Groundwork continues on a public healthcare exchange aimed at getting coverage for more individuals and small businesses, but significant progress will have to wait until state officials decide on a plan to address the looming $25 billion budget deficit.
The California Health Benefit Exchange is a state-run program that’s an outgrowth of federal healthcare reform signed into law in 2010.
Health insurance exchanges are intended to make it easier for individuals and businesses with up to 50 workers to shop, compare and enroll in healthcare plans.
The goal is to link individuals and businesses seeking coverage to information on tax credits and available subsidies.
Californians with household incomes between 133% and 400% of the poverty line qualify for these credits and subsidies. That’s a range of $29,000 to $88,000 annually for a family of four.
Anyone making less than $29,000 will be steered toward Medi-Cal, a state and federally funded health insurance program for the poor.
State-run health insurance exchanges are fairly new, but they’ve been operating for some time in the private sector.
CaliforniaChoice, an exchange run by Choice Administrators, a business unit of Orange-based Word & Brown Companies, has been in business for 15 years.
Private-Sector Model?
Executive Vice President David Duker said he expects that the state exchange will follow the CaliforniaChoice model when it comes to pooling customers into groups as a way to get better rates.
The model could allow an employer to say how much it’s willing to pay toward premiums. Workers then could use the contribution as a voucher, making a decision on how much they’re willing to pay for coverage and what kind of plan they want.
The California Health Benefit Exchange is expected to eventually include a website providing standardized comparisons on healthcare plans. The program also calls for a benefits calculator, links to available coverage, information eligibility for government subsidies and a toll-free telephone line for assistance.
Five categories of health insurance are expected to be available on the California exchange, ranging from the least costly catastrophic coverage plan to so-called “platinum plans” with better benefits.
Ramp Up to 2014
California Health Benefit Exchange is expected to be fully operational in 2014, when most of the federal healthcare reform kicks in.
Preparations have been in the works for the past several months, although they’ve recently taken a backseat to attempts by Gov. Jerry Brown and the state legislature to tackle the state’s deficit.
“It is important for us to get a solid agreement (on the budget) that will put our finances and our fiscal house in order,” said David Maxwell-Jolly, undersecretary for the state’s Health and Human Services Agency.
Former Gov. Arnold Schwarzenegger signed the law creating health insurance exchanges at the end of September. It made California the first state to create an oversight board for insurance exchange marketplaces since federal healthcare reform was enacted in early 2010. Massachusetts established a health insurance exchange as part of its own reform prior to the federal programs.
A five-member board will oversee California’s exchange.
Schwarzenegger appointed a pair of members before he left office in January. Brown has appointed one member, and two more eventually will be appointed by the legislature.
California got $1 million to fund preliminary planning efforts for the exchange and is set to get additional federal grants this spring, according to the exchange’s website.
After 2014, the exchange is expected to be self-supporting, with fees paid by participating health insurers providing revenue.
The question of how the state-run exchange might affect private enterprises, such as Choice Administrators, remains to be answered, said Duker.
“It is our assumption that, at some point, the state will probably look to hire a vendor to administer the program, but that of course has not been determined yet,” Duker said.
Choice Administrators has been in conversations with the state, he said.
Waiting for Board
Undersecretary Maxwell-Jolly said that any decisions about the direction of the exchange and how it would establish services would come from its board once it is fully operational.
California previously had a state-run health insurance exchange called PacAdvantage, but it failed to gain any traction in the marketplace and closed at the end of 2006.
State-run exchanges have had their share of critics since they surfaced as an element of the Obama administration’s healthcare reform package.
Critics Abound
Republican lawmakers have said the federal government—not states—should take full responsibility for creating exchanges.
Some critics have said they fear that state-run exchanges will turn into unaccountable bureaucracies. In California, there also are concerns that the exchange could further deplete the general fund when the state is wrestling with a budget deficit.
According to CaliforniaChoice’s Duker, laws mandating health coverage don’t necessarily mean people will purchase it, noting that many people who can qualify for state-subsidized plans such as Medi-Cal and Healthy Families don’t enroll. He also noted that the penalties for not buying insurance under new healthcare reform often are significantly lower than the cost of individual premiums.
There are some questions about whether exchanges will help control the cost of health insurance.
Some exchange proponents have argued that putting individuals and small businesses into larger pools eventually could lead to lower rates because insurers would be able to spread risk over a wider range of patients.
Duker said that the idea of premiums going down because of pooling is “a questionable assumption.”
“That isn’t currently what’s happening,” he said.
If insurers are experiencing losses on their members, “they won’t be able to make it up by volume,” Duker said.
Still Leading
California is ahead of most states on developing its exchange despite budget woes.
U.S. Secretary of Health and Human Services Kathleen Sebelius recently said that the federal government plans to give grants to other states and the District of Columbia to establish health insurance exchanges.
The federal department also is expected to offer details on an “essential benefits package” for exchanges in September, according to a story on stateline.org, a Web site that covers public policy issues.
