- A special enrollment period continues through the end of 2021 for uninsured or off-exchange enrollees.
- California has permanently adopted an extended open enrollment schedule: November 1 through January 31.
- Average rate increase of 1.8% for 2022; Bright HealthCare joining and three insurers expanding coverage areas (plus a look back at rate changes in prior years)
- As of 2023, California residents will individual/family health plans will be able to add parents as dependents, as long as they provide at least 50% of the parent’s support.
- New as of 2020: California has a state-based premium subsidy (no longer necessary in 2021, due to American Rescue Plan’s enhancement of federal subsidies).
- Also new as of 2020: A state-based individual mandate in California, with a penalty for non-compliance.
- Premium increases across the 11 Covered California insurers averaged less than 1% for 2020 (new individual mandate is keeping premiums stable).
- Nearly 1.6 million people enrolled in individual plans through Covered California with January 1, 2021 effective dates (open enrollment continued through the end of January).
- Health care reform legislation in 2018: Short-term plans banned, AHPs limited.
- Only exchange in the country that only allows standardized plans.
- Single-payer legislation postponed.
- California has adjusted its de minimus range for the allowed actuarial value of metal-level plans, but they’re not taking the same approach as HHS.
Due to COVID and the American Rescue Plan’s new subsidies, Covered California enrollment is open through the end of 2021 for uninsured or unsubsidized Californians
In response to the ongoing COVID pandemic and the Biden administration’s decision to open a special enrollment period on HealthCare.gov, Covered California announced a COVID-related special enrollment period for uninsured residents, running from February 1, 2021 through May 15, 2021. The state estimated that 1.2 million uninsured residents are eligible for premium subsidies through Covered California or Medi-Cal.
Soon thereafter, the federal government enacted the American Rescue Plan, which provides additional premium subsidies to marketplace enrollees, making health coverage much more affordable in 2021 and 2022. To give California residents ample opportunity to take advantage of these new subsidies, Covered California announced another special enrollment period, running from April 12 through December 31, 2021, for uninsured residents as well as residents who were enrolled off-exchange (where subsidies are not available). This window gives these individuals an opportunity to switch to an on-exchange plan in order to take advantage of the new premium subsidies, since there is no longer a “subsidy cliff” in 2021 or 2022.
For uninsured and unsubsidized residents, there is no need for a qualifying event during this special enrollment period. Covered California is spending between $20 million and $30 million on advertising this year to ensure that residents across the state are aware of the opportunity to enroll in low-cost health coverage through the marketplace during the special enrollment period in 2021.
The state also announced a special enrollment period, starting in mid-August, for people in areas where a state of emergency has been declared due to the wildfires in California. These residents have 60 days to enroll in coverage, starting with the date the state of emergency was declared.
Covered CA announced that the ARP’s additional subsidies would be automatically applied to enrollees’ accounts starting in May 2021. The marketplace estimated that 1.4 million current enrollees would start to receive additional subsidies in May as a result of the American Rescue Plan.
California residents are required to have health coverage or pay a penalty on their state tax return (unless they qualify for an exemption from the penalty). But since the start of the COVID pandemic, CoveredCA has essentially had continuously available enrollment, to address COVID, job losses, and wildfires.
Open enrollment permanently extended in California
California enacted legislation (A.B.156) in late 2017 that codified a three-month open enrollment period, with enrollment beginning October 15 and continuing until January 15.
The state then enacted additional legislation (A.B.1309) in 2019, which keeps the three-month open enrollment window but aligns the start of open enrollment with the November 1 date that’s used in the rest of the country, and pushes out the end date until January 31. This new schedule is permanent, so enrollment in Covered California, and outside the exchange, will run from November 1 through January 31 each year.
Under the terms of California’s 2019 legislation, people who enroll by December 15 will have coverage effective January 1 (this has consistently been extended a bit each year). People who enroll between December 16 and January 31 will have coverage effective February 1.
New law will allow some California residents to add parents to their health plan as dependents
California A.B.570, enacted in October 2021, makes California the first state in the country to provide a pathway for some policyholders to add their parents to their health plan as dependents.
The legislation only applies to individual/family health plans (ie, not to plans that people get from an employer), and it will take effect in 2023. Under the new law, a California resident with individual/family health coverage will be able to cover parents as dependents, as long as the parents rely on the policyholder for at least 50% of their living expenses.
An earlier version of the bill would have applied to employer-sponsored health plans as well, but was opposed by business groups that worried about the cost. With the modification to make the legislation apply only to individual/family plans, the state expects that only about 15,000 people will use the option to add parents to their health plan.
California exchange overview
California was the first state to authorize a state-run exchange under the Affordable Care Act, with former Gov. Arnold Schwarzenegger signing legislation in 2010 to create the exchange. California’s exchange — Covered California — is widely considered one of the country’s most successful.
The state has also been proactive in terms of enacting legislation to ensure that the individual market remains stable: California law banned the sale of short-term health insurance plans as of 2019, and prevents sole proprietors and partners from purchasing association health plans coverage instead of individual market plans. And as of 2020, California implemented an individual mandate and began offering state-based premium subsidies for people earning up to 600% of the poverty level (these subsidies are no longer necessary in 2021 and 2022, because the American Rescue Plan has enhanced federal premium subsidies, more than covering the portion that California had previously been covering).
Enrollment in California’s exchange is second only to Florida, with more than 1.6 million individual market enrollees as of early 2021, plus about 47,000 people enrolled in small group plans through Covered California’s SHOP platform.
Covered California has also enrolled more than 5 million people in Medi-Cal (Medicaid) since the exchange began operating in 2013 (Medicaid enrollment fluctuates throughout the year, but California’s total enrollment in Medicaid and CHIP grew by nearly 5 million people from late 2013 to April 2021). Not coincidentally, the state’s uninsured rate has dropped considerably: From 17.2% in 2013 to 7.2% in 2018, according to US Census data (although it increased to 7.7% in 2019).
As of 2021, there are still about 2.7 million people in California who don’t have health insurance. Covered California estimates that about 1.2 million of them are eligible for either Medi-Cal (Medicaid) or a Covered California plan with premium subsidies. Covered California had noted in late 2018 that about 30% of people enrolled in individual/family plans outside of Covered California (ie, off-exchange) would be eligible for premium subsidies if they switched to Covered California — and that was before the state started offering its own additional premium subsidies in 2020, to people with income up to 600% of the poverty level, and before the American Rescue Plan temporarily eliminated the “subsidy cliff” nationwide.
In 2017, amid uncertainty over continued federal funding for cost-sharing reductions (CSR), California was the first state to announce its decision to allow insurers to create slightly different off-exchange silver plans, and only add the cost of CSR to on-exchange silver plans. The state then actively encouraged unsubsidized silver plan enrollees to switch to off-exchange coverage, in order to protect those consumers from having to pay the higher premiums that were necessary to cover the cost of CSR. Consumers who get subsidies were encouraged to continue to shop in the exchange, where their subsidies increased to offset the higher premiums. Ultimately, several other states did the same thing for 2018, and the approach had been widely adopted by 2019.
Covered California is one of ten state-run exchanges that uses 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 remaining state-run exchanges and the federally-run exchange simply set minimum standards that carriers must meet, and then allow the sale of any plans that meet those guidelines; that’s known as a clearinghouse model as opposed to an active purchaser model).
Covered California is also the only exchange in the country that requires all health plans to be standardized, which means that within a single metal level, all plans have the same benefits (with the exception of HSA-qualified plans, which are also standardized but with benefits that are different from the other bronze and silver plans; Covered California’s board approves changes to the standardized HSA-qualified benefit design, as needed to comply with IRS regulations pertaining to HSA-qualified plans).
Which insurers offer coverage in the California marketplace?
As of 2021, there are eleven insurers that offer exchange plans in California. Covered California announced in July 2021 that an additional insurer, Bright HealthCare, will be joining the marketplace, bringing the total number of participating insurers to 12.
The following insurers will offer plans in the California exchange as of 2022, with plan availability varying from one location to another:
- Anthem Blue Cross of California
- Blue Shield of California
- Bright HealthCare
- Chinese Community Health Plan
- Health Net
- Kaiser Permanente
- L.A. Care Health Plan
- Molina Healthcare
- Oscar Health Plan of California
- Sharp Health Plan
- Valley Health Plan
- Western Health Advantage
Three existing insurers plan to expand their coverage areas as well: Anthem Blue Cross of California, Blue Shield of California, and Valley Health Plan. As a result, all residents will be able to select from at least two insurers, and most Californians will be able to select from among four insurers.
Average rate increase of 1.8% for 2022; Bright Health joining marketplace and three insurers are expanding coverage areas
Covered California announced in July 2021 that the preliminary individual market rate changes for 2022 amount to a 1.8% increase. As of October 2021, residents can window shop on Covered CA to see rates and plans for 2022.
The rate changes for 2022 are higher than the rate changes have been for the past two years (when they were under 1% each year), but the average rate increase across the three-year window amounts to just 1.1%, indicating significant stability in the state’s individual insurance market.
Anthem Blue Cross of California, Blue Shield of California, and Valley Health Plan are all expanding their coverage areas for 2022, and Bright Health is newly joining the exchange.
The following rate changes apply in California’s individual market:
- Anthem Blue Cross of California (expanding to cover Alameda, Contra Costa, El Dorado, Marin, Napa, Placer, Sacramento, San Francisco, San Mateo, Solano, Sonoma, and Yolo counties): 2.5% decrease.
- Blue Shield of California (expanding to cover parts of Monterey and Santa Barbara counties): 1.3% increase.
- Bright HealthCare: New for 2022, offering plans in Contra Costa County.
- Chinese Community Health Plan: 1.7% increase.
- Health Net: 4.5% increase.
- Kaiser Permanente: 2.2% increase.
- L.A. Care Health Plan: 2.9% decrease.
- Molina Healthcare: 0.1% decrease.
- Oscar Health Plan of California: 8.6% increase.
- Sharp Health Plan: 0.7% decrease.
- Valley Health Plan: (expanding to cover San Benito and Monterey counties): 5.5% increase.
- Western Health Advantage: 3% increase.
But as is always the case, weighted average rate increases don’t paint a full picture:
- They only apply to full-price plans, and very few enrollees pay full price for their coverage (as of February 2021, 85% of Covered CA enrollees were receiving premium subsidies; that percentage increased later in 2021, after the American Rescue Plan was implemented). For people who are receiving subsidies, the net rate change from one year to the next will depend on how their specific plan’s rates are changing, as well as any changes in their premium subsidy amount (which depends on the cost of the benchmark plan, as well as the enrollee’s projected income for the coming year).
- Overall average rate changes also don’t account for the fact that premiums increase with age, so people who maintain individual market coverage for several years will continue to pay more each year — just due to the fact that they’re getting older — even if their health plan technically has an overall rate change of 0% during that time.
- A weighted average, by definition, lumps all the plans together. But different insurers offer plans in each region, and each insurer’s rate change is different. So the specific rate change that applies to a given enrollee can vary quite a bit from the average.
Covered California premium changes in previous years
For perspective, here’s a look at how overall average premiums have changed in California’s marketplace over the last several years:
2015: Increase of 4.2 percent.
2016: Increase of 4 percent. The exchange noted that consumers who shopped around during open enrollment 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.
2017: Increase of 13.2 percent. This was more than triple the average rate increases in 2015 and 2016, but it was also considerably lower than the average rate increases that were implemented in many other states for 2017.
2018: Increase of 12.5 percent plus an additional 12.4 percent for silver plans. California’s Insurance Commissioner announced on April 28 that insurers in California could file two sets of rates for 2018 plans: “ACA rates” and “Trump rates,” with the latter based on the higher premiums that would be necessary if the Trump administration continued to sabotage the ACA. As of August 2017, the weighted average rate increase across all 11 CoveredCA insurers was 12.5 percent. But that was based on the assumption that cost-sharing reduction (CSR) funding would continue to be provided by the federal government. Ultimately, Covered California decided to implement the CSR surcharge (ie, a larger rate increase for silver plans) on October 11, the day before the Trump administration announced that CSR funding would indeed end immediately. The average surcharge on silver plans was an additional 12.4 percent, on top of the rate increase that would have applied otherwise (details below about Covered California’s approach to CSR funding).
2019: Increase of 8.7 percent. The weighted average rate increase for 2019 was 8.7 percent, but the exchange noted that it would only have been about 5 percent without the elimination of the individual mandate penalty at the end of 2018 (California implemented its own individual mandate and penalty as of 2020).
2020: Increase of 0.9 percent: Insurers in California’s individual market finalized a weighted average rate increase of 0.9 percent, which was the lowest the state has seen since ACA-compliant plans became available in 2014 (the average increase for 2021 ended up being even lower, as noted above).
2021: Increase of 0.6%: Covered California’s individual market insurers proposed an overall average rate increase of 0.6 percent for 2021, and the rates were approved essentially as-filed. This amounted to a record-low rate increase for Covered California plans. And two of the insurers — Oscar and Anthem Blue Cross — expanded their coverage areas for 2021. Eleven insurers offer plans through Covered California in 2021. Six of the insurers implemented average rate decreases that ranged from 0.5% to 4.6%, and five insurers implemented average rate increases that ranged from 1% to 9%.
Changing insurer participation over time in Covered California
Anthem Blue Cross had offered plans statewide in Covered California prior to 2018, but had sharply reduced their coverage area to just three of the state’s 16 rating areas as of 2018 (28 counties in Northern California, Santa Clara County, and the Central Valley). For 2020, however, Anthem expanded their coverage area, returning to the Central Coast, part of the Central Valley, Los Angeles County, and the Inland Empire.
Market share in Covered California has evolved considerably over the years. Just three insurers had 80 percent of the market share as of the end of 2016: Blue Shield had 31 percent, Anthem had 25 percent, and Kaiser Permanente had 24 percent. Those same three insurers continued to make up a large portion of the exchange market in 2017, but they weren’t quite as dominant as they were in the past: Kaiser had 28 percent of the market share, Blue Shield had 25 percent, and Anthem had 19 percent (a little over half of those Anthem enrollees had to select new coverage for 2018 due to Anthem’s shrinking coverage area that year. Molina had 12 percent of the Covered California market in 2017, and Health Net had 11 percent (the other six insurers had a combined 6 percent of the market share).
UnitedHealthcare exited the individual market in California at the end of 2016, as was the case in most of the states where they offered plans in 2016. By February 2016, UnitedHealthcare had about 1,400 enrollees in Covered California (less than a third of a percent of the exchange’s total QHP enrollment).
UnitedHealthcare and Oscar were both new to the exchange for 2016. United Healthcare applied in January 2015 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 2015, 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. United’s participation was short-lived, however, as they left after just one year.
California allocated $295 million to provide additional premium subsidies (no longer necessary with the American Rescue Plan in place)
California enacted legislation in 2019 to create a temporary state-based premium subsidy for Covered California enrollees with household income up to 600% of the poverty level (for a family of four enrolling in a plan for 2020, that amounted to a household income of up to $154,500).
California’s budget bill (A.B.74) included an appropriation of $295 million to cover the cost of the subsidy program, with 75% of that money allocated for enrollees who don’t get any federal subsidies (ie, those with income between 400 and 600% of the poverty level) and 25% allocated for enrollees who earn between 200 and 400% of the poverty level (ie, they are already eligible for federal premium subsidies, but California would provide supplemental subsidies; according to a Covered California press release, small subsidies were also available to some households with income below 138% of the poverty level; these are individuals who aren’t eligible for Medicaid due to immigration status, which means they haven’t been in the US for at least five years). The state-based premium subsidies were also addressed in S.B.78, which clarifies that the subsidies aren’t available after 2022.
Covered California reported that 486,000 had already enrolled in plans with financial assistance under the new state-based premium subsidies as of December 12, 2019. The exchange estimated that a total of 922,000 people would be eligible for the state-based premium subsidies. In February 2020, Covered California reported that about 47% of applicants with income between 400 and 600% of the poverty level had qualified for the state-funded subsidy, and the average subsidy amount for those households, covering 32,000 consumers, was $504 per household per month.
The exchange had previously estimated that up to 663,000 people with income between 200 and 400 percent of the poverty level would qualify for an average of $12/month in premium subsidies from the state of California, in addition to the subsidies they get from the federal government. Another 23,000 low-income California residents (whose income would actually make them eligible for Medi-Cal (Medicaid), but they aren’t eligible because they haven’t been in the US for at least five years) were projected to be eligible for an average of $1/month in additional subsidies from the state of California, on top of the substantial federal premium subsidies available to these enrollees.
But as of 2021, the state-based premium subsidies are no longer necessary. That’s because the American Rescue Plan’s enhanced federal subsidies bring net premiums well below the level they would have been with the previous federal + state subsidies. So although California residents are no longer receiving state-based subsidies in 2021, they are receiving additional federal subsidies that more than make up the difference. The result is after-subsidy premiums that are lower than they were before the American Rescue Plan was enacted, even though the state-funded subsidies are no longer applicable. (Note that CoveredCA has said that they will automatically apply the new subsidies to enrollees’ accounts as of May 2021).
California created a individual mandate that took effect in 2020
California also enacted S.B.104 and S.B.78 in 2019, in order to create an individual mandate in California starting in 2020. The penalty for non-compliance will be based on the federal individual mandate penalty that applied in 2018 (ie, $695 per uninsured adult, or 2.5 percent of household income), but exemptions and maximum penalties will be California-specific. For example, the state notes that because California’s tax-filing threshold is higher than the IRS filing threshold, 115,000 fewer people will have to pay California’s individual mandate penalty, compared with the number of people who would have had to pay the federal penalty if it had remained in effect.
As a result of the state-based premium subsidies and individual mandate, California estimated that 229,000 additional people would obtain coverage in 2020. And the restored individual mandate penalty kept premiums 2 to 5 percent lower than they would otherwise have been, resulting in an overall average rate increase of less than 1 percent — the smallest the state has seen since ACA-compliant policies debuted in 2014.
Covered California’s enrollment total for 2020 ended up at 1.54 million for 2020, as opposed to 1.51 million in 2019. And after open enrollment ended, Covered California opened a special enrollment period through April 30 for people who didn’t know about the state’s new premium subsidies and/or the state’s new individual mandate.
The special enrollment period allowed people who were uninsured to enroll in a plan through Covered California, and it also allowed people with off-exchange coverage to transition to on-exchange coverage, in order to take advantage of the state-funded premium subsidies (and federal ACA subsidies, if applicable). This was important, as Covered California estimated that there are 280,000 people with off-exchange coverage — who had at least initially kept that coverage for 2020 — who would be eligible for premium subsidies (from the state and/or federal government) if they switched to an on-exchange plan.
The exchange’s fact sheet about the special enrollment period notes that they were “working with issuers and regulators on a plan to allow the
transfer of deductibles accumulated off-exchange to an on-Exchange health plan.” This is a crucial aspect of allowing a seamless transition to an on-exchange plan, for people who were previously insured off-exchange. (Normally, transitioning from off-exchange to on-exchange (or vice versa) during a special enrollment period means that the person has to start over with a new deductible and out-of-pocket maximum, regardless of whether they’ve already incurred charges under their old plan during the first part of the year.)
People who enrolled in a Covered California plan during the special enrollment period had coverage effective the first of the month after they applied. California’s new individual mandate has an exemption available for people who only have one short gap in coverage that’s not more than three months long. So a person who was uninsured could enroll by March 31, have coverage effective April 1, and will not owe a penalty for being uninsured in 2020 as long as they maintain their coverage for the remainder of the year. But an uninsured person who enrolled in April would have had coverage effective May 1, which means they’d have a four-month gap in coverage (January through April). That will trigger a penalty (assessed on their 2020 tax return, filed in early 2021) equal to one-third of the annual penalty amount, assuming they maintain coverage for the final eight months of the year and aren’t otherwise exempt from the penalty.
Covered California enrollment: 2014-2021
2014: 1,405,102 people enrolled in private plans through Covered California during open enrollment for 2014 coverage.
2015: 1,412,200 people enrolled in private plans through Covered California during open enrollment for 2015 coverage.
2016: 1,575,340 people enrolled in private plans through Covered California during open enrollment for 2016 coverage.
2017: 1,556,676 people enrolled in private plans through Covered California during open enrollment for 2017 coverage.
2018: 1,521,524 people enrolled in private plans through Covered California during open enrollment for 2018 coverage. Total enrollment, including renewals, was slightly lower than it had been in 2017, but the lower enrollment volume may have been due to the state’s approach to handling the Trump Administration’s decision to end federal funding for cost-sharing reductions (CSR). California led the way in encouraging non-subsidy-eligible enrollees who preferred silver-level plans to shop outside the exchange in order to avoid having the cost of CSR incorporated into their premiums.
2019: 1,513,883 people enrolled in private plans through Covered California during open enrollment for 2019 coverage. Covered California noted that although enrollment was very similar to the prior year, there was a considerable drop in new enrollments. This coincided with the elimination of the federal individual mandate penalty at the end of 2018, and the exchange reiterated the need to establish an individual mandate in California. Lawmakers did just that in the 2019 session, and the state’s new mandate will take effect in January 2020.
2020: 1,538,819 people enrolled in private plans through Covered California during open enrollment for 2020 coverage. This was about 1.6 percent higher than the prior year’s enrollment, after three straight years of year-over-year enrollment declines. California’s new individual mandate and state-funded premium subsidies are a big part of the reason enrollment increased (combined with a very modest rate increase, which is partly due to state’s new individual mandate).
2021: 1.57 million people had enrolled in plans with a January 1 effective date, but open enrollment continued through the end of January, likely adding to that tally. The exchange noted that this was a record high for that point in the open enrollment window.
2018 legislation: Short-term plans banned; AHPs not allowed for self-employed individuals
California enacted several pieces of legislation in 2018 addressing health care reform in California. They include:
- S.B.910: Prohibits the sale of short-term health insurance plans as of January 1, 2019. The Trump Administration has rolled back the Obama Administration regulations that shortened the allowable duration of short-term plans. S.B.910 is an effort to protect the state’s major medical individual market, and prevent short-term plans from siphoning off the healthiest members into lower-cost plans.
- S.B.1375: Prohibits sole proprietors and partners in a partnership (along with their spouses) from being considered “eligible employees” who can purchase small group health insurance. This means such individuals cannot purchase association health plan coverage, and must instead purchase coverage in the individual market if they wish to obtain health insurance. As with S.B.910, the point of this legislation is to protect the overall health of the risk pool for individual market coverage in California, so that the healthiest members cannot shift to association health plan coverage instead (as of mid-2019, association health plans can no longer market to sole proprietors in any states under the Trump administration rules that were rolled out in 2018, as a federal judge has invalidated the rule and an appeal is pending).
- A.B.2499: Codifies medical loss ratio (MLR) requirements into California law. Existing regulations in the state simply required insurers to comply with the federal medical loss ratio rules. But A.B.2499 clarifies the specifics in California law, which will remain in place even if the federal MLR requirements are repealed in the future. Large group plans must spend at least 85 percent of premiums on medical claims and quality improvements, while individual and small group plans must spend at least 80 percent. An earlier version of the bill called for codifying more stringent MLR rules in California (90 percent for large group plans and 85 percent for individual and small group plans), but the version that was enacted simply mirrors the existing federal rules.
- A.B.2472: This legislation requires the California Council on Health Care Delivery Systems to analyze “the feasibility of a public health insurance plan option to increase competition and choice for health care consumers” and submit a feasibility report to the legislature by October 2021. An earlier version of the bill would have allowed people who aren’t eligible for Medicaid to buy into the Medicaid program., essentially creating a public health insurance option in California that would operate alongside the private plans that are available for purchase (the state would have had to obtain a waiver from the federal government in order to implement a Medicaid buy-in program). The feasibility analysis could still end up recommending a Medicaid buy-in program but the current law only calls for an analysis and report, rather than moving forward with Medicaid buy-in.
California has its own de minimis range for metal level actuarial value
Under the ACA, all new plans have to conform to one of four metal levels (in addition to catastrophic plans). The metal level delineation is based on actuarial value (AV): Bronze plans cover 60 percent of average costs across a standard population, silver plans cover 70 percent, gold plans cover 80 percent, and platinum plans cover 90 percent. But because it’s difficult to hit that number exactly, an allowable de minimis range of +/-2% was incorporated in the requirements.
The market stabilization regulations that HHS finalized in April 2017 allow the de minimis range to expand to +2/-4%. So a plan with an actuarial value of 66 to 72 percent would be considered a silver plan, and the new rules took effect for the 2018 plan year.
But California has its own state law that allowed de minimis variation of only +/-2%, so the less stringent federal regulation did not take effect in California at that point; plans still had to comply with the existing rules (ie, silver plans must have an actuarial value of 68 to 72 percent, for example).
In 2019, California enacted legislation (SB78) which, among many other provisions, provides more flexibility on the de minimus range for actuarial value. But instead of the approach that HHS took, of allowing insurers to err more on the low end of the actuarial value range, California is doing the opposite: The new legislation allows plans to have a de minimus range of +4/-2%, which means that plans can have AV up to four points above the target number, but can still only go two points below it. Under California’s new rules, a silver plan could have an AV of 68 to 74 percent.
Will California be the first state to implement single-payer? Maybe, but Assembly pended legislation until it’s more complete
No U.S. states have single-payer health care systems, although some have tried to implement single-payer. Vermont was working towards single-payer under a 1332 waiver, but pulled the plug at the end of 2014, amid concerns that the costs would be higher than expected. In Colorado, single-payer advocates pushed for reform in 2016, but voters defeated Amendment 69 (which would have established a single-payer system in the state) by a wide margin.
Will California eventually succeed where others have failed? Perhaps, but it won’t be in the immediate future.
On February 17, 2017, State Senators Ricardo Lara (D, Bell Gardens) and Toni G. Atkins (D, San Diego) introduced S.B.562, the Californians for a Healthy California Act.
S.B.562 was sponsored by the California Nurses Association, and would have transitioned California to a single-payer system at a not-yet-determined future date (a Senate Appropriations Committee analysis indicates that it would take “many years” to fully implement the system called for in S.B.562). The program, which would be overseen by a nine-member board of directors, would not have deductibles, copays, or coinsurance, and would cover “all medical care determined to be medically appropriate by the member’s health care provider” on a fee-for-service basis.
The legislation then went to the California Assembly, where it met with considerable skepticism over the price tag (estimated at $400 billion per year, although much of that would be offset by the elimination of current health insurance premiums and out-of-pocket costs). On June 23, Assembly Speaker Anthony Rendon (D, 63rd Assembly District, southeast Los Angeles) issued a statement in which he noted that while he’s supportive of the push for single-payer, S.B.562 was “woefully incomplete” as passed by the Senate. He explained that the bill would remain in the Assembly Rules Committee “until further notice,” and urged the Senate to “fill the holes in SB 562 and pass and send to the Assembly workable legislation that addresses financing, delivery of care, and cost control.”
Incidentally, Rendon’s statement came the day after Senate Republicans unveiled the Better Care Reconciliation Act (the BCRA, which ultimately failed to pass in late July). Rendon described the BCRA as a “cynical plan to repeal the Affordable Care Act, posing a real and immediate threat to millions of Californians who only have health coverage because of the ACA.”
On May 22, the California Senate Appropriations Committee published an analysis of the fiscal impact of S.B.562:
- The total price of the single-payer system envisioned in the bill was projected to be $400 billion per year.
- $200 billion of that would come from existing federal, state, and local funding that could be reallocated to fund California’s single-payer system.
- The other $200 billion would have to come from new taxes; the analysis indicates that a 15 percent payroll tax on earned income would cover it.
- A significant portion of the new payroll tax would be offset by the elimination of current health care spending by employer and employees. That current spending is estimated at between $100 billion and $150 billion, so the new tax would only have a net impact of $50 billion to $100 billion. In other words, it would not increase employer/employee health care spending by $200 billion.
- Additional legislation would be necessary in order to implement the 15 percent payroll tax (or whatever tax-based system is deemed necessary to fund the program). And voters would have to weigh in. Currently, the Gann Limit restricts state spending growth based on inflation and population growth. But the single-payer system’s additional $200 billion tax price tag (even though much of it is offset by reductions in current private spending) is more than California’s total proposed budget for the coming fiscal year. Voters would either have to agree to repeal the Gann Limit, or exempt the single-payer tax funding from the Gann Limit.
- Overall utilization of health care services is expected to be higher than current utilization in Medi-Cal (Medicaid) or employer-sponsored plans. The analysis projects a 10 percent increase in utilization over the current Medi-Cal system, but notes that this is likely conservative. The increased utilization is expected because people will be able to see any willing provider, and receive coverage for any treatment that the provider says is medically appropriate, all without any cost-sharing (copays, deductibles, coinsurance).
- Reimbursement rates for providers would be similar to Medicare rates. Medicare reimburses at a higher level than Medicaid, but generally at a lower level than private insurers.
- People currently enrolled in Medicare would be transitioned to the California system. This is different from the approach that Colorado proposed in 2016, which would have kept Medicare beneficiaries in their existing federal plan. But federal employees, military personnel, and veterans would retain their existing coverage rather than transitioning to the new California system.
- “essentially all” of the people who work in California’s health insurance industry would lose their jobs if the state transitions to single-payer, as would many people who currently serve in administrative positions. The bill provides for job retraining programs, but it’s unclear whether it would be enough to successfully re-employ everyone.
- There are questions about whether the federal government would cooperate with the waiver process that would be required to wrap Medicare and Medi-Cal into the single-payer system, along with self-insured large employer plans that are currently regulated by federal law (ERISA) rather than state oversight.
California has been down this road before. Voters rejected a single-payer proposition in 1994, and then-Governor Arnold Schwarzenegger vetoed two bills, in 2006 and 2008, that would have created a single-payer system in the state.
California withdrew proposal to allow undocumented immigrants to buy coverage through Covered California
SB10 was signed into law in California in June 2016. The law allows undocumented immigrants to purchase unsubsidized coverage in the exchange, but a waiver from HHS was necessary in order to move forward, since the ACA forbids undocumented immigrants from purchasing coverage in the exchanges.
California’s waiver proposal was complete as of January 17, 2017, which was the start of a 30-day public comment period. But on January 18, the state withdrew the waiver at the request of California State Senator Ricardo Lara (D, Bell Gardens), the senator who had introduced and championed SB10 (Lara is the senator who introduced S.B.562 in an effort to bring single-payer to California). Governor Jerry Brown agreed with Lara’s decision to withdraw the waiver proposal.
The state withdrew the proposal because they were concerned that the Trump administration might use information from the exchange to deport undocumented immigrants. Lara said that he didn’t “trust the Trump administration to do what’s best for California and to implement the waiver in a way that protects people’s privacy and health.” He called the withdrawal of the waiver “the first California casualty of the Trump presidency.”
Undocumented immigrants can already purchase full-price coverage outside the exchange. It’s not clear how much SB10 would have decreased the uninsured rate among undocumented immigrants if it had been implemented, since they would still have been required to pay full price for their coverage in the exchange.
Covered California 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 2015, Covered California rolled out a cap on prescription costs that went into effect 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 is also available to many consumers purchasing plans outside the exchange. The cap is linked to the metal level of the plan purchased; for the majority of consumers, the cap is $250 per specialty medication per month, but it ranges from $150 to $500, with bronze plan enrollees having the highest specialty drug copay cap.
The California legislature also created a similar cap state-wide, to include non-grandfathered group and individual plans sold only outside Covered California. Assembly Bill 339 was signed into law in October 2015, and took effect January 1, 2017. It applies to all non-grandfathered individual and small group plans in the state, and limits the copayment for a 30 day supply of any medication to no more $250, until January 1, 2020. For plans designated as high deductible policies, the copay limit would apply after the deductible is met.
Covered California fixed pregnancy glitch
For part of 2015 and 2016, a glitch in Covered California’s system had been automatically transferring privately-insured pregnant women to Medi-Cal if their income made them eligible for Medi-Cal while pregnant. Medi-Cal is available to all adults with income up to 138 percent of the poverty level, but for pregnant women, the income threshold extends up to 213 percent of the poverty level.
So a woman with income between 138 percent and 213 percent of the poverty level would be eligible for a subsidized qualified health plan (QHP) in the exchange if she’s not pregnant, but for Medi-Cal if she is pregnant. And a pregnant woman counts as two people for Medi-Cal eligibility determination, but just one person for QHP subsidy eligibility determination, further increasing the number of women whose eligibility status could change with a pregnancy.
Some women had been reporting their pregnancies to Covered California, and the exchange had been automatically switching them to Medi-Cal without confirming that the woman wanted to switch. This caused about 2,000 women to lose access to their healthcare providers because of network changes, and the exchange began working as quickly as possible to remedy the problem. By September 2016, the issue had been resolved, and pregnant women are now given a choice of remaining on their QHP or switching to Medi-Cal
Some women prefer to switch to Medi-Cal, since they save a considerable amount of money on premiums and out-of-pocket costs with Medi-Cal. But switching can mean having to choose a new doctor, which some women are uncomfortable doing mid-pregnancy.
California’s SHOP exchange
California’s Small Business Health Options Program (SHOP) exchange lets small employers sign up and offer coverage to their employees year round. Five insurers are offering medical plans through the SHOP: Blue Shield of California, Chinese Community Health Plan, Health Net, Kaiser Permanente, and Sharp Health Plan.
The SHOP exchange in California has seen consistent growth, with 47,000 covered individuals as of 2018.
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. Employers determine the amount they’re willing to pay for health insurance, and employees can then select from among all the plan options available in the SHOP exchange; the employer gets one bill each month, but employees have a wide range of plan choices.
In 2015, Covered CA’s SHOP exchange was open to businesses with one to 50 employees. That changed in 2016 however, and businesses with up to 100 employees are now able to purchase coverage. That was supposed to be the case nationwide, but in October 2015, President Obama signed HR1624 into law, keeping the definition of “small group” at businesses with up to 50 employees (the ACA had called for expanding “small group” to include businesses with up to 100 employees starting in 2016).
States were still allowed to expand their definitions of small businesses, and California had already aligned their laws with the ACA. California is one of only four states to expand the definition of small group in 2016. California businesses with up to 100 employees fall under the category of small groups starting in 2016.
California health insurance exchange links
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.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.