The ACA specifically requires the Covered California health insurance marketplace to be self-sustaining beginning on January 1, 2015. The ACA also allows Covered California to charge assessments or participation fees to health insurance issuers to generate funding, to support its operations.
Table 1 identifies the participation fees for key products to be offered by Covered California health insurance marketplace for the individual market. Issuers will be collecting premium payments for coverage in the Covered California marketplace that will be sufficient to cover the costs of any agent enrollment activities and the costs of the Covered California participation fee. The health plan issuers will be billed monthly based on the monthly enrollment totals reported by Covered California for those enrolled through and by the issuers for those enrolled in QHPs outside Covered California as well. A late fee of 1% per month is proposed to be charged if the issuer does not provide timely payment. The participation fees will be reviewed and adjusted annually as needed. (Click image to enlarge.)
Table 2 shows the participation fees in the SHOP. Covered California will establish a fee with two components: the 4% of premium fee to collect revenue to support operating costs of the marketplace and a component to support the cost of agent and general agent commissions paid by the Covered California SHOP. As with the individual market participation fee, Covered California will review these assumptions during initial operational period and make adjustments as required. (Click image to enlarge.)
Approximately 600,000 of the individuals currently insured on individual plans are eligible for subsidies. Covered California wants to work with participating plans on a focused marketing plan that will rollover the majority of these individuals into Covered California qualified health plans. Covered California is exploring ways to incentivize plans to cooperate in this effort. It has proposed give plans a discount of up to 10% of their participation fees for those lives that they convert from existing insurance coverage. This discount could apply to either the rollover of existing covered lives or enrollment in the Exchange of those about to lose employer-based coverage.