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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 Reform Category

Why Did I Get a Premium Rebate?

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Question: I just received a check from Blue Shield of CA for my 2014 health insurance premium rebate. However, my premiums in 2014 were fully reimbursed by the ACA subsidies. Shouldn’t this check be going to the government, not to me?

Answer: One of the provisions of the Affordable Care Act (Obamacare) is the requirement that insurers, like Blue Shield of California, spend at least 80 percent of premiums on medical expenses to help make certain that consumers get value for their healthcare dollars. If carriers do not meet this Medical Loss Standard (MLR), they are required to pay rebates to eligible subscribers. Blue Shield of California missed the 80 percent target by 3.3 percent of premiums for its Individual and Family Plans in 2014. By law the rebate is paid to the consumer, not the IRS, regardless of the consumer’s net premium.

Question: If you withdraw $10,000 from an IRA, is that added to income amount to be calculated for Covered California.

Answer: Yes. Withdrawals from traditional IRAs (not Roth), 401Ks, and company pensions are taxed as income and will add to your Adjusted Gross Income (AGI on line 37 of 1040 tax return) which is the number on which Covered California bases its premium assistance calculations.

Is Obamacare the End of COBRA?

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Question: As I understand it, when the ACA goes into effect, that is effectively the end of COBRA. If you lose, or resign from, a job mid-year (not during the yearly enrollment period), are you allowed to purchase insurance through the exchange at that time?

Answer: If you loose access to affordable employer-sponsored group coverage outside of the annual open enrollment period you will be eligible for a special enrollment period during which you can purchase coverage in the individual exchange. While this eliminates the need for COBRA, the Department of Labor has ruled that COBRA will continue to be available in 2014. One scenario where a person could benefit by staying on COBRA is that it is cheaper than Covered California individual coverage would be.

Large Group Rates Higher?

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Question: I appreciate the Covered California choices for those in the “individual market” but I have concerns about the effect of the ACA on “large group” employer-based insurance premium rates. At work we have two choices, Kaiser or Anthem. We are hearing that premiums for next November could go up as high as 25%. Is this true and if so why? Wouldn’t more people in the insurance pools drive costs down? This rate increase rumor sounds counter-intuitive to me.

Answer: The rumors of huge rate increases in the individual market proved to be wrong. Perhaps your group rates won’t go up at all. Fewer uninsured will have a downward pressure in rates but it will take some time. The upward pressure on rates from the ACA in the large group market comes from requirements for more comprehensive coverage.

Question: Will a Broker be allowed to have his unlicensed staff be certified to enroll clients in CoveredCa. Other AEE,s employing assisters and navigators are unlicened.

Answer: No. Only, a California licensed agent or Assister can be certified by Covered California. Unlicensed agency staff may assist consumers but may not assist enrollments in Covered California. Furthermore, an agent may not employ employ or otherwise provide financial renumeration to certified assisters for enrollments in Covered California. In-person assisters and and navigators can only assist enrollments in the exchange on behalf of certified assister entities. They are not free to act independently.

ACA and Medi-Cal Asset Recovery

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Question: If someone under the age of 62 below the FPL enroles Medi-Cal in 2014 under the ACA, will their assets at death be subject to the asset recovery process similar to the current Medi-Cal process? Also any assets they acquire or inherit after enrolment, will those also be subject to the Medi-Cal asset recovery process?

Answer: The asset recovery process to which you refer applies to Medi-Cal’s payment for custodial care. If a person needs non-medical assistance with daily living in the form of home care or nursing home care there are asset requirements for eligibility and asset recovery after death. These requirements have not changed as a result of the ACA and will continue beyond 2013.

Medical Costs Out of Control

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Question: We appreciate our future ability to purchase insurance via Covered California however, is there anything being considered about the out-or-control pricing generated by the pharmaceutical industry, the hospitals, and the providers?”

Answer: In the short-term, neither the ACA or the Exchange does much to affect the underlying medical costs of drugs, hospitals, and doctors. The most immediate reduction in medical costs will be due to the expansion of Medi-Cal, by adding more than 1 million newly insured patients with medical reimbursements below Medicare rates. Covered California will contribute to lower healthcare costs over time by providing more transparency and competition on the health insurance side. On the provider side, the ACA supports Affordable Care Organizations (ACOs) - new models that integrate hospital and physician services to achieve greater accountability and coordination of health care. California’s health care policy wonks are working to track the development of integrated approaches to the delivery of care and financing, to determine how ACOs would work in the public sector as well as the private health care marketplace.

For more on this topic read our commentary, Why Medical Costs are Killing Us

Question: How much will premiums increase in 2014?

Answer: We’ll know by May of this year, when health plan issuers must have their final premiums ready. In the meantime, we can only guess. A 2009 Congressional Budget Office (CBO) report suggested an increase of between 10% and 30% beyond what they would have been without the ACA. But higher premiums for people who purchase coverage in the individual market will be offset by federal subsidies for low and middle-income families. The increases on the individual market are because of ACA provisions that: (1) Require plans to cover a broader scope of items — including maternity care and mental health treatment; (2) Mandate that premiums for older beneficiaries be no more than three times higher than what younger people pay; (3) Bar insurers from rejecting people with pre-existing conditions; and (4) Limit deductibles.

Grandfathered Plans

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Question: Even though my high deductible plan is grandfathered, can my insurance company decide to stop carring this type plan or are they required to keep these plans in force for their grandfathered clients?

Answer: Yes. The health plan issuer can decide to stop offering any grandfathered plan at any time.

Background: The Affordable Care Act allows healthcare plans that were in existence on or prior to March 23, 2010, to remain generally the same by “grandfathering” the healthcare option. This option is available for all plans in existence on March 23, 2010, that have continuously covered someone since that date, and have not taken any restricted actions under the regulations. The major benefit to grandfathering a health plan is that grandfathered plans have the ability to avoid several mandates and thus avoid the increases in healthcare costs associated with those mandates.

PCIP Will Phase Out in 2014

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Question: What happens to people who are insured by PCIP in 2014?

Answer: PCIP (Preexisting Conditions Insurance Plan) insureds will be free to select a health plan from Covered California or directly from a health insurance company. Since your preexisting conditions will no longer matter as far as purchasing health insurance is concerned, the need for the PCIP will cease to exist. The PCIP will have served the purpose for which it was created and it will phase out in 2014.

What is a Stand-Alone HRA Plans

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Question: Just read your article, No Standalone HRAs Allowed in 2014, and I’m concerned. They have an HRA at my work and I love it. It practically eliminates any out-of-pocket expenses. It’s with Anthem. Is that a standalone HRA? Will it be outlawed?

Answer: No. The HRA plan you have is not a stand-alone plan, It is integrated with a group health insurance plan (Anthem) and those will still be good going forward. A stand-alone HRA either has no health insurance component at all or is integrated with individual health insurance coverage. Only this type of HRA will be eliminated next year.

Question: Do I have to report employer-paid health benefits on my employees W-2s? If so is it for the tax year 2012 or 2013?

Answer: Yes. Actually, this requirement became effective as of January 1, 2012, but was deferred by making the requirement optional for employee’s Tax Year 2011 W-2 forms. The requirement is now effective for employee Tax Year 2012 W-2 forms that will be issued in 2013. However, the IRS has provided an additional year of relief to employers who issue fewer than 250 W-2 forms for the 2012 tax year. Last week, the Center for Consumer Information and Insurance Oversight (CCIIO) issued a notice extending the deadline for employers to notify their employees about the availability of health insurance offered through the exchanges. Employers now have until later this year to notify employees, versus the original notification deadline of March 1— the intent is to have notifications coincide with open enrollment in October 2013. This decision was made by the U.S. Department of Labor citing the need to allow employers additional time to comply.

These benefits are not taxed. The IRS says their purpose is to inform employees of the true value of their employer-sponsored health benefits. (Download the full IRS FAQ on this topic below.)

Employer-Provided Health Coverage Informational Reporting Requirements- Questions and Answers.pdf

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.

Question: I currently have a high-deductible healthcare policy (HDHP) from Blue Cross, but it is not a “qualified plan” under the ACA. Will I have to pay the penalty in 2014 and onwards if I keep my existing insurance policy?

Answer: If your current health care coverage continues to be available after January 2014 as a grandfathered plan, you may choose to keep it. There will be no tax penalty as long as you are insured.

Health Insurance for undocumanted

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Question: I teach English in Los Angeles to undocumented students from Mexico. They ask me how they would get health insurance through the new Obama Administration plan?

Answer: Obamacare rules that undocumented residents are not eligible for public health - Medi-Cal - coverage or for subsidized coverage in Covered California. Undocumented residents should be able to purchase health insurance in the open market as they can now.

Question: Obamacare requires insurers to submit all premium rate increases of 10% or more for state or federal review. Is this helping to reduce rates?

Answer: Yes. The average health insurance premium increase would have been 6.8% without ACA rate review, while the average rate change implemented was actually 5.4%. The ACA provision that requires insurers to submit all premium rate increases of 10% or more for state or federal review is working. About one in five requests by insurers to change premiums were denied, lowered or withdrawn during state review. During the eight-month period before the Sept. 1, 2011, implementation of the rate review provision, 33% of filings requested an increase of 10% or more. In the last four months, fewer than 18% of filings were for an increase of 10% or more.

Question: Why does the California PCIP program require 6 months without insurance prior to applying for coverage?

Answer: PCIP has a limited amount of money and the program was created to cover people without coverage because of preexisting conditions. PCIP was concerned that some consumers would cancel their current coverage to sign up with PCIP because it was a better value than their current coverage.

Question: Is it not a fact that federal premium subsidies are another form of social welfare?

Answer: If you get health insurance from your employer, you’ve been receiving a generous public subsidy for years. The higher your income is, the larger your subsidy relative to your lower-income colleagues. That’s because the contributions your employer makes toward your group health insurance premium is a tax-deductible business expenses and non-taxable compensation to the employee even though it is a form of compensation. Estimates of the total dollar amount of that subsidy range between $200 billion and $300 billion a year, depending on what taxes are included in the analysis (only federal income taxes, or also payroll taxes and state income taxes). Estimates consistently show that high-income earners receive the bulk of that public subsidy.

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.

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: Can I wait until I am ill to purchase health insurance under the affordable care act?

Answer: While there will be a tax penalty for not having health insurance after January 1, 2014, it will not be illegal not to have health insurance. However, if your plan is to wait until you are ill to purchase health insurance in California, it may be too late by then. If you pass up on health insurance when it first becomes available to you, you will have to wait until the year-end open enrollment period or have a qualifying event (loss of employment, divorce, childbirth, etc.) before you can purchase health insurance coverage. These restrictions are necessary to protect the market against adverse selection,

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.

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.

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.

Question: Do i have to offer health insurance to my employees?

Answer: No. Employer-sponsored health insurance is not mandatory in California or the any other state for that matter. Employers provide health insurance to maintain a competitive edge in hiring and retaining good employees. Beginning in 2014, larger employers - those with more than 50 full-time employees will face a play-or-pay tax if they do not provide group health insurance that meets standards set by the Affordable Care Act. Small employers - those with less than 50 full-time employees - will not be required to provide health insurance.

Question: Are catastrophic health plans optional under the Affordable Care Act?

Answer: The ACA requires that qualified plans offer essential health benefits that among other requirements limit cost-sharing (out-of-pocket maximum and maximum deductible). In 2014, out-of-pocket expenses cannot exceed the HSA compatible high deductible health plans. based on that, todays limits would be $6,250 for family (2 or more) and $3,150 for an individual. Deductibles will be limited to $4,000 for families and $2,000 for individuals. Depending on your current coverage you may consider this catastrophic coverage, but these limits are much lower that current high deductible health plans.

Question: In 2014, if I only offer a defined contribution plan will i be penalized?

Answer: The answer is no. There is no penalty for a small business (less than 50 employees) that does not provide a health benefit plan for its employees - either now or in 2014 and beyond. If you offer a “defined contribution” that your employees can use to purchase individual health insurance either through the Exchange or the outside market, you are going beyond what the law requires. We expect this to be a common practice, especially among employers with lower-income workers since these workers will qualify for premium subsidies within the exchange. Tax issues will have to be considered, the defined contribution is not tax deductible to the employer and is taxable income to the employee.

Question: Will the essential benefits package apply to plans outside the Exchange as well as inside?

Answer: The essential health benefits package is aimed at ensuring that health plans in individual and small group markets offer a minimum of coverage, both inside and outside of health benefit exchanges, scheduled to take effect in 2014. Care must be taken to ensure that identical rules apply to health insurance benefits regardless of where they are sold to avoid adverse selection. Comparable benefit packages must be offered both in or out of the Exchange, otherwise, sicker patients will gravitate toward the market where more comprehensive coverage is sold. To the extent the rules are different outside the Exchange versus inside, there is room for market manipulation. California will need to consider how strongly to link rating rules inside and outside.

Question: I recently heard mention of a California "bridge the gap" insurance plan on the radio. It was part of a discussion about health care reform. What does that mean exactly? Is it available now?

Answer: They were referring to the Preexisting Conditions Insurance Plan or PCIP. It is one of the first major provisions of national health care reform to take effect and is available now. PCIP was designed to bridge the gap between now and 2014, when insurers will no longer be allowed to decline health coverage or charge higher premiums to individuals with pre-existing conditions. Coverage under the PCIP is available to Californians who have been without health coverage for at least six months and have been declined coverage from a carrier due to their pre-existing condition.

CA PCIP Enrollment at 6,000

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Question: What is the enrollment in CA PCIP?

Answer: The California Preexisting Conditions Insurance Plan (PCIP) has enrolled 6,000 members as of the end of 2011. PCIP is a temporary, federally funded insurance plan for US Citizens who have been uninsured for six months or more and have been denied coverage because of a preexisting condition. The program is scheduled to end January 2014 when insurers will be required to accept all applicants without charging higher rates. California has been allotted $347 million in federal funding for PCIP in 2012. The money isn’t going as far planned because the individuals who have enrolled have filed more claims than expected. This pent-up demand for health care among the uninsured is a cautionary tale that the Exchange must heed.

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.

Individual Mandate Penalties

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

Answer: The Affordable Care Act specifies that the “applicable dollar amount” of the tax is generally $695, to be phased in and adjusted as follows:

ACA Individual Mandate Penalty.png

Effect of Health Reform on Brokers

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Question: What is the health care reform impact on California health care brokers?

Answer: California health insurance brokers and agents have already been negatively affected by health reform. One of the first provisions of the Affordable Care Act (ACA) was the Medical Loss Ratio (MLR) regulation which has reduced the commission rate for brokers in the individual and small group market by 30% or more.

In 2014, brokers may find themselves excluded from commissions in the individual Exchange in California. And while the Shop Exchange for small businesses will most likely want brokers to participate. the small group market may be decimated by the exclusive availability of subsidies in the individual Exchange causing many small groups to become collections of individual plans funded by defined employer contributions.

We at CAHBA believe that these forces will drive those brokers who wish to thrive in the post health reform world to adopt fee-based business models because individuals and employers will need guidance that goes beyond eligibility and enrollment assistance available at the Exchanges.

Question: I've heard there are some problems with subsidies for child-only coverage under ACA. Can you explain what these children and their families face, and what can be done to address these issues?

Answer: Employer-sponsored health insurance often does not cover dependents. In other instances, families find that the dependent coverage that is offered is unaffordable. Consequently, some children whose parents have group health coverage must rely on other sources of coverage, including Medi-Cal, CHIP or individual health insurance. Eligibility for premium subsidies under the ACA is limited for those without employer-sponsored health insurance, which may create challenges for parents wishing to purchase coverage for their children in the exchange. Clarification on how such subsidies will be determined is necessary.

Within-family variations in eligibility can complicate matters. Because of different income eligibility thresholds for adults vs. children, many children are eligible for
Medi-Cal or CHIP while their parents are not. Eligibility is also dependent on citizenship and documentation status, and variation in status among parents and children is not
uncommon. Citizen children of undocumented parents, for example, may be eligible for Medi-Cal while their parents are not. Under the ACA, some children will qualify for Medi-Cal or CHIP while their parents may qualify for premium subsidies to purchase coverage in the exchanges. Families in these situations may need special outreach to ensure they are aware of options for children, and integration of eligibility and enrollment processes for Medi-Cal, CHIP and exchange coverage will also be important.

Additional complexities are introduced when one parent is living outside the household, or when children live with grandparents, other relatives, guardians or in foster care. Today, parents living separately often share responsibility for obtaining their children's coverage, sometimes as a result of a court order, which can create many complexities. Issues also arise for children living in kinship care with neither parent - often
with grandparents who receive Medicare benefits, or with relatives who receive ESI, but for which the children do not qualify. Child support orders will need to evolve to
be consistent with new coverage requirements under the ACA, and options for child-only policies and associated subsidies will also require clarification.

Going forward, it will be important to consider how the law will apply to children living in these situations, and what special considerations for them may be warranted as the new regulations are developed and implemented. For more information, read the full report funded by the Robert Wood Johnson Foundation and prepared by researchers at the Urban Institute.

California got a $10 billion Medicaid Waiver. What does that mean?

The so-called "Medi-Cal waiver" is $10 billion in Medi-Cal funds that California secured from the federal government in November 2010.. Funds from the waiver go toward public hospitals and the expansion of local health programs.

According to Anthony Cava -- spokesperson for California's Department of Health Care Services - "the waiver could reduce state spending on health care by as much as $365 million annually".

Previously, seniors and people with disabilities who had Medi-Cal coverage could choose whether to find their own physician or enroll in a managed care plan if one was available in their area. Under the new policy, beneficiaries who live in counties that offer a managed care option will be required to sign up for that plan.

The 16 counties that will be affected by the change are:

  • Alameda
  • Contra Costa
  • Fresno
  • Kern
  • Kings
  • Los Angeles
  • Madera
  • Riverside
  • Sacramento
  • San Bernardino
  • San Diego
  • San Francisco
  • San Joaquin
  • Santa Clara
  • Stanislaus
  • Tulare

The shift to managed care will be phased in over the next year. Beneficiaries will need to select a plan by the month of their birthday, or the state will choose a plan for them.
Certain beneficiaries in the 16 counties will be exempt from the requirement, including:

  1. Children in foster care
  2. Those who pay part of their Medi-Cal costs
  3. Those who receive coverage from both Medi-Cal and Medicare
  4. Those who receive long-term care

Question: Will the health reform eliminate health insurance brokers?

Answer: Brokers, in all modern industries, are vulnerable to two developments that risk their livelihoods. First, that the goods or services they sell may be standardized, and second that technology will aggregate information and do away with middlemen.

In these respects, the health reform law poses a clear threat to insurance agents. Specifically, the health insurance exchanges slated to launch in 2014 — which will standardize insurance coverage and ease individual purchases — could further marginalize brokers’ role.

But the exchanges also might provide a windfall to the industry. Millions of uninsured Americans will be pushed to shop the exchanges to obtain coverage and are expected to need assistance. Meanwhile, brokers will be able to apply for Navigator grants under ACA if they can prove that they are helping individuals and small business owners to negotiate their way through the exchanges.

For example, California projects that as many as four million state residents may shop for insurance coverage through the new Health Benefit Exchange. One of the first tasks facing the Exchange’s board is to design the Navigator program.

Can brokers wait until 2014? Many agents say that they are struggling now. Insurance commission schedules that took effect this year sliced broker fees by as much as 50%. A recent National Association of Health Underwriters survey found that 21% of brokers have been forced to cut jobs, and more than 70% have seen their incomes decline because of the reform law.

Question If the individual mandate fails in the courts, are there other options that would get similar results in terms of near universal coverage?

Answer: Nothing proposed so far would work as well as the mandate. Preliminary findings from the Congressional Budget Office show that eliminating the mandate would reduce the number of newly insured individuals from 32 million to 16 million. However, Jonathan Gruber -- an economics professor at the Massachusetts Institute of Technology who helped develop the reform law -- said removing the measure would have a larger effect, reducing that figure to eight million.

Two alternatives to the individual health insurance mandate would cover fewer individuals and would not lower costs substantially.

First Alternative

For CAP's analysis, Gruber examined an alternative to the mandate that would automatically enroll people in a health insurance plan and permit them to opt out. He found that the strategy would result in about 24 million newly insured U.S. residents. According to MedPage Today, the auto-enrollment option would cover fewer individuals than the individual mandate because fewer employers would offer health plans to workers if there was no coverage requirement. Gruber estimated that the cost of the strategy would be roughly the same as the cost of the individual mandate, because an estimated 80% of newly insured individuals would be automatically enrolled in Medicaid. In addition, he estimated that many young and healthy individuals would opt out of coverage, which would increase premiums by 11% in the non-group market.

Second Alternative

The second option for replacing the individual mandate is modeled after Medicare and would permit individuals to choose whether they purchase insurance, but force them to pay a penalty if they enroll after a certain date. Gruber estimated that around 12 million U.S. residents would gain coverage under this alternative. He estimated that premiums would increase by about 20% more than under the individual mandate because fewer healthy individuals would purchase insurance. However, he estimated that cost would be around 25% less than the mandate.


Gruber said, "The bottom line is there is no alternative to the individual mandate that gives us close to comparable results." He added, "They're not nearly as effective. They cost almost as much and they cover many fewer people while leading to much higher premiums for those who are insured".

Question: It seems to me there's a pretty good chance the law that every American must have health insurance or pay a penalty will be declared unconstitutional by the Supreme Court. Will that kill the rest of the health reform law?

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?

Question: I just read the the the new health reform law is unconstitutional. What now?

Answer: Actually a federal judge in Virginia has ruled the individual health insurance mandate is unconstitutional. The mandate would require most Americans to get health insurance starting in 2014 and penalize those who do not. Admittedly, the mandate is a core part of the health reform bill. Many experts agree that without it the Affordable Care Act will be gutted. Two other federal district judges had previously ruled that the insurance mandate was constitutional. This issue will most probably conclude at the Supreme Court just as the 2012 election is cresting. Legal experts are divided on whether the Supreme Court is likely to void the law.

As a health insurance professional, I know this, If we're going to outlaw discrimination based on preexisting conditions, the only way to keep people from gaming the system and raising costs on everyone else is to ensure that everyone takes responsibility for their own health insurance. We actually have the examples of New York and New Jersey where this has been shown to be true.

Question: I'm worried that the penalties for ignoring the health insurance mandate are too low - something like $100 for the first year - meaning many people will not buy until they need it. This situation is almost as bad as having no mandate at all, leading to costs and premium prices going through the roof.

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