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Health exchange starts in October

This is the second article in a series examining the potential impacts of Covered California’s statewide health-benefit exchange.

This calculator estimates what health insurance subsidies a family or individual may be eligible for based on income:
http://healthreform.kff.org/SubsidyCalculator.aspx

In an effort to bring affordable health benefits to millions more, beginning in October, health insurance plans will be laid out as a buffet for California users, who will be able to easily compare options to select the level of service at a price point that fits their budget.

California is leading the country in establishing an online health benefit marketplace, a requirement of the Affordable Care Act, which will debut on Oct. 1. Monitored by Covered California, a quasi-governmental organization appointed by Gov. Jerry Brown, the health-care plans – many of which include significant subsidies – would go into effect on Jan. 1, 2014. According to Covered California’s 2012 annual report, when fully enacted by 2019, the reformed health care system will expand coverage to around 4.6 million Californians without health insurance, as well as reduce cost for millions of others on high premium/deductible plans.

Come October, Californians will be able to search four tiers of health plans: platinum, gold, silver and bronze. The plans are based on the actuarial value, or what percentage of costs the plan will cover completely after premiums and deductibles have been paid. Platinum plans will have the highest premium payments, but must cover 90 percent of all medical care; gold plans will cover 80 percent; silver plans will cover 70 percent; and bronze plans, with the lowest premium payments, will cover 60 percent of medical care costs. Some states, including California, will also offer an extremely low cost catastrophic care option for young adults (under age 30 in 2014) to cover extreme illness or injury but not regular medical care outside of three primary care physician visits per year.

Unlike some other states, California is creating a selective health exchange process, meaning Covered California will review each plan and only accept the ones that offer coverage at a fair price. Insurance companies had until Jan. 15 to submit their proposals, which will be negotiated with the state before being offered to the public. All prices and services will be clearly listed on Covered California’s website beginning Oct. 1, where users can enter their zip codes and see all the plans offered in their region (the state exchange includes 19 regions in California based on cost of living and other demographics).

The health-benefit exchange is targeted toward individuals who cannot receive medical coverage through an employer, and small business – defined as 50 employees or less. Both groups, who have historically paid more for health care, are expecting to see significant savings under the new system.

“The exchange is really focused on the individual market, which is the most broken system at this point,” said Rick Heron, chief marketing officer for Western Health Advantage, which recently began offering an insurance product in the North Bay developed with Sonoma Valley and Marin General hospitals.

A typical individual plan pays an estimated 55 percent of expenses incurred, compared to 80 to 90 percent for employer plans, according to Covered California. Of the more than 2 million Californians on individual plans, 69 percent pay high deductibles in addition to 100 percent of premium payments. To participate in the health-care exchange, insurance companies must bundle individual plans to provide better rates, which is the reason larger corporations see better rates for their members.

Individuals who fall within 100 to 133 percent of the federal poverty line will most likely be filtered into the state’s Medi-Cal program, where the vast majority of medical benefits are covered by the state. However, when Gov. Brown released his budget figures last Thursday, some in the medical community expressed concern that it didn’t include proper resources to tackle the influx of Medi-Cal patients expected under the Affordable Care Act.

“We simply cannot continue to cut resources while adding more patients into the mix,” California Medical Association President Dr. Paul R. Phinney said in a written statement. He explained that the budget plans to continue cuts in reimbursement rates paid to medical providers who treat Medi-Cal patients. “Governor Brown’s budget assumes roughly $1 billion per year in savings as a direct result of provider reimbursement reductions that were made in the 2011-12 budget … Actions like this will assuredly force physicians out of the Medi-Cal program, which is expected to get more than 2 million new patients in 2014 under the ACA (Affordable Care Act) Medicaid expansion.”

Those within 133 to 400 percent of the federal poverty line will qualify for federal health subsidies, including 3.1 million California residents. To give an example of the range of subsidies, a family of four within 150 percent of the federal poverty line (annual income of $35,137) would pay an average of $117 a month; while a family of four at 399 percent of the federal poverty line (annual income of $93,700) would pay $742 a month for health insurance through the exchange (see the breakdown of expected costs in the chart included in this article).

How the small businesses that cover 3 million Californians interact with the health exchange remains to be seen. They could choose to continue their current private insurance at the same rate; buy into a plan offered by the state health-benefit exchange; or cancel their coverage and allow employees to buy into the individual health exchange plan that fits their needs.

“The economic estimates are all over the place, no one knows what small businesses will do,” Heron said.

Health coverage for larger businesses and corporations will not change; currently the health-benefit exchange is exclusive to individual and small businesses.

To prepare, launch and analyze the newly established exchange, the state of California received more than $235 million in grants from the federal Health and Human Services (HHS) Department, more than any other state in the nation. So far, 18 states and the District of Columbia have had their health-care exchanges conditionally approved, including California, with another 24 pending.