Cal­i­for­nia achieves near-uni­ver­sal cov­er­age

Modern Healthcare - - INSURANCE - By Shelby Liv­ingston

“The rea­son peo­ple buy cov­er­age that they didn’t be­fore is be­cause they get fi­nan­cial help to do it.” Peter Lee Ex­ec­u­tive di­rec­tor Cov­ered Cal­i­for­nia

AUSTIN, Texas—As many as 1,200 coun­ties in the U.S. may have only one in­surer of­fer­ing health plans on Oba­macare ex­changes next year. And 47 coun­ties may not have any in­surance op­tions, ac­cord­ing to new pro­jec­tions from the CMS.

But that’s not the case in the na­tion’s most pop­u­lous state. In Cal­i­for­nia, 11 plans com­peted for con­sumers in 2017 and the state has been known to turn away in­sur­ers be­cause of high prices and in­ad­e­quate net­works. So while there’s con­sid­er­able hand-wring­ing in such states as Alabama, Iowa and Ohio, Cal­i­for­nia serves as a bit of a shin­ing ex­am­ple of an in­surance ex­change gone right. Whether the state can sus­tain the mo­men­tum if el­e­ments of the Af­ford­able Care Act are re­pealed re­mains to be seen.

Cal­i­for­nia’s unin­sured rate fell from 17% be­fore the ACA to about 7% today. Half of the unin­sured are un­doc­u­mented im­mi­grants and not el­i­gi­ble for ACA cov­er­age, mean­ing the unin­sured rate is closer to 3.6%, one anal­y­sis shows.

“Cal­i­for­nia has in essence reached vir­tu­ally uni­ver­sal cov­er­age,” said Peter Lee, ex­ec­u­tive di­rec­tor of the state-op­er­ated in­surance ex­change, Cov­ered Cal­i­for­nia, dur­ing a ses­sion ear­lier this month at the 2017 AHIP In­sti­tute and Expo in Austin. “We’ve done that in an in­di­vid­ual mar­ket that has ac­tu­ally kept pre­mium in­creases at his­tor­i­cally low lev­els. We’ve done that with a very com­pet­i­tive mar­ket­place.”

The av­er­age rate in­crease for 2017 was 13.2%. In 2016 and 2015, rates rose just 4% and 4.2%, re­spec­tively. Cov­ered Cal­i­for­nia has not yet pub­lished health in­sur­ers’ rate re­quests for 2018.

Cal­i­for­nia en­joyed some built-in ad­van­tages com­pared with other states when it came to run­ning an in­surance ex­change, said Larry Le­vitt, se­nior vice pres­i­dent at the Kaiser Fam­ily Foun­da­tion, who was not part of the AHIP ses­sion. He said state of­fi­cials and large in­sur­ers, such as Kaiser Per­ma­nente, sup­ported re­form. The state also re­ceived sig­nif­i­cant fed­eral grant dol­lars. But Cov­ered Cal­i­for­nia also took steps to en­sure suc­cess. “It’s sort of a com­bi­na­tion of na­ture and nur­ture,” Le­vitt said.

Key to Cov­ered Cal­i­for­nia’s suc­cess was the state’s de­ci­sion to ex­pand Med­i­caid, Lee said; 1 out of 3 Cal­i­for­ni­ans un­der the age of 65 are on Med­i­caid. The ACA al­lowed states to ex­tend Med­i­caid to adults with in­comes up to 138% of the fed­eral poverty level. A few stud­ies have shown that states that ex­panded Med­i­caid had lower mar­ket­place pre­mi­ums. That’s be­cause lower-in­come in­di­vid­u­als with higher rates of ill­ness, and thus higher med­i­cal spend­ing, were taken out of the ex- change risk pool and those costs were shifted to Med­i­caid.

Cov­ered Cal­i­for­nia spends more than $100 mil­lion an­nu­ally on mar­ket­ing the ex­change to con­sumers. The mar­ket­ing bud­get comes from a pre­mium tax the ex­change levies on health in­sur­ers. The av­er­age con­sumer in the state is ex­posed to a Cov­ered Cal­i­for­nia ad in print, ra­dio or tele­vi­sion about 49 times a year, Lee said. “If you don’t mar­ket and sell, you don’t get a good risk mix,” he said. Dur­ing the last few weeks of the 2017 open en­roll­ment, the Trump ad­min­is­tra­tion pulled back on en­roll­ment out­reach. Ex­perts say the move likely dented ACA ex­change en­roll­ment, which fell to 12.2 mil­lion in 2017 from 12.7 mil­lion the year be­fore.

The ex­change also stan­dard­ized the ben­e­fit de­signs of plans of­fered on the in­di­vid­ual mar­ket. For all peo­ple en­rolled in sil­ver plans or above, out­pa­tient care isn’t sub­ject to a de­ductible. Con­sumers can make ap­ples-to-ap­ples com­par­isons and shop based on pre­mi­ums, out-of-pocket ex­penses and whether their doc­tors are in the plan’s net­work, Lee said.

But the cost-shar­ing re­duc­tion sub­si­dies are “the se­cret sauce” to why there are very few unin­sured in Cal­i­for­nia, Lee said. “The rea­son peo­ple buy cov­er­age that they didn’t be­fore is be­cause they get fi­nan­cial help to do it.”

Fund­ing for those fed­eral sub­si­dies, which help low-in­come Amer­i­cans af­ford cov­er­age on the ex­changes, hasn’t been guar­an­teed by the Trump ad­min­is­tra­tion for 2018 or even the rest of the 2017, cre­at­ing uncer­tainty that has led some in­sur­ers to hike 2018 rate re­quests or pull out of cer­tain mar­kets.

It’s “crazy” that fund­ing for the sub­si­dies is in ques­tion, Lee said. Cov­ered Cal­i­for­nia’s low rates will jump if the Trump ad­min­is­tra­tion doesn’t agree to fund the sub­si­dies by mid-March. At that point the state’s ex­change, which re­quired in­sur­ers to sub­mit two sets of rates—one that as­sumes fund­ing for the sub­si­dies and one that does not— will go with the worse-case-sce­nario rates, Lee said.

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