Health insurance in California
- California’s state-run exchange is considered one of the most successful.
- California implemented an individual mandate and state-based premium subsidies in 2020.
- California’s open enrollment continues through January 31 each year. A special enrollment period due to COVID-19 continues until June 30 for uninsured residents.
- Eleven insurers offer 2020 coverage in the California individual market, with an average premium increase of less than 1% for 2020.
- New California law means many independent contractors were reclassified as employees as of 2020, and eligible for labor law protections.
- About 1.54 million Californians enrolled in 2020 coverage through the exchange.
- California accepted the ACA’s Medicaid expansion in 2013.
- California law bans the sale or renewal of short-term health insurance as of 2019.
- Nearly 6.4 million Californians were enrolled in Medicare as of early 2020.
California’s health marketplace
California’s state-run exchange, Covered California, is widely regarded as one of the most successful established under the Affordable Care Act. During the open enrollment period for 2020 coverage, 1.54 million people enrolled in private plans through Covered California
California enacted legislation in 2019 to create a state-based individual mandate and state-based premium subsidy program, both of which took effect in 2020. The individual mandate has a non-compliance penalty that mirrors the federal penalty that was in effect in 2018. California allocated $295 million in state funds to provide premium subsidies to people earning between 400 and 600 percent of the poverty level (ie, people who aren’t eligible for federal premium subsidies), as well as supplemental subsidies for enrollees with income between 200 and 400 percent of the poverty level.
California enacted legislation in 2019 that permanently sets open enrollment dates that differ from the rest of the country. California will continue to have a three-month open enrollment period, running from November 1 through January 31 each year. Due to the COVID-19 pandemic, Covered California opened a special enrollment period for uninsured residents who don’t have qualifying events, giving them until June 30, 2020 to enroll in a plan through the exchange.
There are 11 insurers offering individual health plans through Covered California for 2020. The average rate changes for 2020 vary by region in California, but the overall weighted average increase for individual plans was less than 1 percent — the smallest it’s ever been since Covered CA opened for business. The modest rate increase was due in large part to California reinstating an individual mandate as of 2020.
New California law requires some independent contractors to be classified as employees as of 2020
California AB5, enacted in September 2019, took effect in January 2020 and requires some businesses to reclassify certain independent contractors as employees (here’s a summary of the legislation). Employees are eligible for various benefits that aren’t provided to independent contractors, including minimum wage ($12/hour in California), worker’s compensation, employer contributions to Social Security and Medicare (FICA taxes), and overtime pay.
And under the ACA’s employer mandate, large employers (50+ full-time equivalent employees) are required to offer their full-time (30+ hours per week) employees health insurance that is affordable and provides minimum value. There is no requirement that coverage be offered to independent contractors, but large employers must offer health benefits to people who are newly reclassified as full-time employees.
Employers will generally be able to use the look-back method of determining whether newly reclassified workers are working full-time, which will give them up to a year to make the determination and begin offering coverage to those who work 30+ hours per week (the look-back method is only available for use if an employee is seasonal or has variable hours, but employers would generally be able to consider newly reclassified workers — who have flexible hours and schedule their own worktime — as variable-hour employees.)
Small businesses are not required to offer health benefits under the ACA. But if they do offer coverage, the offer cannot be discriminatory — benefits can only vary based on bona fide employee classifications, so newly-reclassified employees would have to be offered the same coverage as other workers as long as they fall within the same employee classification.
Several industries are exempt from the new law, including doctors, accountants, architects, real estate agents, travel agents, graphic designers, investment advisors, and in some settings, barbers, cosmetologists, and manicurists. Uber and Lyft, which have long battled the issue of employee misclassification, are working to get an initiative on the 2020 ballot that would have drivers classified as independent contractors.
But for businesses that are subject to the new law, there is no doubt that more workers are being classified as employees rather than independent contractors starting in 2020. And while that will likely result in some workers becoming newly-eligible for employer-sponsored health insurance, it could also result in people seeing their hours cut to below 30/week so that large employers don’t have to offer them coverage. It could also result in small businesses dropping their employer-sponsored plan altogether and sending their employees to the individual market instead, especially if they know that the bulk of their employees will likely be eligible for premium subsidies in the exchange if and when the employer-sponsored plan is no longer available.
Average premiums for a single employee covered by an employer-sponsored plan amount to more than $7,000 in 2019. For family coverage, the average total premiums exceed $20,000. On average, employers pay the bulk of these premiums, covering about 80 percent of the average single employee’s premium, and about 70 percent of an average family premium. But premiums have been increasing far faster than wages or inflation, making health insurance an increasingly heavy burden for employers.
Depending on the industry, its profitability, and the skillset of its workers — including those currently classified as contractors — some businesses will likely opt to expand their employer-sponsored coverage to include the newly reclassified workers. But others might make changes to their coverage offerings or their employees’ hours in order to avoid the added cost of covering additional workers.
California embraced the ACA’s Medicaid expansion in 2013, as then-Gov. Jerry Brown signed legislation that was expected to expand Medi-Cal coverage to over a million Californians.
Between fall 2013 and January 2020, California’s Medicaid enrollment increased from about 7.75 million to about 11.5 million – a 48 percent increase. California’s Medicaid program is by far the largest in the nation. (About 16 percent of the nation’s Medicaid enrollees are in California).
To learn more about California’s Medicaid program visit the California Department of Health Care Services. Note: California’s Children’s Health Insurance Program (CHIP) was previously known as Healthy Families. In 2013, California transitioned Healthy Families enrollees to Medi-Cal.
Read more about California’s Medicaid expansion.
Short-term health insurance in California
California’s lawmakers passed a bill in 2018 that prohibits the sale or renewal of short-term plans in California as of January 1, 2019. (The sale of other non-ACA-compliant plans, such as fixed indemnity products and critical illness plans, continues to be allowed.)
Read more about short-term health insurance in California.
How has Obamacare helped California?
California embraced healthcare reform, creating a state-based exchange and expanding Medicaid. According to U.S. Census data, the uninsured rate in California dropped from 17.2 percent in 2013, to just 7.2 percent in 2018.
Covered California has also helped Californians lower their prescription medication costs. In 2016, the state exchange rolled out a cap on prescription costs. Available to consumers purchasing off-exchange plans as well, the cap is linked to the metal level of the plan purchased and is $250 per specialty medication per month for the majority of consumers.
Does California have a high-risk pool?
Prior to the ACA’s reforms in the individual health insurance market, medical history was a factor in eligibility for private plans in nearly every state, including California. Applicants with pre-existing conditions were often unable to buy individual plans in the private market, or if coverage was available it came with a higher premium or with exclusions on pre-existing conditions.
The California Major Risk Medical Insurance Board (MRMIB) was created in 1991 to provide a coverage option for people who were ineligible for coverage under a private plan because of medical history.
Under the ACA, all new health insurance policies became guaranteed issue starting on January 1, 2014. This change largely eliminated the need for high-risk pools, since pre-existing conditions are no longer a barrier to obtaining coverage.
The California Budget Act of 2014 included a provision for MRMIB to cease operations as of July 1, 2014. Most of the MRMIB insureds had already been able to obtain coverage through the exchange or expanded Medicaid, but remaining members were transitioned to the California Department of Health Care Services on July 1.
Medicare in the state of California
There were 6,362,817 California residents enrolled in Medicare as of March 2020. About 45 percent were enrolled in Medicare Advantage plans, while the other 55 percent were enrolled in Original Medicare.
Read more about Medicare in California, including the state’s rules for Medigap plans.
California health insurance resources
- California Association of Health Plans
- California Department of Health Care Services
- California Department of Managed Health Care
- California HealthCare Foundation
- California Nurses Association
- California One Care
- California State Department of Insurance
- Health Access California
Health reform legislation in California
Here’s a summary of several important health care reform bills that California has enacted in recent years:
- SB4 – This legislation, renamed the Health for All Kids Act, focuses on Medi-Cal access for undocumented immigrant children under the age of 19. SBF took effect in May 2016, making undocumented immigrant children eligible for Medi-Cal based on their household income alone.
- SB10 – This bill was signed into law by Gov. Brown in June 2016. It would have allowed undocumented immigrants to purchase unsubsidized coverage in the exchange, but the state needed a waiver from HHS in order to implement the law (the ACA does not allow undocumented immigrants to purchase coverage in any state’s exchange, even if they pay full price). California submitted a waiver proposal to HHS, but ultimately withdrew the waiver two days prior to President Trump’s inauguration. California State Senator Ricardo Lara (D, Bell Gardens) had introduced and championed SB10, but he requested that the waiver proposal be withdrawn (and Gov. Brown agreed) because the state was concerned that the Trump Administration could use information from the exchange to deport undocumented immigrants.
- California enacted legislation in 2018 to ban short-term health plans and limit enrollment in association health plans.
- In 2019, California enacted legislation to reinstate an individual mandate in California as of 2020, and to create a state-based temporary premium subsidy program.
Other California state-level health reform legislation includes: