How state plans to protect insured
Covered California has more leeway than others to set the rules for health care plans
Hell hath no fury like a president scorned. And with the embarrassing collapse of the GOP-controlled Senate’s plan to repeal and replace the Affordable Care Act, many health care experts predict that Donald Trump and his administration will do whatever it takes to “let Obamacare fail,” as the president put it last week.
But the people who run the state’s Obamacare insurance marketplace say they have their own plans in place to make sure hundreds of thousands of Californians don’t lose their health coverage.
“We have pieced together good ideas that have come from health plans and advocates — four or five elements, all about protecting consumers,’’ said Peter Lee, Covered California’s executive director.
Motivating the effort is this stark reality: Even without Con-
“Most other states don’t have the ability to do what we do.’’ — Peter Lee, Covered California
gress’ assent, Trump has a variety of options to obstruct or even undermine the Affordable Care Act.
Among the strategies is a fallback plan in case the Trump administration eliminates the subsidies that help low-income Obamacare enrollees pay for out-of-pocket medical expenses. Even if Trump uses his executive powers to weaken the enforcement of a critical part of the law — the individual mandate requiring people to have health insurance or pay a steep tax penalty — California could impose its own.
Finally, if Trump curtails the advertising surrounding the upcoming 2018 enrollment season, as his administration did last winter to drive down the number of sign-ups, Covered California can rely on its own robust budget for marketing and outreach efforts.
“Most other states don’t have the ability to do what we do,’’ Lee said last week by phone from Washington, D.C., where he was meeting with congressional staff and administration officials as well as leaders of other statebased marketplaces to talk up California’s successes with Obamacare.
Unlike other state-based exchanges in the country, Lee said, California’s has greater leeway to shape the market and set the rules of the road for health plans — a result of a bipartisan effort by the Democraticcontrolled Legislature and former Republican Gov. Arnold Schwarzenegger.
Health care experts say Covered California’s ability to maintain an array of health plans leads to lower premiums and lower annual rate hikes compared with states that depend on the federally operated exchange.
Since Obamacare kicked into gear in January 2014, the law has slashed the rate of uninsured Californians by more than half. Those numbers were boosted by the 3.8 million residents who took advantage of a provision that allows adults without dependent children to enroll in Medicaid, the low-income health program that the Golden State calls Medi-Cal.
“It’s a creative solution and a good example of where California is trying to get out ahead of the curve.” — Amy Adams, California Health Care Foundation
As long as Republicans don’t pass a replacement health care bill, there’s little Trump can do to undermine the half-centuryold Medi-Cal program. So Lee’s biggest priority will be to save the private plans on the health insurance exchange that now enroll 1.4 million Californians — most of whom are in highly subsidized plans.
Obamacare is primarily funded by the federal government by spending reductions in Medicare, tax hikes on the wealthy and taxes on drug and medical equipment makers.
The law’s generous subsidies are available to any legal California resident earning between 139 percent and 400 percent of the federal poverty level. But anyone who earns between 139 percent and 250 percent of the poverty threshold — between $34,200 and $61,500 for a family of four — also is eligible for additional subsidies called “cost-sharing reductions,” which lower out-of-pocket costs such as co-pays and deductibles.
About 7 million Americans, including roughly 700,000 Californians, receive those extra subsidies. And the federal government reimburses insurers on the exchanges about $7 billion to reduce the cost of the co-pays and deductibles for low-income people.
In 2014, however, House Republicans sued the Obama administration, saying that Congress never appropriated funding to give insurers that money. A federal judge ruled in the Republicans’ favor and ordered that payments be stopped. But the ruling was appealed by the administration, and the payments were allowed to continue pending the appeal.
Not only would a decision by Trump to end to those subsidies send many premiums soaring because health insurers would have to pick up those costs themselves, many companies would also likely flee the markets, said Amy Adams, a senior program officer at the Oakland-based California Health Care Foundation.
In anticipation of such a move, Covered California has devised a work-around.
For 2018, the exchange will allow health insurance companies to artificially inflate their popular “Silver” plan rates to cover the cost of cost-sharing reductions.
But consumers enrolled in moderately priced “Silver” plans whose rates are inflated should not be adversely impacted because their monthly subsidy — paid by the federal government — also would increase, Lee said.
“It’s a creative solution and a good example of where California is trying to get out ahead of the curve,” Adams said.
Experts also say that the Golden State has managed to keep rates relatively stable because California’s large population helps attract more insurers, which makes the marketplace more competitive. The exchange also aggressively negotiates directly with insurers to get the best rates, networks and benefits.
If Trump decides not to enforce the tax penalty for not having insurance, experts predict more people would likely go without coverage — and that would shrink the insurance pool, leaving older and sicker people in the pool, causing premiums to skyrocket.
How could the state fight that decision?
One little-known part of the Affordable Care Act allows states to pass an individual mandate, enacting their own tax penalty for not having health insurance, said Robert Laszewski, a Virginia-based health policy expert.
Lee said Massachusetts, which passed a health care law similar to Obamacare in 2006, has a such a mandate and “it can work.” But, he noted, the decision is the prerogative of the Legislature — and the new law would require a two-thirds vote.
Anthony Wright, executive director of the advocacy group Health Access California, said to have any effect on Covered California’s open enrollment later this year, that vote would have to happen before September — when the current legislative session ends.