Ca Health Exchange approved
This is the first in a series examining the impact of Covered California, the health insurance marketplace required under the Affordable Care Act.
Come October, how individuals and small businesses shop for health insurance will be drastically different under the Affordable Care Act. At Sonoma Valley Hospital, this could mean more patients, but lower reimbursement rates.
Last Thursday, Covered California – the state’s still-forming healthcare marketplace required under the Affordable Care Act – received conditional approval from the United States Department of Health and Human Services. By Oct. 1, it will launch an online shop where individuals or small businesses (50 employees or fewer) can make apples-to-apples comparisons on services and price, for insurance products that will go into effect on Jan. 1, 2014.
“In 10 months, consumers in all 50 states will have access to a new marketplace where they will be able to easily purchase affordable, high quality health insurance plans …,” Health and Human Services (HHS) Secretary Kathleen Sebelius said in a recent written statement.
Kelly Mather, chief executive officer of Sonoma Valley Hospital, said she expects the move will bring more patients into the district hospital. Some of those patients will be newly insured individuals, while others will be residents or businesses that switch onto plans that allow them to receive health care closer to home.
For example, 20 percent of Sonoma Valley Health Care District residents currently use Kaiser Permanente, which requires users to seek medical care at a Kaiser facility in Petaluma, Santa Rosa or San Rafael. To help combat this exodus of patients, in 2011 the hospital established its own health insurance product with the Western Health Advantage, designed to directly compete with Kaiser on price and services. But without a multi-million dollar marketing budget like Kaiser, it’s more difficult to get out the word about the new offering. Covered California’s healthcare marketplace will allow users to compare products and pick one that meets their financial and geographic needs.
“People have had to take Kaiser because of the cost savings, even though it’s less convenient for them,” said Rick Heron, chief marketing officer at Western Health Advantage.
“The exchange, in our opinion, is good because it’s increasing access (to care) and leveling the playing field so we can better compete” with major insurance providers such as Kaiser, Blue Shield and Blue Cross, he added.
Mather said she expects that a portion of newly insured Valley residents will choose an option that keeps their care local. She is also hopeful that more small business clients will switch to a plan that includes Sonoma Valley Hospital.
“Most of the businesses in Sonoma are small and would qualify for the exchange,” she said.
But the new patient volume won’t necessarily help the hospital’s bottom line. Mather explained that all hospitals expect to see lower reimbursement rates under the new system. For decades, commercial insurance companies paid an average of 120 percent to 130 percent of the cost of care, Mather said, compensating for the 75 percent to 80 percent reimbursement rates that hospitals receive from government insurance plans such as Medi-Cal and Medicare.
“I think that will slowly disintegrate,” Mather said. She explained that because major insurance companies will be offering lower rates, they will likely lower hospital reimbursement rates.
“That’s a concern for most hospitals,” she added, noting that the new law does not address this potential loss in revenues among hospitals.
However, with more insured individuals in California, she is hopeful the hospital won’t need to expend as much to cover uninsured individuals in the future. Emergency rooms are required to care for anyone who walks in the door, which can become costly charity care if the patient doesn’t have insurance.
“The exchange is good because there’s more uninsured people who will have access to insurance,” Mather said, explaining that it should help the hospital’s finances. “It’s hard to quantify that right now since we don’t know how many people it will affect.”
Covered California estimates that around 2 million uninsured California residents will receive health coverage in 2014. At Sonoma Valley Hospital, an estimated 3 percent of patients have no insurance, but there’s no way to estimate exactly how many local residents will sign up for new coverage. The controversial individual mandate provision, which would require nearly every American to purchase health insurance or pay a fine, is still being debated in the federal courts.
“There’s a number of things that still need to be worked out on the federal level,” Heron said.
He said his office has been working since November on its proposals for the state healthcare exchange, which are due Jan. 15. Unlike some other states, he said, California opted to do a selective bidding process to decide what to include in the marketplace, meaning not all companies who apply will see their products offered in the exchange. It’s an effort to combat price gouging.
“The selective process allows them (the state) to ask, ‘Why are you 50 percent higher than everyone else?’” Heron said, “The exchange will now have the (cost and price) information for everyone, so I expect we’ll see prices start to average out.”