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Pemiums on California’s health insurance exchange will rise by an average of 0.8 percent next year, the lowest increase in the agency’s history, state officials announced this month.

Covered California Executive Director Peter Lee credited two new statewide initiatives for keeping the proposed rate hikes low: Next year, California will be the first state in the country to offer state-funded tax credits to middle-class enrollees, which will be paid for in part by a new tax penalty on Californians who don’t have health insurance.

“It shows what happens when a state says, ‘Protect the Affordable Care Act and build on it to make the system work for all Californians,’” Lee said.

Covered California estimates that the state-based tax credits, in conjunction with the new state tax penalty, will result in 229,000 newly insured Californians.

The average rate hike for 2020 is far lower than this year’s average increase of nearly 9 percent—and the five-year average increase of 8.4 percent. Covered California began offering health plans in 2014 to individuals and families who purchase their own insurance as part of the state’s implementation of the Affordable Care Act.

Most Covered California enrollees receive financial assistance based on their incomes.

California’s announcement of 2020 Obamacare rates comes at a precarious moment for the federal health law: Oral arguments were set to start Tuesday in a landmark lawsuit filed by a group of Republican attorneys general who want the entire health law overturned. The 5th Circuit Court of Appeals in New Orleans heard oral arguments in the case, known as Texas v. United States. California Attorney General Xavier Becerra is leading a group of Democratic attorneys general in defending the Affordable Care Act.

The Trump administration, through the Department of Justice, has declined to defend the law. Depending on what happens at the appeals court, the health law could reach the U.S. Supreme Court before the 2020 presidential election.

The Trump administration has taken other steps to hobble Obamacare, including shortening the annual open-enrollment period for the federally run health insurance exchange, healthcare.gov, and drastically slashing funding for enrollment outreach efforts. Administration officials have said that a replacement plan for Obamacare will be unveiled soon.

Matthew Fiedler, a fellow with the USC-Brookings Schaeffer Initiative for Health Policy, said California’s “relatively subdued” rate increase shows that insurers expect the state’s new health insurance requirement and tax credits to help bring healthier people into the market — and are responding with lower premiums for consumers.

“Everything California is doing depends on the Affordable Care Act remaining in place,” Fiedler said.

Lee said the 11 health insurers participating in Covered California would return next year, and Anthem Blue Cross, a national plan, will expand its offerings in the state. Anthem’s expansion comes after it pulled out of some regions in 2018. The insurer will expand into the Central Coast, parts of the Central Valley, Los Angeles County and the Inland Empire, Lee said.

Nearly all Californians will have a choice of at least two insurers, Lee said.

California is divided into 19 pricing regions, and not all 11 plans participating in the exchange next year will be offered in each region. In some regions, the rate increase will be higher than the statewide average. In others, it will be lower.

What consumers ultimately pay depends on where they live, their income, how much coverage they want and their choice of insurer.

The health exchange is expected to release proposed rates by region on July 17; state regulators must approve them.

California’s new financial assistance for middle-class consumers, combined with the average rate decrease for silver plans, may encourage some people who previously bought less-expensive bronze plans to move up to silver plans. Silver plans provide more coverage with lower out-of-pocket costs for medical care, said Anthony Wright, executive director of the consumer advocacy group Health Access.

This year, nearly 31 percent of Covered California enrollees chose bronze plans, which are not eligible for cost-sharing subsidies.

“As the Trump administration seeks to blow up the Affordable Care Act, California is succeeding at making it better,” Wright said.

Open enrollment for 2020 is expected to start in October. State lawmakers are weighing whether to extend the enrollment period to Jan. 31. Open enrollment for 2019 coverage ended on Jan. 15.