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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Recently in Health Insurance Exchange Category


Question: Can a senior citizen who is paying for Part A of Medicare because he has not worked in the US cancel Medicare and sign up ACA to take advantage of qualified subsidy?

Answer: This question was answered earlier in the CAHBA Q&A Forum by Premier Agent Max Herr. He is Max’s unedited answer.

Courtesy of the PPACA, persons age 65 and older are now required to enroll in Medicare unless covered by another health plan (generally employer-sponsored). As a result, no one over age 64 is eligible for premium tax credits regardless of income.

The exception to the Medicare enrollment is based on residency. Legal immigrants over age 65 are eligible for enrollment in Medicare if they have been in the US at least 5 years. Prior to that, they must obtain “minimum essential coverage” in some other manner.

Persons over age 65 who do not have fully insured status (40 credits) pay a premium of up to $426 in 2014 (less than 30 credits, the premium is reduced for persons with 30-39 credits). Failure to enroll in Medicare Part A when first eligible (at age 65 for most, or when the five-year residency threshold is crossed if later) means a 10% premium penalty for twice the length of time a person was not enrolled in Part A.

The Part B premium penalty remains a lifetime penalty. The 1% per month premium penalty for Part D is also a lifetime assessment.

So the temporary solution for this German couple, if they have not been in the US for five years is to obtain any form of minimum essential coverage. Once eligible for Medicare Parts A and B, the monthly cost, even at the maximum of $426 for Part A + $104.90 for Part B, is likely to be a lot lower than a Gold plan for a 64-year-old (or older) person.

At $75,000 income, they are well below the joint MAGI threshold for a Part B premium “enhancement”.


Dropping Retiree Health Plan

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Question: I am a dependent on my wife’s retiree health plan. Can I drop that coverage and get a plan on the California Exchange? Can I qualify for a subsidy based just on my income, or is the subsidy based on total household income even though the insurance would be just for me.

Answer: Assuming your spouse’s retirement plan is a group health plan and since have access to an employer-sponsored plan, you are not eligible for a subsidy in the Exchange. You may however choose any exchange plan of off-exchange individual plan you wish.


Can Spouse Opt Out of Group Coverage?

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Question: I work for a public school in which my employer pays for my health insurance. My wife is a homemaker and is on my insurance, but I pay the entire premium. My gross income last year was 27,000. Can my wife leave the insurance she currently has and shop on the exhange?

Answer: The IRS has ruled if one has “access” to employer-sponsored coverage they are not eligible for premium assistance in the exchange. So your spouse can opt out of your group coverage and shop at the exchange, but she will not be eligible for a subsidy.


Question: I am self employed and qualified for low income insurance through my state. My girlfriend/soon to be wife’s company does not offer same sex marriage health insurance. if I get married I will lose my insurance through my state because they use her income as part of the application process. If I apply for the insurance in January under the Obama care will it be just my income or will it be our income combined? She does not need coverage it would be just myself.

Answer: After the DOMA ruling yesterday, your partner’s employer must offer coverage for married same-sex couples at some point (assuming your state allows same-sex marriage), probably not until the group’s next open enrollment. Obamacare will treat you as a couple only if you file income taxes jointly. Being treated individually will be better for you if you have a lower income than your partner, you may qualify for premium assistance in the exchange. She will not because she has access to affordable group coverage.


Exchange Coverage for Spouse?

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Question: If I am currently on my spouse’s insurance can I deny insurance coverage from my current employer under new Obama health care plan? My employer is saying no that I cannot deny and would have to go t part time to avoid that.

Answer: Yes. You can drop off your spouse’s employer-based coverage and enroll in the Exchange, but you will not be eligible for premium assistance because you have access to employer-based coverage. The employer would have to exclude all spouses and children from coverage in its group plan for the dependents to be eligible for subsidized coverage in the Exchange. It is only when the insured’s employee-only cost exceeds 9.5% of income that the coverage is deemed not “affordable”, making the entire family, including the employee, eligible for premium assistance in the Exchange.


"Obamacare" Maternity

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Question: I have insurance under my mother’s policy, with no maternity. My due date is in mid January, 2014. Does this mean that I can get insurance right before my birth to cover my hospital expenses?

Answer: Yes. Your new coverage can be effective January 1, 2014. Coverage includes maternity and there are no waiting periods.


Question: My wife is a small business owner, and is covered under my policy. However, the cost of covering her is exorbitant. Can she opt out of my coverage and buy her own policy on the new exchanges?

Answer: Your wife can purchase individual health insurance on the state exchange, but she will not be eligible for a subsidy because she has access to employer-based health insurance through your employment. The exception to this rule is if your shared contribution to your own coverage (employee-only) exceeds 9.5% of your income. In that case you and your spouse may be eligible for an advance tax credit in the exchange.


Stay on Cobra in 2014?

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Question: I am currently on cobra which will last till i go on medicare. will i be forced to get ins. from an exchange in 2014 or can i stay on cobra, if i so desire? thank you

Answer: You can stay on COBRA if you wish, but I suggest you take a look at coverage offered in your state exchange. You might get better coverage for less money especially if you qualify for a premium subsidy.


Question: When Obamacare comes along can I drop my insurance through my employer and buy my own policy that meets my needs? Our current coverage is horrible.

Answer: Yes. You can opt out of your employer-based insurance and buy a plan in your state exchange, but you will not be eligible for a premium subsidy if you have access to “affordable” employer-sponsored health insurance. To be considered affordable, your contribution toward the employee-only coverage must be less that 9.5% of your income.


Question: I read an article that said rates of individual insurance would go up as much as 60%. Won’t that erase the savings from subsidies?

Answer: A new study released on Tuesday by the nonpartisan Society of Actuaries estimates that individual premiums will rise 32 percent over 2013 rates on average nationwide within three years, 2014 - 2016, partly as a result of higher risk pools (more sick people in then insured population). Changes would vary by state, from an 80 percent hike in Wisconsin to a 14 percent reduction in New York. For anybody eligible for subsidies, their contribution to the total premium is fixed on a range between 2% and 9.5% of income. So, for the subsidized, it doesn’t make any difference what the final rates are. On an individual basis, age and income will determine how much of an increase. The subsidized group are likely to pay about 47% to 84% less in monthly premiums compared to 2013. The un-subsidized young (below 40) and will see the highest premium increases. Some of older un-subsidized group will have lower premiums than today for better coverage. On a positive note for the un-subsidized, coverage will be more comprehensive for all, meaning less out-of-pocket costs thus reducing the impact of higher rates.


Question: The largest insurance carriers, like UHC, Aetna, Humana, are saying that they will only be participating in a few state exchanges, just to see “how things go”. Does California know which companies will definitely be selling plans on our state’s exchange-marketplace?

Answer: No definite answer yet, but the largest California carriers will most probably be in Covered California, including Kaiser, Anthem, and Blue Shield. I’ve heard that United Healthcare will not participate in the California exchange, but that’s hearsay.


Recently Documented Resident

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Question: I got my green card in April 2010. Can I buy healthcare insurance from Covered California? I heard you have to wait 5 years.

Answer: Yes. Lawful immigrants who have lived in the U.S. for less than five years may participate in Covered California and be eligible for subsidies if income-qualified. But you are still required to be a lawful resident for 5 years to qualify for Medi-Cal.


Subsidy for Spouse

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Question: I’ve opted to have an individual health plan because, being in good health, it’s less expensive than buying into my spouses employer plan. As an independant contractor, will I be eligible for a health insurance tax subsidy if our family income is low enough?

Answer: The ACA says that someone with access to “affordable” employer-sponsored coverage cannot get a premium subsidy from state exchanges in 2014, unless the cost of the employer-based health care coverage for that employee exceeds 9.5 percent of the worker’s household income. The IRS ruled recently that the calculation of affordability will be based on the cost of employee-only coverage, not family coverage. For example, if your spouse contributes $300 each month or $3600 for the year for his or her portion of the premium for the employee only, Your family income would have to be less than $37,895 per year no family member would qualify for a subsidy even though they are not covered by the spouse’s group plan.


Obamacare or Employer Plan

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Question: If i lose my health insurance thru my husband’s employer do i have to take one offered thru my employer or can i take one thru the health care exchange?

Answer: If your employer offers group health insurance coverage that is “affordable” you should take it, because you will not be eligible for a premium subsidy in the state Health Insurance Exchange.


What Happens to COBRA?

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Question: What is the status of Cal-COBRA going forward? If my employer ends group coverage, will my COBRA abruptly end and would that be considered a qualifying event? Is the natural expiration of a COBRA (18 months) considered a qualifying event to purchase from the exchange outside of the enrollment dates?

Answer: The ACA did not eliminate COBRA or Cal-COBRA or change the existing rules. If you stay on COBRA until your coverage expires you will qualify for special enrollment outside of the open enrollment period. Likewise if your COBRA coverage ends for any other reason it will be considered a qualifying event.


Question: My son turns 26 next year and is disabled with lyme disease and cannot work (no financial income). Currently, he is covered under my work insurance plan. What options does he have when he can no longer be on my plan.

Answer: Your son will be eligible for coverage in your state health insurance exchange on January 1, 2014, as would any legal resident of your state regardless of medical conditions. You don’t have to wait until he is 26. His income will determine whether he is eligible for Medicaid or subsidized private coverage.


Question:I am 60 and retired. I kept the retiree insurance offered by my previous employer while waiting for a response from an individual insurance application for a plan that was half the cost. I was denied insurance based on pre-existing conditions. It is VERY difficult to continue paying these premiums ($600)and would like to know if I will be able to enroll through an exchange in the fall of 2013 for the 2014 implementation of the health care act, or will I have to be uninsured to do so?

Answer: Yes. You will be able to enroll in a ACA conforming health plan through your state exchange anytime after 10/1/13 and your new coverage will be effective on 1/1/14.


Eligible for Medicaid in 2014?

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Question: I am a single mom with 2 children. I make about $20,000. We don’t have insurance now. We don’t qualify for Medicaid because I have some savings. Can we get health insurance through the exchange if we do not qualify for medicaid due to assets?

Answer: Starting in 2014, Medicaid will no longer consider assets, only income. So based on your income you will be eligible for free public health insurance from Medicaid. If you choose to opt out of Medicaid in favor of Exchange coverage, you cannot also be eligible for subsidized coverage. You would have to pay the full premium and I don’t think that will be practical for you.


Better Coverage in 2014?

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Question: We currently have an Aetna PPO through my employer. My spouse is 53 and has a chronic illness. So far she is doing okay, but our fear is that when I retire next year, and we shop from the exchange, the potential treatment she may need won’t be as good as what I currently have with Aetna. That our options for treatment will be limited. Are these fears unfounded? Will the latest treatments be available?

Answer: The quality of health insurance coverage in 2014 will actually be better - more comprehensive and with fewer restrictions - than it is now as a result of health insurance reforms imposed by the Affordable Care Act.. You can still purchase an Aetna PPO plan if you so choose, either in the state exchange or the outside marketplace.


Question: Will the SHOP exchange will offer the same qualified health plans as the individual exchange?

Answer: The ACA leaves this up to the states. In some states, like California, there will be two separate exchanges one for individuals and one for small-businesses and both exchanges must offer the same standardized plans. In some states the two exchanges may be combined.


Who Gets Subsidized?

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Question: Who will be eligible for premium subsidies in the health benefit exchange in 2014?

Answer: Legal residents, under 65, and not incarcerated will qualify for subsidies called advanced premium tax credits in 2014, if their taxable household income (AGI) is between 133% percent and 400% percent of the federal poverty level. The amount of the subsidy decreases as income increases.


Obamacare Catastrophic Coverage?

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Question: Will there catastrophic coverage under Obamacare?

Answer: Yes. But the catastrophic plan can be offered only only for young adults, those under age 30 before the plan year begins. The catastrophic plan will be the lowest priced health plan available within the guidelines of essential benefits. Catastrophic plans will have an actuarial value of about 60% (bronze level). The deductible and out of pocket maximum will be $6400 per year.


Question: What is the individual mandate health care reform amount of tax?

Answer: The Affordable Care Act (ACA) specifies that the “applicable dollar amount” of the tax is $695 per adult to be phased in and adjusted as follows:

  • In 2014, the penalty is $95 per adult and $47.50 per child (up to $285 per family) or 1% of family income, whichever is greater.
  • In 2015, the penalty is $325 per adult and $162.50 per child (up to $975 per family) or 2% of family income, whichever is greater.
  • In 2016, the penalty is $695 per adult and $347.50 per child (up to $2,085 per family) or 2.5% of family income, whichever is greater.

Question: I have seen this on many ACA timelines, but have not seen any guidelines on how employers are supposed to notify their employees, or what specific information must be included. Have those guidelines been set? Where can I get more information on how employers notify their employees of Exchanges?

Answer: The ACA places three requirements on employers to disclose information to employees either at the time of hire or by March 1, 2013 for current employees:

  1. Employers must provide written notice informing employees about the state’s Exchange, including a description of how the employee may contact the Exchange for assistance.
  2. The employer must notify employees if the plan offered by the employer is inadequate, meaning it does not meet the actuarial value of 60 percent. The employer must let employees know that they may be eligible for a premium tax credit and a cost-sharing reduction if they purchase a health plan through the Exchange.
  3. Employers must notify employees that if they purchase a health plan through the Exchange, the employee may lose the employer’s contribution to health benefits offered by the employer.

Multi-State Health Plans

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Question: Do you think that offering nationwide health plans is a good idea for Covered California?

Answer: First a little background for our users: at least two multi-state health plans chosen by the federal government will compete with private health plans in state Exchanges. These health plans are similar to those available to members of Congress and other federal employees and will be offered by private insurance companies under contract with the United States Office of Personnel Management (OPM).

The Covered California board has expressed concerns because these federal plans do not appear to be under the same requirements and restrictions as California health plan issuers participating in the Covered California health insurance marketplace. Some of the reservations expressed by the board are:

  • Participation Fees: If the participation fee imposed by OPM is lower than the Covered California health insurance marketplace, California’s QHPs will be at a competitive disadvantage.
  • Essential Health Benefits: Will the multi-state plans be allowed substitutions to essential health benefits. California law prohibits this, but the rules for multi-state plans are unclear.
  • Cost-Sharing and Standardization: The federal proposal does not require the multi-state plans to adopt the same cost-sharing and standardized plan designs that other health plans must meet by state law.
  • Recertification and Decertification of QHP: The proposed rules exempt the multi-state plans from decertification and decertification by Covered California.
  • Regulatory Oversight: California’s role in ongoing oversight of the multi-state plans is unclear.

Question: I run a small business with 30 employees who live in 5 different states. Most of them will probably qualify for premium subsidies, but I’m concerned about those that live in states that will have federally run exchanges like Texas for instance. Will they be eligible for subsidies? I’ve heard no.

Answer: Yes. Just last week, the Congressional Budget Office (CBO) released a letter to the House Oversight Government Reform Committee Chair Darrell Issa saying that it never considered that the subsidies might only be available in states operating their own exchanges. CBO Director Doug Elmendorf said in the letter, “the issue [had not been] raised during considering of earlier versions of the legislation in 2009 and 2010, when CBO had anticipated, in its analysis, that the credits would be available in every state.


Question: Does Obamacare cover children dental and vision to 26 years old?

Answer: No. When the Affordable Care Act (ACA) is fully implemented in 2014, Qualified Health Plans (QHPs) will include some dental coverage for children through age 18. Covered California still has to decide what that coverage will include. The Covered California will offer optional stand-alone dental and vision plans for all residents under 65.


Question: I attended a panel discussion recently that included Peter Lee, Executive Director of Covered California. He referred to “assisters” as well as navigators. What are assisters? Are they same as navigators?

Answer: In California, Navigators and Assisters are essentially the same thing. Their roles and responsibilities are virtually the same. Both Eligible Navigators or IPAs must be affiliated with an Assister Enrollment Entity. The difference is in how they are compensated. Assisters are paid a flat-fee of $58 per successful application and $25 per successful annual renewal. Navigator entities are paid for performance-based block funding based on meeting Covered California enrollment targets. However it’s important to note that that it is the enrollment entity that is compensated by Covered California and then the entity in-turn compensates assisters or navigators that are affiliated with it. Assister training and certification will begin in August 2013 so that IPAs are ready to assist with Covered California enrollments beginning October 1, 2013. Navigator certification will not begin until November 2013 because the exchange will need time to conduct an analysis to determine where enrollment assistance gaps occur (geographic areas or targeted market segments) then grants for the Navigator Program will be awarded to enrollment entities to fill-in the gaps. Navigators are expected to begin enrollment assistance in December 2013.


Question: Does an increase in rates qualify as a qualifying event to change insurance outside of open enrollment.

Answer: Just so you know, we're getting ahead of ourselves here. Covered California ) is months away from making a definitive ruling on this issue. However, I can answer your question with an educated guess because the ACA speaks to the affordability issue. For example, if you are offered employer-sponsored coverage in July and your contribution for that coverage exceeds 9.5% of your income, you can opt out of your employer's group and enroll in a qualified health plan through the Exchange and this could be done outside of the annual open enrollment period starting in October.


Qualifying for Subsidy

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Question: If i qualify for a subsidy in 2014, can I enroll through a private exchange and still have the premium subsidy?

Answer: Only Covered California can qualify an individual or family for a premium subsidy. Private exchanges are expected to have the ability to electronically hand-off a client for income verification and final enrollment at Covered California. From the client’s point-of-view, the experience of shopping, deciding, and applying remains with the private exchange or web-based agent.


Do Assets Count?

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Question: Is the subsidy only based on yearly income?? What if I have alot of assets but low income?

Answer: Only your income is considered. Covered California will qualify you financially based on your adjusted gross income from last year’s tax return.


Outside of Open Enrollment

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Question: Can you enroll after open enrollment period in the California health benefit exchange?

Answer: Enrollment outside of the annual enrollment period will be possible is the applicant has experienced a “qualifying event” such as (loss of employment, marriage, divorce, child birth, immigration documentation, etc.)


AB 1642 and ACA Conflicts?

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Question: Is the “small employer” definition of 1 to 100 employees under the ACA only applicable to participation in the exchanges? For instance, can an insurance carrier that is not participating in the exchange still deem a group of 51 and over “large” after 2016? I am trying to ascertain if this new definition is universal. Most carriers “must offer” insurance to small groups (usually 50 and under) - will they now have to offer to groups 100 and under even if they are not going through the exchange?

Answer: In California small group health insurance is governed by a state law - AB1672 - which protects businesses with 2-50 employees. The question you raise is about potential conflicts between California law and federal law - the Affordable Care Act. No worries. The California legislature has already shown itself to be more than willing to modify state laws to insure Covered California is successful.


Is Premium Subsidy Taxable?

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Question: Are low income premium subsidy dollars considered taxable to members?

Answer: No. The ACA calls to the premium- subsidy an “advanced tax credit” and is therefore not taxed as income.


Question: Do providers have to participate in the California Health Benefit Exchange?

Answer: Providers like doctors and hospitals will not contract directly with Covered California. They will continue to have contractual relationships with the health insurance carriers that sell their plans in the Exchange.


Question: Why is the Exchange an essential part of Obamacare?

Answer: Many large California companies like Cisco, as well public entities like CalPers and labor unions, create their own private health insurance exchanges. These private exchanges provide the employees of that company a side-by-side comparison of the different insurers’ from which to choose. The health insurance plans permitted on the exchange are typically chosen by the company’s employee-benefit department. Since insurance carriers compete to be included, the employer can regulate these companies’ behavior during and after the enrollment period.

Covered California was created in a sincere attempt to offer millions of low-income and uninsured Americans the health benefit choices enjoyed by workers at large US companies, government entities, and unions. The objective is to help those with family incomes above 133 percent of the federal poverty level (currently about $30,000 for a family of four) buy guaranteed-issue, community-rated, federally-subsidized, private health insurance.

The Exchange will do almost the same thing that big companies do for their employees for those who don’t get their healthcare at work. The Exchange will decide which health plans they’ll offer, make it easy for users to compare coverage and select a plan, and assist in enrollment in a private health insurance plan through the Exchange.


Will the Exchange be Cheaper?

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Question: I work for a big retail company that has a health plan but I can’t afford it. My cost to insure my family would be almost 30% of my wages. Will the Exchange be cheaper for me?

Answer: Yes. In 2014, your contribution for employer-sponsored health insurance cannot exceed 9.5% of your wages or your employer will pay a penalty called the play or pay tax. Also, if your employer does not offer you affordable health insurance (below 9.5% of your wages), you will be free to shop for your own coverage at the Exchange where you may save more if you qualify for premium subsidies.


Small Group Market at Risk?

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Question: You obviously believe that the ACA puts the group health insurance market in California at risk. Yet, most of the press coming out of the health insurance industry says that most employers will continue to provide group health insurance. Who’s right?

Answer: There’s room for disagreement on the published surveys to which you refer. Most are biased toward maintaining the status-quo, partly because that’s what the entities conducting the surveys want to hear, but mostly because the respondents have no idea how to answer the question. They don’t yet understand how the ACA will affect them and their employees. Here are some other reasons:

  • Under the ACA, small-business employers (less than 50 employees) are not required to provide employer-sponsored health insurance and there is no penalty for not doing so. The California small group market accounts for about 3 million lives today. About 1.2 million individuals currently in the small-group market qualify for premium subsidies which are only available in the individual Exchange.
  • Small-business employers are struggling with what to do with health care costs. The solution available today is an “average” solution that maybe meets the needs of half of their employees. They don’t have a solution that is tailored to the individual. The individual Exchange is going to have something that is tailored to what the person is trying to buy.
  • The incumbent small-group carriers - Anthem, Kaiser, and Blue Shield - who control two-thirds of the market, are not highly motivated to defend this market. They probably expect to maintain their market-share in a migration to individual plans in the Exchange. While their more profitable market - larger employers with more that 50 employees - account for 12 million lives.
  • Another possibility is that there is a disruption in this market, that is a different group of health plans captures this emerging individual market because they master the kinds of skills and build the kind of model that allows them to capture this new growth opportunity.

Question: How big could the individual health insurance market be, say by 2016?

Answer: No one really knows exactly what the size of the California individual market is going to be, but it is certainly going to be much larger than it is today, which is about 1.5 million people. About 500,000 of those currently self-insured in the individual market will qualify for premium subsidies and move to the Exchange. About 3 million currently uninsured are expected to enroll in individual market through the Exchange. Non-Exchange individual business could add another 1 million people. So, the 2014-2015 individual insurance market in California should be about 5 million lives. Also, it remains to be seen how many employers - especially those under 50 (employees) - will decide to drop coverage and point their employees to the Exchange. California could have anywhere between 5 million and 8 million people in individual health plans by 2016.


Exchange Brand Name Delayed?

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Question: I expected the Exchange to announce their new brand name today at their monthly board meeting but they did not. When can we expect it?

Answer: You’re right. The Exchange would have liked to announce it today, but they are not there yet. They will make a selection of the final 1 to 3 names next week. So far the list has been narrowed down to 5 names.

  1. Covered, CA
  2. CaliHealth
  3. Avocado
  4. Ursa
  5. Eureka

How Much Choice Among QHPs

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Question: How much choice among QHPs in each tier should consumers be offered?

Answer: I believe that the best selling products on the Exchange will be Bronze and Silver plans. Therefore, the Exchange needs to cut the carriers some slack to design additional plans for those tiers. Carriers should be allowed to design 3-4 Bronze and 3-4 Silver plans to encourage innovative benefit designs and give individuals additional options for the plans that are likely to be most popular. For the Gold and Platinum plans, one plan design each for the individual exchange and 2 Gold plans and 1 Platinum plan for the small group exchange should be sufficient.


Question: Why is the Exchange opposed to charging higher premiums for tobacco users?

Answer: Consumer groups have advised the Exchange board that rating-up tobacco users will raise an additional obstacle (higher premiums) to a group of people who need to be insured. I think that’s a mistake. We need affordability to be job one. I believe that issuers should to be allowed to use the tobacco use rating factors (up to 50% premium surcharge) permitted by the ACA . If carriers are allowed to set their own tobacco rating factors rather than having them set by the state, premiums for all Californians will be lower.


Exchange Jobs

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Question: Where can I find a listing of the government job openings for the CA Health Benefit Exchange?

Answer: Click Here


Affordability for Young People

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Question: I’m 27, single, and I have a decent job, but I’m definitely not making the big bucks. I don’t get health insurance at work. I had my own policy for a while, paying out about $150 a month but I never used it. I had to lapse it when my car needed major work. Anyway, I read where the Obamacare mandate penalty is $95 a month. How much more will health insurance cost?

Answer: In 2014, the cost of health insurance will be a lot more than the ACA mandate penalty. The annual fine for not purchasing health insurance under the ACA is $95 per person in 2014 (or 1% of taxable income, whichever is greater), $325 in 2015 (or 2%), and $695 in 2016 (or 2.5%). Thereafter, the mandate fine is indexed to inflation. The monthly premium for the benchmarked essential-benefit qualified health plan plan individual plan in 2012 is about $300 per month for a male age 26. It will be higher in 2014.

But, if you are like many of the young people under 30 who are just entering the work force, you have a below-average income. If so, you will qualify for either Medi-Cal or private health insurance with premium subsidies, which will make your health insurance coverage either free or highly discounted.


Question: Will the Exchange raise health insurance rates?

Answer: Yes. In the first few years of the Exchange’s life, health insurance premiums will be higher because, the Affordable Care Act (ACA) does nothing to immediately reduce medical costs on which insurance premiums are based and the ACA has several requirements that will tend to raise premiums over the short -term, namely:

  • The requirement that all insurance plans cover “essential benefits”,
  • The requirement that all plans meet a “minimum actuarial value” of 60 percent ,
  • The requirement that insurers spend 80 percent of individual-market premium costs on health expenses (medical loss ratio), and
  • Requirements that insurers align rates more closely between the young and the old (community rating).

The competitive efficiencies and economies of scale brought about by the Exchange should help to reduce the rates in the longer term.


Monthly Premiums are Killing Us!

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Question: We live in PA. In 2010 my husband left his last job and went out on his own as a painting contractor. We shopped for health ins and were told we could no longer get covg as a sole proprietor as we had in the past in that situation. We now had to become an LLC and then they had to have my husband on one plan on his own and me as an “employee” on another plan w/our daughter. We all have pre-existing conditions. I alone had a heart attack w/stents placed in 2009 and we all 3 take about a total of 15 rx meds. Our total ins premiums right now through KHPE are over $1800 per month. That’s 1 1/2 times our mortgage. We can barely make these payments each month and are trying to figure out if there’s something better out there for us. Starting to feel really hopeless.

Answer: There is hope, but not immediately. If you can make those premium payments for another 16 months, you will be off the hook. In January 2014, you will able to purchase individual health insurance form the State Health Insurance Exchange in PA. Rates will be the same for all regardless of health conditions. In addition, federal subsidies will greatly reduce your premium. Hang in there. It’s not hopeless.


Question: Once the Exchange is up and running will an employer be able to pay the Exchange for employees who buy their own health insurance from the Exchange? Would that be pre-tax for the employer?

Answer: No. The employer cannot pay Covered California directly for the employees’ premiums in the individual exchange. If the employer reimburses some or all of the employees’ premiums those payments would NOT be tax deductible to the employer and such payments would be taxable income to the employee.


Question: How can employers contribute to individual health insurance premiums for their employees without violating federal law?

Answer: Employer can reimburse some or all of the employees’ premiums legally. But those payments would NOT be tax deductible to the employer and such payments would be taxable income to the employee.


Question: If the Republicans win in November and successfully cut off funding for Obamacare, will the Exchange survive?

Answer: Republicans have indicated they will seek to repeal the law if they win the White House and Congress in the November election. Whether they can actually do that remains to be seen, but uncertainties about federal funding for the Exchange challenge its viability. Federal subsidies are the Exchange’s main attraction, its “killer app” if you will. Experts agree that the Exchange could work without federal subsidies, but it wouldn’t attract nearly as many people.


Question: What power does the Exchange have to help to improve overall health care quality in California?

Answer: A recent Robert Wood Johnson Foundation Paper Exchanges & Quality -rwjf.org.pdf points out that states have a number of options for using their health insurance exchange to help drive quality improvement and delivery system reform, including:

  • Providing plan performance information on specific quality metrics important to consumers, so that they can more easily assess which plans do a better job providing the services they want.
  • Aligning quality improvement and reimbursement strategies for the exchange, Medi-Cal, CHIP, state employee benefits programs, and, possibly, private employer purchasing alliances, so that a critical mass of health plans are sending a common set of signals to their provider networks.
  • Using the exchange’s Web portal to give consumers relevant and actionable information on plan and provider quality, and Web-based decision support tools to promote higher-value plans as consumers consider their plan choices.

Exchange and Cafeteria Plans

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Question: Will employees who opt for coverage in the Individual Exchange be allowed to use their employer-sponsored cafeteria plan to pay their premium with pre-tax dollars.

Answer: No. HHS regulations prohibit employers from permitting employees to use pre-tax dollars in their cafeteria plan to pay for coverage through a QHP in the Individual Exchange. It does permit SHOP enrollment using a cafeteria plan if the employer is eligible for the SHOP (50 employees or less). This recent provision amends section 125 of the Internal Revenue Code relating to cafeteria plans. It states that a qualified benefit does not include a (QHP) offered through an Exchange unless the employer is Exchange-eligible and offers employees the opportunity to enroll in a QHP through the SHOP Exchange. Effective date is for taxable years ending on or after Jan. 1, 2014.


Question: Is it better for a business with less than 25 employees to keep current employee healthcare plan in place or cancel it before 2014?

Answer: Your question is one many small business owners will be asking in the next year or two. Do I keep providing group health insurance for my employees or turn them loose to shop for individual health insurance on the Exchange? On a strictly objective level, your answer will depend on (1) the income level your employees and (2) the employment market for your employees. Let me give two examples to illustrate - a retail store with 25 employees versus a software development firm with 25 employees. The retail store employees are mostly low-income, many of whom will qualify for premium subsidies in the Exchange. Retail employees are relatively easy to hire and train. Conversely, the employment market for software developers is very competitive, so this business would do well to keep providing a comprehensive group health plan to attract and keep the employees it needs. Employers who choose to take advantage of the Exchange’s premium subsidies to help fund their employee health benefits may still offer group health insurance to a subset of their employees. The tax consequences and health plan regulations on how that will work are yet to be determined.


Consumer Benefits

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Question: What are the benefits for the consumer in the california insurance exchange?

Answer: Here are the main benefits for individuals in the Exchange One Stop Shopping: The Exchange will offer qualified health plans (QHPs) from most of the health insurance issuers in California at affordable rates. Guaranteed Issue: All health insurance will be required to cover anyone who applies regardless of health history or pre-existing conditions. Premium Subsidies: Federal premium subsidies or “advance tax credits” are financial payments graduated on income level to support the purchase of QHPs exclusively through the Exchange. Essential Health Benefits: All health plans will offer at least the standard set of defined Essential Health Benefits. Consumers will be able to compare coverage much easier than today.


HIPPA Plan and Exchange

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Question: If you are currently under existing HIPAA individual plan can you then change to the new insurances to be offered by the Exchanges effective Jan 1, 2014?

Answer: Yes. HIPAA plans will phase out after the Affordable Care Act (ACA) becomes fully implemented in 2014. You will be able to purchase individual health insurance in the Exchange or the private market that costs less and provides better coverage than your current HIPAA coverage.


Question: How do I become an exchange navigator in California?

Answer: In California, Navigators and Assisters are essentially the same thing. Their roles and responsibilities are virtually the same. Both Eligible Navigators or IPAs must be affiliated with an Assister Enrollment Entity. Assister training and certification will begin in August 2013 so that IPAs are ready to assist with Covered California enrollments beginning October 1, 2013. Navigator certification will not begin until November 2013 because the exchange will need time to conduct an analysis to determine where enrollment assistance gaps occur (geographic areas or targeted market segments) then grants for the Navigator Program will be awarded to enrollment entities to fill-in the gaps. Navigators are expected to begin enrollment assistance in December 2013.


PCIP and CA Exchange

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Question: If I am currently enrolled in CA PCIP program, will it be necessary to then reenroll for new insurance via the new exchange? Also, there is a 6 month period where you cannot be covered by any insurance to enroll in PCIP. Will there also be a similar waiting period of non insurance for those ins plans offered by the exchanges? Will there be any pre existing condition exclusions allowed under the insurance co that will be in the exchanges?

Answer: Yes. You will want to enroll in a qualified health plan in the California Health Benefit Exchange or the private market outside the exchange in January 2014 when your preexisting conditions are no longer a factor. The coverage and rates should be better that PCIP. There will be no requirement that you be without health insurance for at least 6 months. The Affordable Care Act does not mention a waiting period and it is unlikely the California Exchange would require one. There will be no pre-existing condition exclusions in any plans after January 2014, either in the Exchange or the outside market.


Affordability and ACOs

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Question: What, if anything, will the Exchange do to promote Accountable Care Organizations (ACOs)?

Answer: So far, the California Health Benefit Exchange Board has not discussed ACOs in public meetings. Yet, the Exchange must address affordability in order to meet the goal of increasing healthcare coverage. Affordability is often facilitated through innovation of benefit plan design and creative thinking about provider networks and delivery systems. ACOs offer significant potential for new forms of value-based plan designs which support affordability and quality of care. The exchange should consider working with California health insurance carriers to support this innovation.


Assister Training Adequate?

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Question: How can a two-day training course prepare so-called “Assisters” to help people choose the right health insurance coverage? I am a licensed agent with eight years experience selling both individual and small-group health insurance in California and I am sometimes confused by the endless benefit choices and financial trade-offs?

Answer: I share your concern. Covered California just published a draft of the training curriculum for assisters. While the outline certainly looks comprehensive, I believe the proficiency of the assister will vary greatly depending mostly on their after-training experience. At one end of the spectrum, you have the assister who goes to work in a call center surrounded by experienced assisters and supervisors and deals with many applicants every day. Obviously, this assister will retain and put into practice much of what they’ve been taught. At the other extreme, an assister who only works with a handful of applicants in the first few months after training will retain very little of the training. The same could be said of agents. An agent who typically works with small groups will be in a whole new world when it comes to assisting enrollments in Covered California.


Question: I am self-employed. My spouse’s dependent coverage is too expensive. Will I be able to purchase insurance through the exchange?

Answer: Absolutely. You will be able to apply for coverage in a qualified health plan through the California Health Benefit Exchange starting in October 2013 for coverage effective January 1, 2014. You may even qualify for subsidized health coverage calle advanced tax credits in the Exchange, which is the exclusive channel for these tax credits. Those individuals and families with incomes between 138% and 400% ($92,200 for a family of four) of the Federal Poverty Level (FPL) will qualify for subsidies.


Question: Will Brokers need to contract with the Exchange to prove that we are licensed and insured? Any other requirements to get paid through the Exchange?

Answer: The California Health Benefit Exchange categorizes brokers as Assisters - along anyone else that wants to facilitate an enrollment in the Exchange. All Assisters will be certified through the Exchange after completing required training. Certification will be renewed annually. Currently, the Exchange is saying that Assisters should complete at a minimum a two-day Assisters Training. The Exchange has given flexibility for program sponsors to consider an abbreviated version of the training program licensed agents. Assister training and certification will begin in August 2013 so that IPAs are ready to assist with Covered California enrollments beginning October 1, 2013 Keep in mind that agents are not paid by the Exchange, but by the carriers offering qualified plans through the Exchange, Contracting with carriers will still be required.


Question: I currently am 100% covered by my employer but will be going part-time My employer will not pay any of my health insurance costs as a part-time employee. To make ends meet I will need to also be self-employed. I have a pre-existing condition that requires very pricey drugs. Is my best option to elect COBRA and hope that they don’t repeal the health care act so that I can get affordable coverage in 2014?

Answer: Yes. Your best option is to elect COBRA. It will cover you until you can enroll in guaranteed health insurance coverage available through your state health insurance exchange in January 2014. If your income is still on the low side by then, you will probably qualify for a subsidy to help pay your premium. And of course, your preexisting conditions will no longer affect the availability or cost of health insurance.


Exchange Coverage Cheaper?

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Question: Will i get cheaper coverage from a state health insurance exchange?

Answer: No and yes. In general qualified health plans sold through the state-based exchanges starting in 2014 will be higher-priced than the average plan today. That’s because they must contain a minimum of essential benefits which today’s cheaper plans do not cover. However, many millions of Americans will qualify for “advance tax credits” which are federal subsidies for the purchase of private health insurance available only through the exchanges. These subsidies are based in income and are quite generous. For example, subsidies will be available to a family of four with annual income up to $92,000.


Affects of the SCOTUS Ruling

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Question: What are the immediate results of yesterday’s Supreme Court ruling on state exchanges?

Answer: The SCOTUS decision puts a lot of pressure on those states that have not done much to get their exchanges started while hoping the ACA would be declared unconstitutional. Now, they are under severe time constraints to implement an exchange. Many states will be left with no alternative to a federally run exchange. States must also decide whether to accept the Medicaid expansion program and will probably decide along party lines - many Republican dominated states choosing not to. The development of the California Exchange is way ahead of the curve relative to other states and will most surely continue with Medi-Cal expansion. So, other than a sigh of relief, no changes in California.


Exchange Enrollment Scenarios

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Question: How do you see the agent completing an enrollment in the Exchange? Will we be able to enroll subsidized members? What about our existing individual members?

Answer: It remains to be seen how the Exchange guides enrollments from the carrier and agent channels. The best I can do at this point is provide some likely scenarios.

  • Only a contracted carrier or the Exchange itself - acting as administrator for the carrier - can complete an enrollment. Agents and Navigators involved in outreach, education, and pre-screening will complete an application for enrollment and submit it to the Exchange.
  • Agents and Navigators could pre-screen individual health insurance applicants for eligibility for subsidized coverage in the Exchange or Medical, and transmit pre-populated applications and a warm hand-off to Exchange staff to complete enrollment.
  • Contracting carriers could partner with the Exchange in enrolling both current members who are subsidy-eligible, and new subsidy-eligible members that the carrier identifies as part of the its marketing efforts. This is a cost-effective means to provide a sizable portion of the Exchange’s projected first year enrollment.

The process we envision would be similar to the current method submitting an online application to a carrier for underwriting, Of course, post reform there will be no medical underwriting, but financial underwriting in its place.


Question: How will the Exchange handle the flow of premiums? Will policyholders pay the Exchange or the insurance carrier that issued their health plan? Will the federal subsidies go to the insured or the Exchange?

Answer: Individuals and families who enroll in qualified health plans in the California Exchange will pay their premiums directly to the health insurance companies who issued the insurance policy. In the case of individuals with federal subsidies, the U.S. Department of Treasury will make direct deposits to insurance companies of federal subsidies such as Advance Premium Tax Credits (APTC) and Cost-Sharing Reductions (CSR).

Conversely, the SHOP Exchange will bill the employer for the aggregate monthly premium for the group’s employees. The monthly premium payment is a combination of the employer contribution and employee pre-tax payroll deductions for the employee responsibility. The employer writes one check to the Exchange and the Exchange platform disburses the appropriate premiums to each employee-selected carriers.


Question: Will agent compensation in the Exchange truly match agent compensation outside the exchange? I am thinking of tiered compensation arrangements based on volume that are common in today's market.

Answer: Most of the details of the agent compensation picture is still in the TBD category, but the Exchange needs to insure that they have a level playing field in terms of agent compensation to protect against adverse selection. The requirement that agent compensation be the same in and out of the Exchange should extend to all forms of compensation - monetary as well as non-monetary incentives or considerations. Similarly, the principle should be applied to all bonuses, overrides, and like programs that reward high-volume agents and brokers. Such programs must calculate eligibility for bonuses equally, without regard to whether the enrolled lives are in Exchange or non-Exchange products.

The Exchange should also prohibit, by contract, participating issuers from paying product-specific bonuses in or out of the exchange. Such bonuses, if targeted for example only at non-exchange offerings, could thwart the goal of requiring that commissions be equal in and out of the Exchange.


Question: Will Navigators be sufficiently motivated by $58 per enrollment in QHPs and nothing at all for Medi-Cal enrollments?

Answer: You have wonder about the livelihood of navigators under this model. (See Navigator Compensation Update).This could not be the sole focus or job of any navigator. Furthermore, beyond 2014, enrollment is expected to decline by close to two thirds, providing even less opportunity for sustaining a livelihood in this space.

The Exchange is looking to Medi-Cal for ways to fund direct compensate for navigators assisting Medi-Cal enrollments, but if they are unsuccessful, they will be creating a model where navigators would be required to promote enrollment in a program without any financial incentives. I believe that unless navigators are appropriately compensated, enrolling individuals in Medi-Cal could pose a challenge. Navigators should have direct financial incentives to assist with any services they provide to facilitate enrollment.


Question: How can the Exchange control the tendency for assisters to steer consumers to certain Qualified Health Plans rather than others?

Answer: The steerage concern is an important one. Both the ACA and the Exchange have safeguards in place to minimize it, For example, having the same commission structure both in and out of the Exchange. However, the steerage concern needs to be balanced against a far greater concern, particularly in the early years of the Exchange: the need to successfully enroll individuals on a massive scale. The failure to achieve very substantial participation rates in the Exchange will, more than any other single factor, undermine the viability of the Exchange, and force premiums up. It must be recognized that direct benefit assisters will have a financial incentive to enroll individuals in a particular way. Health plans will not extend great effort to enroll people into competing health plans. Providers will not generally enroll individuals into plans that exclude the provider from their networks. This must be recognized and accepted. Instead of attempting to eradicate the natural tendency of private entities to enroll individuals in their own systems, the Exchange might choose instead to embrace this incentive to generate the massive enrollment that will be needed for the Exchange to succeed.


Exchange Enrollment Period

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Question: When will people be able to start buying insurance through the California Health Benefit Exchange?

Answer: The initial open enrollment period of the Exchange will start on October 1, 2013 and extend to March 31, 2014. While people can enroll as early as October 2013, coverage will not be effective until January 1, 2014.


Question: How will agents be compensated for placing business in the Exchange?

Answer: Agents will be compensated for facilitating enrollments in the individual exchange for both subsidized and non-subsidized enrollees. Agents will not be compensated for enrollments in public programs - Medi-Cal and Healthy Families. Compensation rates will be the same as outside the Exchange. Commissions will paid by the carriers directly to the producers.

Agents will be the primary sales channel for the SHOP Exchange. Unlike the individual exchange, the SHOP will pay agents directly. The Exchange will likely match carrier commissions although they are still considering the option to set their own commission rates which would also be based on the prevailing commissions. In either case, the Exchange supports a level playing field among the carriers and the SHOP program.


Question: Have you heard if the SHOP will offer the same qualified health plans as the individual exchange?

Answer: The Exchange Board is currently considering how closely aligned the Qualified Health Plans (QHPs) should be between the two Exchanges. Two general issues arise from the alignment question - one is the alignment of insurers and the other the alignment of benefit plans. It looks like the Exchange will go with “partial” alignment in both cases.

The following options are available for alignment of insurers between exchanges:

  • Option A1: Full alignment: Health plan issuers submit qualified health plan applications for participation in both individual and SHOP exchanges in the same geographic coverage regions, and contracts are only awarded to issuers that can serve both markets.
  • Option A2: Partial alignment: Health plan issuers submit applications for participation in both the individual and SHOP exchanges. However, the Exchange would permit health plans that only want to participate in one exchange on an exception basis.
  • Option A3: No required alignment: Health plans may participate in either Exchange.

The following options are available for the alignment of benefit plan offerings between exchanges:

  • Option B1: Full alignment: Benefit plan offerings would be identical in both exchanges.
  • Option B2: Partial alignment: Benefit plan offerings would generally be consistent in both exchanges, with the possibility of some differences to meet the needs of Individual and Small Group enrollees.
  • Option B3: No required alignment: Benefit plan offerings are unique to each Exchange.

The Exchange staff and consultants have made their preliminary recommendation to pursue partial alignment for both plans and benefit design (A2 and B2).


HHS Final SHOP Rules

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Question: Was there anything for brokers to hang their hats on in the HHS Rules pertaining to the small group market?

Answer: Nothing really earth shaking, mostly housekeeping details. Have a look:

  • Requires SHOP to use the same special enrollment periods as the individual Exchange - October 1, 2013 to March 31, 2014 - and offer newly qualified employees coverage outside of open enrollment periods.

  • Adds a definition of minimum participation requirements (percent of employees that must participate) and permits the SHOP to impose such rules. SHOP QHP health plans cannot impose minimum participation rules.

  • Affirms that Exchanges have the latitude to determine the extent to which employers may limit choice for their employees.

  • Adds requirement that SHOP develop and offer a premium calculator.

  • Adds a requirement that SHOP must report employer contribution and employee enrollment to the IRS.

  • Removes requirement that SHOP continue coverage if an employer fails to take action during an election period.


Question: What do the HHS interim final rules mean to California brokers? Is there anything new there?

Answer: Yes. There is very definitely some new and potentially positive clarification of the brokers’ relationship with the individual Exchange. The “Interin Final Rules” (typical government term - how can something be both final and temporary?) released by the HHS last week, mention agents and brokers in section 155.220 as follows:

  • Exchanges may allow agents and brokers to enroll individuals in Exchange coverage under specified conditions, and
  • Gives the Exchange the ability to allow private insurance websites to enroll individual exchange coverage but the websites must have all of the information about Qualified Health Plans that are on the Exchange website.

Also good news in what was omitted from the rules - the feds did nothing to limit broker compensation. It was thought they might. Instead, broker compensation was passed on to the states. This follows the trend established with the essential benefits ruling, giving a great deal of flexibility to the states.

Brokers have a lot of work to do with the state exchanges to make them appreciate the vital role we play.


Question: How will healthcare providers be reimbursed by the CA Exchange?

Answer: California healthcare providers will continue to be reimbursed directly form the insurance carriers as they are now. However, you can look for some improvements once the Exchange is operational. The behavior of insurance companies that offer qualified health plans through the exchange will be more transparent and they can be held accountable for short-comings such a delays or denials of provider reimbursements as a condition of their continued participation in the Exchange. The exchange can also make available information to providers as well as consumers about how different health insurance plans perform on measures such as prompt payment of claims, customer service, breadth and quality of plan provider networks, and outcomes of grievance and appeals processes.


What Brokers Want to Know

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Question: What questions do brokers have about exchanges?

Answer: While it is generally impossible to know who is asking the questions that come into our Q&A website, the majority of questions about Navigators seem to come from brokers. In general, brokers and agents are looking out for their survival. Brokers are trying to figure what role, if any, they will have in the exchange. What the market outside the Exchange will be like for individual health insurance in particular. How will they interface with the exchange? Will the exchange pay a commission? Will it be competitive with the outside market? All questions for which we have few answers at this point.


Subsidies and Tax Credits

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Question: Are subsidies available in the SHOP Exchange?

Answer: Subsidies for individuals will only be available through the individual exchange. The SHOP Exchange will offer small business tax credits . In 2014, the maximum small business health care tax credit that will be available for eligible small employers will be 50 percent of nonelective contributions. However, the contribution arrangement requirements will also change. Beginning in 2014 the tax credit will only be available to small business employers who purchase their health plans through the SHOP Exchange.


Question: Are large employers expected to use the exchanges?

Answer: Yes. William E. Kramer, Executive Director for National Health Policy at the Pacific Business Group on Health (PBGH) pointed out in a recent paper, “In the short term, from 2014 to 2016, many of these employers are giving serious consideration to using the exchanges to help provide coverage for part-time workers and for retirees not yet eligible for Medicare. In the long term, beginning in 2017, some large employers are considering using the exchanges to provide coverage for all of their employees. Costs, human resources strategies, and competitive pressures, as well as state and federal policy, will be the likely drivers of large employers’ decisions about whether—and how—to use the exchanges.”

We know that some large employers have already asked their health benefit advisers to “run the numbers” on various scenarios that involve paying the play of pay tax and directing some or all of their employees to the individual Exchange in 2014.


Exchange Eligibility 2014

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Question: Who will be able to buy health insurance in the Exchange?

Answer: Exchange eligibility will be quite simple. Starting in 2014, lawful California residents (undocumented aliens are prohibited) may enroll in a qualified health plan through the Exchange. Also in 2014, small employers (50 or less full time employees) can offer coverage to their employees through the Shop Exchange. California may allow access to the Exchange for large employers in 2017.


Question: How many people are expected to obtain coverage in the California Health Benefit Exchange?

Answer: Approximately, 6.5 million Californians will be eligible for coverage in the individual Exchange. It breaks down this way: 2 mil Medi-Cal eligible, 2.4 mil eligible for cost-sharing subsidies, and 2 mil eligible without subsidies. In addition, about 3.8 mil workers will be eligible for coverage in the SHOP Exchange. That rounds out to 8.3 million Californians eligible for coverage in the California Health Benefit Exchange.

The number of eligible who actually enroll will of course be something less than 8.3 mil. How much less remains a guessing game at this point, but 5 million enrolled members by 2016 would not be unreasonable. The Exchange is likely to start with the subsidized population and grow over time depending on their ability to keep administrative costs low and provide a first-class user experience.


Question: First, please define the “shop exchange” and what does “employee choice model” mean?

Answer: SHOP stands for Small Group Option Program. It’s an separate exchange for small businesses with fewer than 50 employees. The employee choice model allows each employee of a participating small business employer to select any carrier and any product offered by the SHOP Exchange. This is an essential component that will differentiate the SHOP from the outside market and provide an incentive for businesses to purchase coverage through the SHOP Exchange. Employees will have the freedom to select the carrier and plan that is right for them, a benefit that employees of many large businesses and government agencies are already offered.


Question: Who will be eligible for health insurance subsidies in the California health benefit exchange in 2014?

Federal Poverty Guidelines 2011 - Data.png

Answer: California residents will qualify for subsidies called premium tax credits in 2014, if their household income for the taxable year is between 100 percent and 400 percent of the federal poverty level (FPL) for the appropriate family size. have a look at the 2000 FPL guidelines they go up a little bit each year. (Click image to enlarge.)

The amount of the subsidy that an eligible taxpayer can receive will depend on their household income, and is based on the total amount of premiums payable by the consumer on the second-lowest-cost silver plan. Generally, the higher the income the lower the subsidy.


Question: What is catastrophic coverage under ACA?

Answer: The affordable Care Act states that health benefit exchanges will be required to offer 4 tiers of coverage plans (bronze, silver, gold, and platinum) and a catastrophic plan. The catastrophic plan can be offered only in the individual exchange and only for young adults, those under age 30 before the plan year begins. These young adults must also be exempt from the individual mandate (to obtain insurance) because affordable coverage is not available or they have a hardship exemption.

The catastrophic plan will be the lowest priced health plan available within the guidelines of essential benefits. Catastrophic plans will have an actuarial value of less than 70% (bronze level).


Question: Are chiropractic benefits covered under the essential benefits plan of the affordable care act.

Answer: We don’t know for sure, but probably some chiropractic benefits will be included in California’s version of the essential benefit plan. In mid-December 2011 HHS announced that it was passing the responsibility for defining essential benefits to the states. HHS guidance says states can define their own set of essential benefits by using an existing major health benefit plan in the state as a benchmark. California benchmarks would include one of the three largest federal employee health benefit plans by enrollment, one of the three largest state employee health benefit plans by enrollment, one of the three largest small business plans by enrollment, and the largest HMO plan offered in the state’s commercial market by enrollment. All of these benchmark plans contain some chiropractic benefits.


Navigator Program Status

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Question: What is the Echange board doing about the navigator program?

Answer: The issues surrounding the Navigator Program are on the back burner. The Exchange Board expects to begin addressing Navigator issues sometime in the spring of 2012. We also await more direction from Health and Human Services (HHS). The Affordable Care Act (ACA) states that the “Secretary (HHS) shall establish standards for navigators… including provisions to ensure that a navigator is licensed if appropriate.” How specific the proposed HHS regulations are will significantly affect this question.


Active Purchaser

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Question: What is an active purchaser health exchange?

Answer: A health insurance exchange’s 
active 
purchaser 
role 
is primarily the power to be selective about plans that qualify to be in the exchange - as opposed to simply providing a marketplace for any plans offered by the health insurance carriers in a given state. The California Health Benefit Exchange will develop a competitive process to select health insurers who will become certified to participate in the Exchange. It can stimulate price competition because health plans will want to get their products on the shelves of the Exchange. Carriers will compete on price to be selected. The more value a health plan offers the Exchange users, the more the Exchange is going to want these plans. First they have to compete to become qualified health plans in the Exchange and then they have to compete again to be selected by the individual healthcare shopper. Currently, the California Department of Insurance does not negotiate health insurance rates with the carriers. In its role as active purchaser the California Health Benefit Exchange can become a proactive force of change in the California health insurance market.


SHOP Exchange Eligibility Criteria

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Question: What will the eligibility criteria of the SHOP Exchange be? Will associations qualify for group coverage?

Answer: The Affordable Care Act leaves the definition of small group size and up to the states - limited to either 50 or 100 full time employees. In California, small groups will be limited to those with 50 employees or less initially, with the option to raise it to 100 in 2017. The existing California state laws must also be observed, that means associations are not eligible for new small group coverage in the SHOP Exchange. Finally, the the Department of Health and Human Services (HHS) will issue regulations that could further define Shop Exchange eligiblity.


Question: Hi, I recently heard that HSA-compatible health care plans are being excluded from the individual exchanges. Given that so many people purchasing individual plans choose high deductible plans, this seems strange that HSA-qualified plans would be excluded. Is this true, and if so, why would HSA-compatible plans be excluded given that consumer directed health care seems to be the way the country is moving (albeit slowly). Thanks for your response.

Answer: In 2014, the small group market, both inside the Exchange an in the private market, will have deductible limits that will negatively impact the HSA-qualified plan market. The cost-sharing limitation on maximum deductible, which applies for the small group market, limits the maximum deductible for the individual coverage is $2,000, and family plans it is $4,000, so HSAs will probably continue to be available, but their tax advantages will be impacted..

The essential benefit plan has yet to be defined by the HHS, but so far it looks like HSA qualified plans will be available in the individual Exchange. The individual market will have a limitation on the overall out-of-pocket maximum limit. This applies to deductibles, co-insurance, co-payments, or similar charges, as well as other expenditures that are qualified medical expenses. The cost sharing for these out-of-pocket expenses cannot exceed the maximum out-of-pocket expense limits for self-only and family coverage for HSA-compatible high deductible health plans during each taxable year. If we applied today’s corresponding limits, the out-of-pocket maximum for self-only coverage would be $5,950, and $11,900 for family coverage. These limits increase annually according to a “premium adjustment percentage” for the calendar year as determined by HHS. The fact that the ACA specifically mentions HSA-compatible high deductible health plans indicates that they will be in the mix.


Question: I know California got a jump on the other states with exchange legislation and Massachusetts already had an exchange, but it seems most other states are dragging their feet. What's up?

Answer: Several additional states now have the laws in place to set up exchanges, including Maryland, Virginia, West Virginia, Indiana, Washington, Hawaii, Colorado, North Dakota, Oregon, and Vermont.

Here's the overall picture:


  • 5-10 states are moving forward, with speed and vision

  • 10-15 are actively "exploring" the legislative & policy terrain

  • 20-30 are still getting ready to get ready or actively resisting

Many states will not be able to get legislation passed in time to set up their own exchanges. In those chase the federal government will set up an exchange for them.


Question: In my conversation with my carrier rep, I was told that they anticipate the exchange individual plans to be more expensive than their plans outside of the exchange. Why?

Answer: That is incorrect. The Exchange is very aware that adverse selection is one of the greatest threat its success. To the extent that rules (including premiums) are different outside the Exchange versus inside, there is room for market manipulation. In fact, the ACA addresses this issue definitely. “A qualified health plan means, among other things, a plan offered by a health insurance issuer that agrees to charge the same premium rate for each qualified health plan it offers without regard to whether the plan is offered through an Exchange or whether the plan is offered directly from the issuer or through an agent. (See ACA § 1301(a)(1)(C)(iii), 42 USC §18021(a)(1)(C)(iii))


Question: I do have a question upon which you may be able to shed some light. It seems to me that (in 2014 and beyond) many small business owners will forego purchasing group health insurance (either in the Shop Exchange or directly from carriers) and send their employees to the individual exchange where some of them will qualify for subsidies. Does the ACA create any obstacles to impede employers from doing so?

Answer provided by David Fear Sr. of Shepler Fear Insurance Agency, Sacramento,. CA. Mr. Fear is a former President of the National Association of Health Underwriters and a recognized expert on the ACA.

Answer: [David Fear Sr.] I cannot see any obstacles from ACA to prevent that from happening. In fact, I do think that ACA encourages this for two reasons: The fact that the law specifically authorizes Exchanges the exclusive ability to administer the Individual Premium Subsidy and that there will be a Risk-Adjustment mechanism between exchanges and carriers outside of the exchange. The former is a HUGE promotion for participation in an exchange and the latter is way to keep the carriers honest so that their product pricing ends up being on par with the exchange. That being said, if I’m a small business employer and employ a number of people who are going to qualify for the premium subsidy, then why wouldn’t I encourage my people to enroll in the exchange since there is “free government money” there for them to pay for their coverage. So, yes, I think that ACA really does buy off the small employers by making the exchange the exclusive place to get the premium subsidy for employees who qualify. Just the opposite for large employers who are penalized for not providing coverage…

Follow-up Question: What are the incentives for purchasing group coverage in the Shop Exchange rather than turning employees loose on the individual exchange?

*Answer: *[David Fear Sr.] Well we know there are disincentives for large employers to not provide group coverage, but not so for the small employers. In fact, I think the small employer premium tax credit that went into effect last year will actually go away in 2014 because that is when the individual premium subsidy kicks in - so that kind of leads me to believe that this deal was set up as a transition into that. On the larger front it seems that if Congress can modify parts of PPACA before 2014 so as to allow for small employers to get the same subsidy outside of the exchange as will be provided within the exchange that many of these issues might be fixable. But if you read what the responsibilities of an exchange are, in a very broad sense they are now going to be the “local agency” that makes determination of eligibility for Medi-Cal, Healthy Families and Exchange Subsidy, not to mention whether or not a person is exempted from the individual and/or the employer mandate. They are going to have HUGE responsibilities and frankly that is why I’m against a Federal-Fallback exchange because I don’t trust the Feds to do this right at all.

[David Fear Sr.] I hope this answers your question. It’s just my opinion based on how I read the law as it now stands…


Pourat.jpg

Nadereh Pourat, Director of Center for Research (UCLA), is the author of two recent policy briefs examining the likely beneficiaries of health care reform in California. Dr. Pourat looked at those likely to be eligible for both the new California Health Benefit Exchange program and the expansion of Medi-Cal. Up to 4.6 million residents may gain coverage, with many of them being working-age, single men. Here Pourat talks about how those numbers might change, how both programs can be improved, and how we should all start preparing now for implementation in 2014.

Q: The Center studies estimate up to 4.6 million Californians may be eligible for coverage under health care reform. However, this may change. Can you explain the processes in motion that may affect the final tally?

Dr Pourat - The final number of eligible and participating individuals will depend on the actions of health insurance plans, employers, state governments and individuals. Health insurers may raise premiums prior to, or even after, the passage of the law. Employers, particularly smaller ones, may opt to pay the penalties rather than pay for health insurance for their employees. State governments have to decide on whether and how to implement the Health Benefit Exchange or Basic Option and how to coordinate enrollment with the Medicaid programs. And ultimately, individuals may not choose to participate in the Exchange or enroll in Medicaid despite the individual mandate.

Q: Medi-Cal and the California Health Benefit Exchange program estimate income and eligibility differently. What effect does this have and how might it be streamlined?

Dr Pourat - Currently, Medi-Cal determines eligibility based on monthly income. The Exchange determines eligibility based on annual income. This is a problem because many individuals' income changes throughout the year dramatically, including seasonal workers and the self-employed. As a result, they could lose Medi-Cal eligibility for some months in a given year. The eligibility and enrollment process has to be coordinated so that no one is left uninsured for part of the year because of different enrollment and eligibility determination processes.

Q: What steps can California take now to prepare for 2014?

Dr Pourat - California has already passed legislation and begun the implementation process in preparation for 2014. The California Health Benefit Exchange program has been created and the Exchange board has begun meeting. California has also used the recent 1115 Medicaid Waiver to create the Low Income Health Program (LIHP) to provide coverage for low-income individuals, many of whom will be Medi-Cal eligible by 2014. The program is implemented at the county level and allows counties to use federal funds to supplement county funds for providing health care. This program paves the way for reform by determining programmatic and health care delivery approaches that are likely to have the biggest impact on individuals' health for the lowest expenditures. It is hoped that this program may reduce the initial pent-up demand on the system after ACA implementation.

In the long term, we should also be thinking about system-wide key challenges of implementation including shortage of primary care physicians, who are the cornerstone to the delivery of low-cost but effective primary care; reducing waste and duplication of services; and ways of engaging patients in better self-care.


Question: Paul Fearer has just been named to the board of the California health insurance exchange. Didn't he fail as head of the spectacularly unsuccessful PacAdvantage exchange?


Question: The Republicans in Congress have claimed that they will vote to repeal the health care reform bill tomorrow. I don't believe they can repeal the law, but could they hamstring the California Exchange by cutting federal funding?


The Exchange is Not Like the HIPC

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Question: The Health Insurance Plan of California (HIPC) was an exchange and it failed. What's different about the new exchange?


Question: The Massachusetts Connector Exchange has had many problems, not the least of which is increasing rates for small businesses. What's different about the California Health Benefit Exchange?


Who will use the Exchange?

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Question: Will everyone in California have to use the Exchange to purchase health insurance?


Businesses with less than 50 employees are not required to provide health insurance. Beginning in 2014, employers with more than 50 employees who do not offer group health insurance will pay a per-employee penalty fee. Also in 2014, employers with over 200 employees will be required to automatically enroll employees into a group health plan.


No. The mandate is for everyone to have health insurance starting in 2014. The Affordable Care Act does not dictate where you must buy it. The California Health Benefit Exchange is a new place to buy health insurance that will be available to all California individuals and businesses. However, those individuals or employees who's income qualifies them for a tax credit must use the Exchange.


What is a health insurance exchange?

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Exchanges are new organizations that will be set up to create a more organized and competitive market for buying health insurance. They will offer a choice of different health plans, certifying plans that participate and providing information to help consumers better understand their options. Beginning in 2014, health insurance exchanges will serve primarily individuals buying insurance on their own and small businesses with up to 100 employees, though states can choose to include larger employers in the future. States are expected to establish Exchanges--which can be a government agency or a non-profit organization--with the federal government stepping in if a state does not set them up. States can create multiple Exchanges, so long as only one serves each geographic area, and can work together to form regional Exchanges. The federal government will offer technical assistance to help states set up Exchanges.

At a health insurance exchange, individuals can easily compare the different features that are available with each type of insurance plan. For example, they can look at the different deductibles, co-pays, co-insurance, and prescription plans that are available. They can also look for plans that have medical facilities in their area.

The idea of health insurance exchanges was part of the Affordable Care Act passed under President Barack Obama. Obama promoted health insurance exchanges as a good way for people to shop for health insurance and find the best deal for their families and businesses. The hope is that insurance companies will be more transparent and open upfront with customers. When they have to compete with each other on level ground, it gives them more of an incentive to be honest with customers and do what they can to bring in customers.

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