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.