age increase. The full rate of Silver plan is represented, no subsidy other than the $1 discount by Covered California. For 2025, Covered California will offer the enhanced Silver 73 to ALL consumers over 200 percent of the FPL.
When we compare plan years, we can see that the second lowest cost Silver plan (SLCSP) is not consistent. We see the greatest changes to the subsidy when a new carrier becomes the SLCSP. In Region 3 Western Health Advantage was SLSCP for 2024. In 2025 AetnaCVS HMO became the SLCSP with a large rate increase. The SLCSP rate increased 16.54 percent. That translates into a larger subsidy for everyone in Region 3.
If we assume the individual has an income of $40,000 for both years, the subsidy increases 27 percent because of the higher AetnaCVS SLCSP rate. This results in a 3.5 percent decrease in the person’s Blue Shield PPO Silver 73 plan. The monthly premium decreases even though the Blue Shield PPO plans had a combined inflation increase and a 1.27 percentage age related increase, for a total increase of 8.78 percent for 40 to 41 years of age.
There are times when some regions get a huge windfall of subsidies. In Region 9, Valley Health Plan left the region. This dropped the expensive Blue Cross EPO into the SLCSP slot. This resulted in a 57 percent increase of the SLCSP rate in 2025 from Blue Shield HMO that was the SLCSP in 2024.
For the 41 year old individual, their Blue Shield Silver plan rate plummeted by 63 percent from $452.84 in 2024 to $166.58 in 2025. This was all due to the monthly subsidy increasing 81 percent from $453.12 to $818.77. Like the previous example, the APTC subsidy increased because the SLCSP increased. The increase in the SLCSP of Region 9 swamped both the rate increase for age and inflation, reducing the individuals monthly premium for the Blue Shield PPO Silver plan.
Region 17, Inland Empire, had a very modest rate change for the SLCSP. The Health Net HMO remained the SLCSP and had a 5.45 percent increase for a 41 old individual. Unfortunately, the Blue Shield Silver plan the individual is enrolled in had a rate increase larger than the SLSCP. While the subsidy increased, it did not keep pace with the inflation increase of the Blue Shield PPO plan. The Silver plan rate increases 5 percent from $371.59 to $391.23 for the 41 year old individual.
Because of the various inputs into the heath insurance rates, it can be hard to predict if someone’s monthly health insurance premium will increase or decrease from one year to the next.
