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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.

May 2013 Archives

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Congratulations Covered California you pulled it off - affordable health insurance with better coverage.

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Proving the dire predictions of rate shock wrong, Covered California announced 2014 rates for standard plans in the exchange. Sample rates are all we have right now, but they sure look good. How do the rates Covered California is announcing compare to costs today in California? To get close to an apples to apples comparison, 2014 rates are compared to current rates available in the small employer market. Both are competitive market with guaranteed issue. CC rates ranged from two percent above the 2013 average premium to 29 percent below the rates in California’s most populous markets. This is impressive since the 2014 products include doctor visits, prescriptions, hospital stays and more essential benefits. Additionally, there is financial protection like a maximum out-of-pocket cost of $6,350 which will dramatically reduce the chances of someone filing bankruptcy because of medical bills.

How Did They Do it?

The major factors that resulted in rates being lower than many predicted are:

  • Better health status of likely enrollees — health plans assumed that Covered California’s marketing, outreach and enrollment plans were likely to result in a more balanced health mix than some commentators.
  • Effective partnerships with providers — Many of the health plans worked for many months to arrange contracts with doctors, medical groups and hospitals that were equally committed to being part of Covered California. These high performance networks were built around quality and cost criteria. Some plans included their integrated delivery system that promote efficiencies and quality. In addition the plans had an emphasis on care coordination, early intervention and management of high-risk enrollees.
  • Trust in the Affordable Care Act’s risk protections — The Affordable Care Act has a number of provisions that are designed to reduce risk for health plans, including a risk adjustment process, risk corridors and reinsurance. These mechanisms were closely reviewed by and trusted by health plans.
  • Reduced administrative costs — While health plans will need to pay a fee to participate in Covered California, that fee will be spread across their entire individual business. At the same time, plans will no longer have any costs for medical underwriting, will have reduced marketing expenses and many committed to limiting profits to only two percent to three percent of Covered California business.


Some agents were developing a marketing strategy that capitalized on the difference in commissions between agents and assisters. With assister enrollment payments fixed at $58 and the agent commission expected to be somewhat higher, the deal involved agents paying assister entities more than $58 for the referral. Similar arrangements between agents and grantees would be more lucrative for both sides of the deal because grantees have received a lump sum an are not paid by enrollment.

Because of the concern that financial arrangements between agents and grantees, Assisters or community-based organizations would increase the overall cost of marketing and enrollment assistance, which are directly reflected in health plans’ costs, Covered California is making a policy clarification, with the following recommendations:

Covered California encourages non-monetary partnerships among all groups offering enrollment assistance. With regard to financial arrangements that could increase overall marketing and enrollment costs, staff recommend adoption of the following recommendations:

  1. Prohibit grantees and Assisters from accepting payment or other valuable consideration from agents for referrals and/or enrollment services; and
  2. Prohibit agents trained and certified by Covered California from providing payment or other valuable consideration to grantees, Assisters and other community-based groups for referrals and/or enrollment services as a condition of program participation.

Shorter Paper Application

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While some of us think applying for health insurance online is pretty cool, others can’t or won’t do it. That why the health insurance exchanges needs a good old-fashioned paper application. Unfortunately, the first attempt at a paper application for individuals and families was 21 pages long. Hardly consumer friendly. There were hoots and hollers. The length of the application was criticized openly by many in the industry, including the NAHU members at their annual DC conference in February.

Low and behold, within 3 months, the CMS has come up with a three-page application for individuals, while the application for families has been reduced by two thirds. CMS says “the consumer friendly forms are much short than industry standards for health insurance applications today.” Click the following link to view and/or download a advance copy of the new application. Ind Paper App.pdf

Consumers continue to lack awareness of how the Affordable Care Act will affect them. Up to two-thirds of the uninsured still say they don’t know what the ACA will mean for them. CMS has repeatedly said in recent weeks that brokers will play a crucial role in consumer assistance and education about the public exchanges for the uninsured and what ACA might mean for all Americans. CMS has said that broker training information will be available by August.

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