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Health Insurance Companies

A Good Deal for Both

California health insurance companies and the Covered California health insurance marketplace are not competitors. In fact, Covered California needs the health plan issuers, without them, there is no Exchange because California’s health insurance companies will be funding the operations of Covered California through participation fees charged by Covered California.

For its part, the Covered California health insurance marketplace can be a powerful partner to insurance companies by aggregating and efficiently delivering two inefficient market segments individual health insurance and small business health insurance markets. Under the Affordable Care Act, (ACA) carriers must reduce administrative costs - also called the medical loss ratio (MLR). To that point, Covered California will help carriers lower the costs of customer acquisition, eligibility maintenance, and billing. Further, Covered California will maintain participant eligibility, provide billing and collection services, transfer eligibility and net premiums to the carrier and pay fees to producers and navigators.

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Covered California Can Deliver Business in Large Blocks

In order to meet this goal, however, Covered California must attract sufficient enrollment to allow the carriers to use Covered California as their delivery model of choice for these segments. The California exchange will no doubt be successful in attracting massive individual enrollment (click image to make larger) because it alone can offer the premium subsidy. The SHOP must compete for California small business groups without a captive market, but the SHOP offers carriers many advantages as a preferred channel for the small business health insurance market. With Covered California assuming eligibility and billing functions, carriers will not even have to track enrollments group-by-group.

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Provides Opportunities for Smaller Carriers

Currently, six health insurance companies account for 80% of the health insurance revenue in California, with 2 companies - Kaiser and Anthem - controlling almost 50% of revenue. As an active purchaser, Covered California can provide a more level playing field for smaller carriers.

Allows Carriers to Focus on Quality of Care

With Covered California providing most of the administrative functions associated with acquisition, maintenance, billing and reconciliation, carriers can properly focus on the quality of care the insured member receives through its provider network and manage provider payments as care is given.

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