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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.


April 2012 Archives


California insurance brokers are eying a possible $360 million-a-year market, after the Obama administration’s surprise decision to let them sell government-subsidized health insurance under the Affordable Care Act (ACA).

Under rules proposed on March 12 by the United States Department of Health and Human Services (HHS), state exchanges may pay brokers’ commissions for the sale of subsidized health insurance plans within the exchange.

The size of the potential market is uncertain. Covered California probably won’t allow brokers to earn large commissions off sales of government-subsidized health care. A conservative figure might be $15 per person per month. At that rate, if private brokers enrolled all 2 million subsidized people expected to buy through the California Health Benefit Exchange, the brokers’ take would reach $360 million annually.

“A $15 commission seems optimistic for subsidized coverage”, said Robert Coolbrith, an analyst for the investment advisory firm ThinkEquity LLC in San Francisco. “There are some potential positives in terms of enlarging the opportunity to enroll people, but there are still lots of uncertainties,” Coolbrith said.

Consumer groups voiced dismay over the HHS rules, “The whole point of a public exchange is to create a consumer-friendly marketplace where people have the ability to make informed choices,” said Ethan Rome, executive director of Health Care for America Now, a labor-backed group in Washington.”

However, “the new rules were crafted to protect consumers while giving states the flexibility to design these marketplaces so they work well for their markets,” said Brian Chiglinsky, a spokesman for the federal Centers for Medicare and Medicaid Services (CMS). “Each state gets the final say on whether to include brokers in the system.”


State Senator Tom Harman (R-Huntington Beach), Vice-chair of the Senate Committee on Health, cautioned for prudence when asked How California Should Respond if Part or All of ACA is Struck Down.

If, as several experts anticipate, the Supreme Court strikes down some or all of the Patient Protection and Affordable Care Act, California will find itself in the untenable position of having promised services it cannot provide without federal funding.

California policymakers, in a rush to lead the nation in implementation, have given little attention to how California will fund the ACA, should it fail the constitutional sniff test. The California Health Benefit Exchange was created in 2010, operating under the assumption that massive federal subsidies will be available for low and middle income earners needing assistance to afford health coverage offered.

It is my belief the Democratic leadership will fully implement legislation concerning the ACA regardless of the court’s decision. As vice chair of the Senate Health Committee, I have heard hours of testimony on legislation seeking to implement facets of the ACA. These measures are irresponsibly moved forward, often in the absence of definitive federal guidance, and without any plan to unwind the implementation should the court reject the ACA.

Just last week a bill dealing with Medi-Cal eligibility was amended to include language stating that it “is the intent of the Legislature to ensure full implementation of the Affordable Care Act … It is further the intent of the Legislature to enact into state law any provision of the Affordable Care Act that may be struck down by the United States Supreme Court and that is necessary to ensure all Californians receive the full promise of the act.”

Previous attempts by some California legislators to move in the direction of single-payer health care have been largely rejected due to the high price tag. Leveraging the ACA as cover to expand state-run health care, the Legislature is moving forward on programs we frankly can’t afford on our own. It appears the Legislature will continue on this path, without a plan in place for funding, regardless of the court’s decision.

The Legislature should slow down and proceed more cautiously on implementation. I intend to introduce legislation that would give the exchange 90 days to submit a plan documenting how it is going to continue operating if the ACA is struck down. In essence, the exchange board will have 90 days to share its “Plan B” — including alternate sources of financing — or implementation grinds to a halt.

ACA implementation has put California on a collision course where no one wins — not the medical community, the people in need of health care or the taxpayers. Let’s get back on the rails.


A recent Urban Institute report* examines what would happen to premiums, coverage, and uncompensated care if the individual mandate is eliminated from the Affordable Care Act (ACA).

Without the individual mandate — the requirement for most Americans to have health insurance or face a penalty — the analysis reveals costs would rise, fewer individuals would be insured, and uncompensated care spending would be much higher.

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The report shows a potential 25% premium hike.

Insurance premiums would rise by as much as one quarter nationwide if the health care law is implemented without the individual mandate.

If the individual mandate was cut the report highlights other main points: (click image to enlarge)

  • Private coverage would fall by 11 million nationwide, covering four million fewer people than it would have without reform.
  • Between 40 and 42 million nationwide would remain uninsured, as opposed to 26 million with the mandate.
  • Uncompensated care spending would be much higher due to the increased number of the uninsured.

Co-authors Matthew Buettgens and Caitlin Carroll, estimate the effects of ACA and the individual mandate by using the Urban Institute’s Health Insurance Policy Simulation Model (2011), which simulates decisions of businesses and individuals in response to policy changes such as new health insurance options, subsidies for the purchase of health insurance, Medicaid expansions and insurance market reforms.

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