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California health insurance exchange / marketplace

2 new carriers joining Covered CA; 4% weighted average rate increase; consumers who shop around could see lower premiums

2016 rates and carriers

In every other state in the country, proposed rate increases of ten percent or more have been available on Healthcare.gov’s rate review tool since the first of June.  But Covered California negotiated a six week delay, and rate proposals for California plans were not made public until July 27.

That’s when Covered California announced that the weighted average rate increase for their plans would be a mere 4 percent next year, and that consumers who shop around (which should be everyone!) would have the opportunity to lower their premiums by an average of 4.5 percent, and as much as ten percent in some areas of the state.

Two new carriers are also joining Covered California for 2016: Oscar Health Plan and United Healthcare – bringing the total number of exchange carriers from ten to twelve.  Covered CA is one of ten state-run exchanges that has an “active purchaser” model, meaning that they negotiate directly with carriers to make sure that rates, networks, and benefits are as consumer-friendly as possible (the other state-run exchanges simply set minimum standards that carriers must meet, and then allow the sale of any plans that meet those guidelines).

United Healthcare applied in January to join Covered California state-wide, but the exchange initially rejected the proposal, citing a rule that requires carriers to wait at least three years to enter the marketplace if they didn’t offer plans for sale starting in 2014.  In February, the exchange issued a compromise, allowing United Healthcare the opportunity to sell plans in five of the state’s 19 regions where fewer than three carriers offer coverage.  The compromise provides the possibility for more competition and choices for consumers, while also preventing carriers from sitting out the initial years of open enrollment and then undercutting existing plans state-wide in subsequent years.

Charles Gaba reports that Covered CA is aiming to increase their effectuated enrollment total by 200,000 people during the 2016 open enrollment period (November 1 to January 31).

Exchange caps monthly prescription costs

The cost of high-end prescription drugs is a growing problem for healthcare cost sustainability, and the rising cost of prescriptions is cited repeatedly in justifications provided by insurers requesting double digit rate increases.  But the cost of specialty medications can also be an insurmountable burden for patients, even when they have health insurance.  For high end specialty medications, like Sovaldi, it’s not uncommon for patients to reach their maximum out-of-pocket exposure very quickly, paying thousands of dollars per month in coinsurance for their medications.

In May, Covered California rolled out a cap on prescription costs that will be effective in 2016, along with various other benefit enhancements that allow consumers access to more care without having to meet steep deductibles.  Because Covered California requires plan standardization on and off-exchange, the prescription copay cap will also be available to many consumers purchasing plans outside the exchange.  The cap will be linked to the metal level of the plan purchased; for the majority of consumers, the cap will be $250 per specialty medication per month, but it will range from $150 to $500, with bronze plan enrollees having the highest specialty drug copay cap.

The California legislature is working to create a similar cap state-wide, to include non-grandfathered group and individual plans sold only outside Covered California.  Assembly Bill 339 would take effect July 1, 2016 for group plans, and January 1, 2017 for individual plans.  It would limit the copayment for a 30 day supply of any medication to no more than one twenty-fourth of the plan’s annual maximum out-of-pocket allowed under the ACA (in 2015, the maximum out-of-pocket is $6,600; one twenty fourth of that would be $275).  For plans designated as high deductible policies, the copay limit would apply after the deductible is met.

The California Assembly passed the bill (48 – 30) in early June, and it’s now with the Senate.

Budget and projections for 2016

In May, Covered California revised its 2016 enrollment projection down to 1.48 million people, growing to nearly 2 million by 2019.  The exchange had projected 1.7 million enrollees for 2015, but ended up with 1.4 million – a 1 percent net growth over 2014, which put them among the worst-performing exchanges in terms of year-over-year growth.

In addition to a smaller estimated enrollment, the exchange is also tightening its budget for fiscal year 2016, which starts July 1.  The budget for the upcoming fiscal year is $332.9 million, which represents a $58 million spending cut when compared with 2015.  Covered California still has $100 million in federal start-up money that can be used during the upcoming fiscal year, but no further federal funds are available.  The bulk of the exchange’s revenue comes from a $13.95/month fee on every policy, and that source is unchanged from the 2015 fiscal year.

Enrollment update

Total private plan enrollment in Covered California exceeded 1.4 million people by April 19.   The exchange had a goal of enrolling half a million new applicants in private plans for 2015, and more than 495,000 new consumers selected health plans through Covered California between Nov. 15, 2014, and Feb. 22.  Between February 23 and May 10, another 117,024 people enrolled in coverage through the exchange as a result of various qualifying events.

By the end of March, total effectuated enrollment in private plans through Covered CA stood at 1,364,659 people (attrition is a normal part of the individual health insurance market – some enrollees don’t pay their premiums, and others cancel their coverage early in the year).  In the press release regarding 2016 rates, the exchange noted that effectuated enrollments were still “more than 1.3 million” as of late July.

Covered California is touting better signup rates among Latinos and African-Americans during the 2015 open enrollment period. Enrollment by minorities lagged in 2014, prompting a reallocation of marketing dollars, the launch of a Spanish-language enrollment website, and an increase in bilingual customer service representatives.

Despite the tax credits that are designed to keep exchange coverage affordable, a recent survey found that 44 percent of Covered California enrollees have difficulty paying their premiums, compared with 25 percent of those with employer-sponsored insurance or private coverage purchased outside the exchange.  Covered California CEO Peter Lee noted that the ACA’s premium tax credits don’t give enrollees a “free lunch” and explained that even heavily subsidized premium are a heavy lift for low-income enrollees.

2015 renewals… 92% or 65%?

In addition to new enrollees, about 917,930 existing exchange enrollees re-enrolled for 2015. In late January, the exchange reported that they had implemented the renewal process for about 92 percent of people who were eligible to re-enroll.  They put the total number eligible to re-enroll at a little over 1 million people; there had been 1.1 million private plan enrollees as of December, but about 85,000 of them were determined eligible for Medi-Cal for 2015.  Of those who re-enrolled for 2015, approximately 386,000 people actively shopped for a renewal policy while about 576,000 people were automatically re-enrolled in the same plans from 2014.

In April, however, Avalere Health reported that Covered California had retained only 65 percent of their 2014 enrollees for 2015, which could leave people wondering which number to believe.  In reality, they’re both correct – it just depends on how you look at it.  Avalere’s calculation is based on total enrollment as of April 2014, and the percentage of that number that renewed for 2015.  Although the exchange reported that they had renewed coverage for 92 percent of their eligible enrollees, that doesn’t count attrition throughout 2014 (attrition is normal in the individual market, and is to be expected), and is based on the number of people who were enrolled in December who re-enrolled for 2015.   But the two re-enrollment data points – 65 percent and 92 percent – are an example of how numbers don’t tell the whole story.

If we just look at total private plan enrollment at the end of the 2014 open enrollment period (1,405,102) versus total private plan enrollment at the end of the 2015 open enrollment period (1,412,200), Covered California increased their private plan enrollment by about 7,000 people this year.

Will undocumented immigrants gain access to coverage?

California lawmakers are considering options for providing access to health insurance for the state’s undocumented immigrants.  SB4 would extend Medi-Cal to undocumented immigrants who qualify based on income, and would allow undocumented immigrants with higher incomes the opportunity to purchase health insurance through Covered California, albeit without access to subsidies.  This would require a federal waiver however, because the ACA does not allow undocumented immigrants to enroll in coverage through the exchanges, even if they pay the entire premiums themselves.

SB4 passed the Senate in early June, and is currently with the Assembly.

Will pregnancy trigger a special enrollment period?

Lawmakers in California are also considering a bill that would make pregnancy a qualifying event.  CA AB1102 would allow a pregnant woman access to a new health plan when she becomes pregnant, but only if she does not already have minimum essential coverage.  AB1102 passed the Assembly, and is currently with the Senate.

Currently, under federal regulations, the birth or adoption of a child is a qualifying event, but pregnancy is not (HHS revisited this question in early 2015, and reiterated their position that pregnancy is not a qualifying event at the federal level).  This means that although the mother and baby both have access to health insurance once the child is born, they do not have access to coverage during the pregnancy if the mother lacks insurance and doesn’t qualify for any of the other special enrollment periods (Medi-Cal is available year-round for those who qualify based on income).

What happens if you don’t sign up?

The Affordable Care Act now requires most people to have health insurance. Those who don’t have insurance — and don’t qualify for an exemption — have to pay a penalty when they file their income tax return.

Penalties are increasing for 2015: 2 percent of your household income or $325 per adult ($162.50 per child under 18), whichever is more. Use this calculator to see how much you may owe.

2015 premiums up slightly

A study published by the Commonwealth Fund shows 2015 rates for Covered California plans increased 1 percent on average. The overall average is weighted and considers all metal tiers. The average cost of individual bronze policies is up 1 percent, the average cost of individual silver policies is flat, the average cost of individual gold policies is up 1 percent, and the average cost of individual platinum policies is up 2 percent.

Detailed rate information is available online via the shop and compare tool and in booklet form.

Insurers participating in 2015

The following ten insurers are offering individual and family plans on Covered California for 2015: Anthem Blue Cross of California, Blue Shield of California, Chinese Community Health Plan, Health Net, Kaiser Permanente, L.A. Care Health Plan, Molina Healthcare, Sharp Health Plan, Valley Health Plan, and Western Health Advantage. All of these insurers participated in the 2014 marketplace.

Not all insurers are available in all parts of the state. In fact, in some ZIP codes just a single company offers plan options. Approximately 29,000 Covered California customers have only one choice of insurance carrier. Peter Lee, executive director of Covered California, says the exchange is trying to address the problem, but the lack of competition in rural areas is a long-standing issue and not one created by the formation of Covered California.

UnitedHealthcare, the nation’s largest health insurance company, asked to join Covered California and sell policies statewide in 2016. However, the Covered California board agreed to let United into just five regions where competition is currently limited. The board’s new policy applies to established insurers, but not startups.

United previously sold individual policies in California, but decided not to participate in California’s marketplace for its first two years of operation. Lee indicated that United and other established insurers who avoided the uncertainty of the early years shouldn’t be allowed immediate, statewide access to potentially undercut insurers who have been with the exchange since its launch.

Oscar Health also wants to join Covered California for 2016. Oscar was formed in 2014 and currently operates in New York and New Jersey.

Covered California had announced in August 2014 that they would have stand-alone adult and family dental plans available for purchase in 2015, and five carriers had planned to offer stand-alone dental coverage through the exchange.  But that has been delayed – probably until 2016 – because of problems with the exchange website.

California’s SHOP exchange

California’s Small Business Health Options Program (SHOP) exchange is open to businesses with one to 50 employees. Small businesses can sign up and offer coverage to their employees year round. Small businesses must submit a completed application and the first month’s premium at least five business days before the end of the month to have coverage starting the first day of the following month.

Online enrollment is not yet available through SHOP. Online enrollment was initially delayed until late November 2013, nearly two months after individual enrollment began. Then, the SHOP was taken offline in mid-February as it “was not meeting the needs of agents or small employers,” according to a Covered California press release. A fall 2014 re-launch of the SHOP enrollment portal was planned. However, as of January 2015 the Covered California site continues to instruct interested small employers to contact a certified insurance agent.

These insurers are offering 2015 medical plans through the SHOP: Blue Shield of California, Chinese Community Health Plan, Health Net, Kaiser Permanente, Sharp Health Plan, and Western Health Advantage.

2014 enrollment

The U.S. Department of Health and Human Service’s final 2014 enrollment report showed that 1,405,102 Californians signed up for commercial health insurance between Oct. 15, 2013, and April 19, 2014.

About 800,000 Californian households received premium subsidies to help pay for 2014 coverage. On average, each household received $5,200 in subsidy assistance. About 480,000 of the households also received cost-sharing assistance valued at about $1,200.

The Gallup-Healthways Well-Being Index found that California’s uninsured rate dropped 6.3 points, from 21.6 percent to 15.3 percent, from 2013 to 2014.

History of California marketplace

California was the first state to authorize an exchange under the Affordable Care Act, with former Gov. Arnold Schwarzenegger signing legislation in 2010.

While Covered California had the nation’s most successful 2014 open enrollment period in terms of the number of signups, it has faced some persistent criticisms and issues.

Enrollment by minorities was low in 2014. To address the issue, Covered California boosted funding and resources to better reach minority communities. According to a Covered California press release, the exchange spent more on advertising that targets Latinos, launched a Spanish-language enrollment website, added more than 200 bilingual customer service representatives, and partnered with several organizations for improved outreach.

Limited physician networks and inaccurate physician directories have been an issue for Covered California and for individual health plans. Covered California removed its online physician directory due to errors for several weeks in October 2013 and again in February 2014. Covered California has not said if or when the online directory will be restored.

Class-action lawsuits were filed against several insurers in July and September 2014 alleging that the companies provided incomplete or inaccurate information about networks or provided network information too late to allow consumers to switch to other plans. In November 2014, the California Department of Managed Health Care (DMHC), the state agency that regulates health plans, ruled that Anthem Blue Cross and Blue Shield of California misled consumers about the size of their physician networks. Both companies disputed the findings.

In August 2014, the California Legislature passed SB 964, which authorizes the DMHC to scrutinize the networks for plans sold on Covered California as well the networks of Medi-Cal plans. Gov. Brown signed the bill in October 2014, despite opposition from the California Department of Finance as well as the California Association of Health Plans, a trade association.

In January 2015, the California Department of Insurance issued emergency regulations to address network access. The regulations specify standard wait times for various medical procedures, require insurers to provide information about physicians, and mandate that provider directories be updated weekly and that directories be available online and in hard copy. The regulations also require insurers to arrange out-of-network care if an in-network provider isn’t accessible. The emergency regulations must undergo a legal review before going into effect.

California health insurance exchange links

Covered California
888-975-1142

California Health Benefit Exchange
Information about exchange planning and development

State Exchange Profile: California
The Henry J. Kaiser Family Foundation overview of California’s progress toward creating a state health insurance exchange.