Affordability of Coverage
The affordability of health insurance in the Covered California health insurance marketplace is perhaps the single biggest challenge to the success, not only of the Exchange but of health care reform in general. At the core of the affordability challenge is the fact that the Affordable Care Act (ACA) does little to reduce rapidly escalating health care costs. In fact, various ACA guidelines could to push up health insurance premiums.
Who Defines Affordability?
- The Uninsured: The uninsured typically define affordable health insurance premiums in the the range of $50 per month for individuals and $100 to 150 per month for family while actual premiums are at least 400% higher. Approximately 50% of those currently uninsured will qualify for Medi-Cal or qualified health plans with the highest premium subsidies that will leave them with a personal responsibility in the desired premium range or below. Approximately 25% of the uninsured - the biggest group are healthy young men - will not qualify for subsidies due to higher incomes, but will have a problem with the perception of affordability.
- The Self-Insured: Those who pay their own health insurance premiums have the most realistic perception of health insurance costs and are most familiar with the trade-offs that they must employ between coverage and affordable premiums. Approximately, 45% of this group will not qualify for subsidies and will see their premiums continue to rise.
- Employer Insured: Most Californians are covered by employer-sponsored group health insurance and are generally uninformed as to the real cost of health insurance their employers pay for them. Covered employees tend to equate affordability with copays and their contribution toward the monthly premium which is always at least 50% less than the actual premium. It is expected that some employees, especially those whose incomes qualify them for subsidies, will be “dumped” onto the Exchange with or without an employer’s stipend to purchase health insurance.
Essential Health Benefits
The ACA established a benefit floor for qualified health plans both in Covered California and in the outside market. Essential benefits plans include 10 categories of care to be included in all health insurance plans. The HHS guidance says states can define their own set of essential health benefits by using an existing major health benefit plan in the state as a benchmark. California has chosen to use the Kaiser Permanente HMO 30 Plan - the largest small-group employee health benefit plan by enrollment in the state. Many fear this benchmark sets the bar too high. This plans is more comprehensive and thus more expensive than most individuals and smaller businesses can afford.
Coverage Tiers and Actuarial Value
Covered California will offer four tiers of coverage options - platinum, gold, sliver, and bronze - often referred to as the metals plans for obvious reasons. These options are based on the percentage of full actuarial value of benefits the plan is designed to provide, and are as follows: platinum 90%, gold 80%, sliver 70%, and bronze 60%. The coverage of the least expensive bronze plan is more comprehensive than most high-deductible individual health insurance plans and thus will cost more than existing plans. Many believe that a bar set this high stifles innovation in affordable health plan design.