Premiums in California's health insurance exchange would rise by an average of 8.7% next year, marking a return to more modest increases despite ongoing threats to the Affordable Care Act.

The state marketplace, Covered California, said the rate increase for 2019 would have been closer to 5% if the federal penalty for going without health coverage had not been repealed in last year's Republican tax bill.

The average increase in California is smaller than the double-digit hikes expected around the nation, primarily due to a healthier mix of enrollees and more competition in its marketplace.

Still, health insurance prices keep growing faster than wages and general inflation as a result of rising medical costs overall, squeezing many middle-class families who are struggling to pay their household bills. The 8.7% increase in California ends two consecutive years of double-digit rate increases for the state marketplace.

Health care costs

"It is not great that health care costs are still increasing that much, but the individual market is not sticking out like a sore thumb as it has in other years," said Kathy Hempstead, senior adviser at the Robert Wood Johnson Foundation. "It's falling back to earth."

The future may be less bright. An estimated 262,000 Californians, or about 10% of individual policyholders in and outside the exchange, are expected to drop their coverage next year because the ACA fines were eliminated, according to the state.

Peter Lee, executive director of Covered California, warned that the departure of healthier consumers would drive up insurance costs beyond 2019 — not just for individual policyholders but California employers and their workers.

"We are paying, in essence, a surcharge for federal policies that are making coverage more expensive than it should be," Lee said in an interview. "There will be more of the uninsured, and more uncompensated costs passed along to all of us," said Lee.

Critics of the Affordable Care Act say it has failed to contain medical costs and left consumers and taxpayers with heavy tabs. Nearly 90% of Covered California's 1.4 million enrollees qualify for federal subsidies to help them afford coverage.

Foiled in its attempt to repeal Obamacare outright, the Trump administration has taken to rolling back crucial parts of the law and has slashed federal marketing dollars intended to boost enrollment.

Instead, the administration backs cheaper alternatives, such as short-term coverage or association health plans, which don't comply fully with ACA rules and tend to offer skimpier benefits with fewer consumer protections.

Nationally, 2019 premiums for silver plans, the second-cheapest and most popular plans offered, are expected to jump by 15%, on average, according to an analysis of 10 states and the District of Columbia by the Avalere consulting firm. Prices vary widely across the country, however. Decreases are expected in Minnesota while insurers in Maryland are seeking 30% increases