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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.

June 2013 Archives

Covered California announced its selection of pediatric dental health plans. The six selected companies: Anthem, Blue Shield, Delta Dental, Health Net, LIBERTY Dental, and Premier Access Dental. Nine stand-alone plans are offered, but all can be bundled with health insurance for a single premium. Health Net Dental is available only when bundled with a health plan.

Three different product types are available, depending on where the child lives: dental health maintenance organizations (DHMOs), dental preferred provider organizations (DPPOs) and dental exclusive provider organizations (DEPOs). Stand-alone plan premiums range from less than $10 a month for an HMO plan in some areas to about $30 a month for a DPPO.

Unlike Covered California’s health insurance plans, dental plans are not designated by metal levels, but come in two actuarial value options: 85 percent, which features higher premiums but lower average out-of-pocket costs; and a 70-percent value plan, with lower premiums and higher average out-of-pocket costs.

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Covered California has persuaded California Department of Insurance regulators to change essential health benefit (EHB) regulations, to eliminate a provision requiring the “qualified health plans” (QHPs) sold through the exchanges to offer pediatric dental benefits. In the revised version, regulators let QHPs leave out pediatric dental benefits as long as insurers are selling stand-alone dental plans through the exchange.

Peter Lee told insurance regulators that actually requiring a QHP to provide pediatric dental benefits would conflict with ACA requirements to exclude dental from premium assistance. “Our federal colleagues have confirmed that Covered California must permit offering QHPs without pediatric dental in multiple conversations,” Lee said. “They were reluctant to provide written guidance on this point because they believed the text of the statute and regulations are so clear.”

Because the Covered California QHP solicitation process did not require QHPs to include pediatric dental benefits, none of the QHPs selected for the individual exchange program did so, and implementing the requirement in the original version of the emergency regulations “would cause a delay of Covered California’s health plan solicitation process, possibly by several months,” Lee said.

Dave Jones.jpg California Insurance Commissioner Dave Jones will recommend that the Covered California SHOP exchange exclude Anthem Blue Cross from selling small business coverage. Jones cited a pattern of “unreasonable rate increases” for small groups by Anthem, amounting to more than 17% in the past year, according to Jones.

Frustrated by his lack of authority to reject premium increases, Jones is using his power under the ACA to recommend that the state exchange, exclude insurers with a pattern of excessive premium increases. In November 2014, voters will decide whether to give him that rate control authority in a ballot initiative.

Anthem says that small business rates are going up 11.5% on average this year and warned that excluding Blue Cross of California from the SHOP would sharply reduce competition.

“The idea you would exclude one of the most widely chosen health plans in the state is ridiculous,” said Micah Weinberg, a senior policy advisor at the Bay Area Council, an employer-backed San Francisco group. “All this would do is make health reform for the small business market less attractive.”


The ACA has established criteria for wellness programs that that are non-discriminatory and open to all employees. There are types of wellness programs:

  1. participatory wellness programs, which are non-conditional (e.g., discounts for gym memberships), and
  2. health-contingent programs that require participants to achieve a specific health goal before being eligible for an award or incentive (e.g., achievement of weight loss goals). Rewards may be in the form of discounts, premium rebates, or waiver of cost-sharing such as deductibles and copayments. Negative incentives in the form of penalties may also be used. The maximum reward can be up to 30% of the total cost of coverage and to 50% for smoking-cessation initiatives.

While the ACA provides a framework for constructing a wellness program and a modest financial incentive, it leaves employers in the driver’s seat to creatively define and implement programs that impact health and costs.

In my opinion, the major obstacles to improving overall company health or providing cost savings to employers are difficult to overcome.

  • It’s usually the healthiest employees who take advantage of these programs.
  • The program’s impact on health or costs is realized several years later.

Employers want to find targeted programs that impact changes in health status and cost reductions that can be realized sooner and apply to those less inclined to participate. And employers are grappling to find the right combination of sticks and carrots to encourage the behavior changes desirable for employees and beneficial to the company’s bottom line.

The Great Rate Debate

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It didn’t take long for those opposed to the successful implementation of the ACA to attack Covered California’s claim that their health care rates would be lower than predicted.

Avik Roy of Forbes headed his article, “Rate Shock: In California, Obamacare to Increase Individual Health Insurance Premiums by 64-146%”. He charged that Covered California “was making a misleading comparison. They compared apples - the plans that Californians buy today for themselves in the individual market - and oranges - the highly regulated plans that small employers purchase for their workers as a group.” He went on to compare today’s individual plans by getting an online quote for individual plans available today where the median cost of the five cheapest plans was $121 for a 40 year old and $92 for 25 year olds. That’s how he arrived at an Obamacare increase of 100% for 25 year olds and 116% for 40-year-olds.

In response, Ezra Klein of the Washington Post and a frequent contributor to MSNBC wrote what I though was an amusing and spot-on analogy. “Imagine you went to Best Buy and found a great deal on a plasma television set. I want to be clear here: You didn’t find a great television set. This television set is actually a bit crummy. The picture is fuzzy. Consumer Reports says it breaks down a lot and it’s expensive to fix. But it’s really cheap. The price tag reads $109. When you take it to the counter, the saleswoman tells you that the set will actually cost you $199. And count yourself lucky, she confides in a conspiratorial whisper. There are customers whom Best Buy won’t sell it to at any price. You ask her which customers those are. The ones who need the TV most, she replies. So here’s the question: Does that television really cost $109?

According to HealthCare.gov, 14 percent of people who try to buy an individual health insurance plan are turned away outright. Another 12 percent are told they’ll have to pay more than the quoted rate, So a quarter of the people who try to buy this insurance product for $109 a month are told they can’t. Those are the people who need insurance most — they are sick, or were sick, or are likely to get sick. So, again, is $109 really the price of this plan?

Comparing the pre-underwriting price of this plan to a guaranteed-issue plan in Covered California is ridiculous. The plans in the exchange have to include those people. They can’t turn anyone away or jack up rates because you once suffered a migraine headache, or experienced a summer of hay fever, or had acne as a teenager

Yes, some people will find the new rules make insurance more expensive. That’s in part because their previous health insurance was made cheaper by turning away sick people. The new rules also won’t allow for as much discrimination based on age or gender. The flip side of that, of course, is that many will suddenly find their health insurance is much cheaper, or they will find that, for the first time, they’re not turned away when they try to buy health insurance. For example, the Commonwealth Fund estimates that 94% of the the 19-29 age group will receive free public insurance or subsidized private insurance under Obamacare.

That’s why the law is expected to insure almost 25 million people in the first decade: It makes health insurance affordable and accessible to millions who couldn’t get it before. To judge it from a baseline that asks only what the wealthy and healthy will pay and ignores the benefits to the poor, the sick, or the old is a bit disingenuous.

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