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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.


December 2011 Archives


Pacific Community Ventures, a San Francisco based non-profit funded by the California Endowment recently presented the results of a study called, CA_Small_Business_Decision_Making.pdf: Understanding Health Care Decision Making in California at the December board meeting of the California Health Benefit Exchange. The study focused on health care decision-making attitudes by owners of small businesses with fewer than 20 employees. Methodology included focus groups in Oakland, Fresno and San Diego and a telephone survey with n-depth interviews of over 800 CA small businesses in the spring of 2011.

Key Findings

  • Awareness of the Exchange is low among CA small business owners; 62% have not yet heard about the Exchange
  • When small business owners learn about the Exchange, they are more likely to offer coverage through the Exchange
  • Many small business owners will learn about the Exchange from insurance brokers. Those who don’t use them may learn from accountants or industry organizations.
  • Messaging about the Exchange should downplay the role of government.

Two strong messages conveyed by the study will prove challenging for the California Health Benefit Exchange.

  • Few small business owners (25%) trust state government agencies in health care. “Small businesses do not want to see ‘.GOV’ on the website”. Most (65%) trust their insurance brokers to help them make decisions about health insurance.
  • Small business (67%) don’t value expanded “employee choice” as offered in the SHOP Exchange model.

The distrust small business owners in this study voiced for state government agencies in health care was clearly not something the Exchange board wanted to hear and in fact one of the board members made a dismissive comment referring to “tea party” attitudes. Indeed, the majority of small business owners are white (80%), male (81%) and Republican (46%). It’s not surprising that most Exchange board members have a different political bias, however the SHOP Exchange will need to be successful in all of California not just Sacramento.

Employee choice (the option to select from a wide variety of health benefit plans from multiple carriers) is thought to be a major selling point of the SHOP Exchange. The fact that small business owners don’t agree should be very disappointing news for the Exchange board. Whereas the individual market exchange will be the exclusive provider of public insurance plans and subsidized private health insurance, the SHOP exchange lacks a compelling attraction. The SHOP will have compete on a more-or-less level playing field with private exchanges, insurance carriers and brokers.

Pacific Community Ventures, a San Francisco based non-profit funded by the California Endowment recently presented the results of a study called, CA_Small_Business_Decision_Making.pdf: Understanding Health Care Decision Making in California at the December board meeting of the California Health Benefit Exchange. The study focused on health care decision-making attitudes by owners of small businesses with fewer than 20 employees. Methodology included focus groups in Oakland, Fresno and San Diego and a telephone survey with n-depth interviews of over 800 CA small businesses in the spring of 2011. - Small business (67%) don’t value expanded “employee choice” as offered in the SHOP Exchange model.


A McKinsey survey, released in June 2011, reported that 30% of employers whose companies offered employer-sponsored health insurance said they would “definitely” or “probably” drop coverage in the years following 2014, the year the Affordable Care Act (ACA) takes full effect. (9 percent said “definitely,” and 21 percent said “probably.”) The respondents in the survey worked for companies that ranged in size from under 20 employees to more than 10,000 employees. They represent a cross section of employer size segments, industries and geographies. All of the respondents played roles in choosing which benefits their companies provide to employees either as primary decision makers (51%) or having influence in the decision-making process.

Respondents were asked their level of awareness of nine key provisions of the ACA such as the individual mandate and employer penalties, premium subsidies and guaranteed issue. Next, the survey explored what respondents said they would do in 2014 and beyond. To make answers to those questions more informed, respondents received factual information on the major provisions of the ACA (e.g., exchange based subsidy levels by household income, guarantee issue provisions, medical underwriting and rating restrictions, and employer penalty or play-or-pay tax levels).

Respondents were then asked a set of questions on whether they thought they would maintain current coverage, offer alternative models such as defined contribution, offer mechanisms to provide employees the choice of accessing the Exchange or cease providing coverage. Respondents were also asked about their biggest concerns in ceasing coverage as well as how they would compensate employees if they did cease to provide coverage.

We were were struck by the intensity of the the negative response generated by the publishing of the McKinsey survey. In addition to the CBO, various insurance industry groups quickly came up with studies of their own predictive of a more gentle downturn in employer-sponsored coverage.

The McKinsey organization responded, “We stand by the integrity and methodology of the survey. The survey was not intended as a predictive economic analysis of the impact of the Affordable Care Act. Rather, it captured the attitudes of employers and provided an understanding of the factors that could influence decision making related to employee health benefits.”


The Obama Administration took a politically expedient escape from the essential health benefits political minefield - defining which medical benefits insurance companies will have to include in their health insurance offerings in 2014. Referred to as the essential health benefits, this group of benefits would form the minimum health benefit package available both inside the state health insurance exchanges and in the private health insurance market as well.

In California, that gives state leaders - the legislature as well as the California Health Benefit Exchange - more control of health insurance. It remains to be seen whether this is a blessing for Californians. Will the shifting of responsibility to the state ease implementation of the Exchange or burden it further? Will health insurance costs be controlled or spike higher as a result of additional benefit mandates demanded by various consumer groups and special interest groups like hospitals and pharmaceutical companies.

It also puts the Immediate pressure on the Exchange Board. Board members got a quick briefing on the proposed requirements, since comments on them are due at the end of January 2012. That leaves the board with one more meeting — on Jan. 17 — to approve comments on those benefit requirement. The Board was totally unprepared for this development.

The Affordable Care Act (ACA) already includes these benefit categories: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care. Some of these benefits, namely habilitative care for autism and pediatric oral and vision care, are not included in typical health insurance plans in most states currently.

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. Many fear these federal and state employee benefit benchmarks set the bar too high, and the largest HMO plan offered in the state’s commercial market by enrollment. These plans are more comprehensive and thus more expensive than most individuals and small businesses can afford.

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