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Covered California News & Commentary

Topics of interest to both consumers and agents related to Covered California and the ACA biased in favor of the successful implementation of the Exchange and deliberately apolitical.

July 2011 Archives

What can we learn from Massachusetts’ Mistakes?

The small business program of the* Mass Connector* is often used as an example by those who predict that the SHOP Exchange will be unsuccessful in California. Indeed the Massachusetts small group program has has its problems.The program closed its doors to new business only a year after its launch, without much explanation as to why. Enrollment during this period was extremely low. The Connector has since focused its small employer efforts on another program, called “Business Express.” The primary focus of Business Express is reduction of costs for small businesses that purchase insurance through the Small Business Service Bureau (SBSB), the administrator for the Connector’s Choice products. While this program offers employers a small reduction in premiums, it does not allow employees any choice of product. In addition, the selection of carriers is extremely limited at this time. Business Express is currently operating without any of the major carriers (i.e., Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim Health Care, and Tufts Health Plan) offering.

What went wrong in Massachusetts?

The Massachusetts version of the SHOP Exchange used an overly complex model in which participating employers selected a level (e.g.silver) of plan for their employees, and a base employer contributory amount was set depending on the employer’s selection of a plan within that coverage tier. Employees then took the employer contribution and were restricted to selecting any carrier’s plan within that tier of coverage. Because employees could not buy a product outside the tier selected by their employer, the employer still controlled the primary health care decision for its employees. In other words, the result was that a single 25-year old was essentially forced to purchase coverage similar to a 55-year old person with four kids, an opposite outcome of the intent of reform.

In addition, the Connector required employers to meet the same requirements that were in place in the market outside the Connector, that is, to pay at least 50% towards the premium and meet employer participation rules such as 70% of eligible employees had to be conered. This requirement overlooked the fact that these barriers were identified before the reform as reasons some smaller employers couldn’t offer health insurance.

Finally, the Connector limited the number of brokers who could sell this product in the state to 20, as well as restricting the client marketing pool.

How California Can Do It Right!

California has enough flexibility in implementing the SHOP Exchange to do it right. it is clear that lawmakers wanted SHOP to facilitate some employee choice. The health insurance exchange needs to have a choice model that features allowing employers to use a defined contribution, offering employee choice across all products, adding a premium aggregator that can collect premiums dollars from multiple sources (i.e. secondary employers, spouses), eliminating participation and contribution barriers, and opening the program to all brokers and all small employers. Such a model could provide greater choice for employees, valuable predictability for small employers, and possibly help to reduce overall cost trends through greater consumer engagement.

Dire Predictions Are Unwarrented

Many pundits have predicted a explosion of health care costs as millions of previously uninsured individuals have health insurance for the first time in 2014, either through an expansion of the Medi-Cal program or through the new California Health Benefit Exchange. It stands to reason, the argument goes, that these new health care recipients will flood the system in a rush to get health care, many of them with long untreated chronic conditions. Makes sense, but once again the facts have a way of interfering with theoretical projections.

Most of 4.6 million potentially eligible residents are male, single, working age

According to two new policy briefs from the UCLA Center for Health Policy Research, the majority of state residents likely to be eligible for federally mandated health insurance coverage initiatives in California in 2014 are also those who may be least likely to excessively use costly health services: men, singles and those of working age.

Using the latest data from the California Health Interview Survey (CHIS), center researchers found that a significant percentage of those newly eligible for both the exchange program and the Medi-Cal expansion were single, male and/or between the ages of 18 and 44. Specifically:

The newly eligible are of working age:

  • Health Benefit Exchange: 56 percent of those currently without any insurance, 55 percent of those with intermittent insurance and 48 percent of the individually insured were between the ages of 18 and 44.

  • Medi-Cal expansion: 66 percent of those without any insurance and 70 percent of those with intermittent insurance were between the ages of 18 and 44

Many newly eligible are male:

  • Health Benefit Exchange: Many of those uninsured all of the year (61 percent), uninsured part of the year (53 percent) and the individually insured (49 percent) were male.

  • Medi-Cal expansion: More than half of those uninsured all year (59 percent) and uninsured part of the year (52 percent) were male.

The newly eligible are largely healthy

The study found that those eligible for coverage through both the exchange and the Medi-Cal expansion tended to be as healthy as those with employer-based coverage or those already covered by Medi-Cal. For example, among the newly eligible:

  • Health Benefit Exchange: Diabetes rates were only 6 percent for both those without any insurance throughout the year and the individually insured. Heart disease rates were 2 percent for those with no coverage or intermittent coverage and 1 percent for the individually insured. Asthma rates were also low, and these rates were comparable to those with employer-based coverage.

  • Medi-Cal expansion: The diabetes rate among those without insurance throughout the year was 5 percent and was 11 percent for those with intermittent coverage. The heart disease rate for both groups was similar and low, at 3 percent. These rates were comparable to those enrolled in the Medi-Cal program under current eligibility criteria.

Expanding coverage to such a large population will increase systemwide health spending. However, findings from the center’s study suggest that these newly eligible Californians are largely single, male and/or of working age and thus are less likely to utilize high-cost health services.

“Costs will go up but may also be mitigated by the relative youth and health of the eligible population,” said Nadereh Pourat, lead author of the two new briefs, which were funded by the nonprofit California HealthCare Foundation. “And by bringing so many young Californians into the system, we may even reduce risk statewide.”

“This is California’s workforce,” Pourat said. “Younger, relatively healthy and, in many cases, male, they have been blocked from access to insurance by high costs and deductibles. Health care reform is now giving them a way into the system.”

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