A critical  investment

A critical investment

insurance exchanges increase access to health care for millions of uninsured individuals

By Rebecca Kuzins 01/24/2013

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Several million uninsured Californians will be able to purchase health care coverage later this year when Covered California, a new health benefits exchange, begins offering policies to consumers.

The creation of such exchanges is one of the provisions of the Patient Protection and Affordable Care Act, commonly referred to by both supporters and opponents as “Obamacare.” California was the first state in the nation to create an exchange and started to design this new marketplace in 2010.

Covered California will begin offering insurance plans on Oct. 1, with coverage starting on Jan. 1, 2014. The exchange will market its products online, enabling consumers to compare the quality of the available plans and apply for federal tax credits to subsidize their premiums.  

A major goal of Obamacare is to increase access to health care for uninsured individuals and small businesses, but it also places restrictions on health insurers. Insurers can no longer deny health coverage based on gender or pre-existing conditions, and new policies must provide preventive care, among other stipulations.

Under the law, uninsured people who fail to purchase coverage will pay an annual penalty of $95, or up to 1 percent of their income, whichever is greater, for two years beginning in 2014. These fines will increase to a minimum of $695 for individuals, $2,085 for families, or 2.5 percent of income by 2016.

However, the law also provides federal subsidies to offset insurance costs for individuals and households with incomes up to 400 percent of the federal poverty line. Individuals earning less than $35,000 a year and families of four making less than $94,000, qualify for subsidies, according to Oscar Hidalgo, Covered California’s director of communications.

Hidalgo said Covered California is aiming to insure 4.7 million Californians in 2014. That includes about 3.2 million uninsured individuals who qualify for federal subsidies through the exchange, or for Medi-Cal, the state’s health care program for low-income residents that is administered separately from Covered California. The 1.5 million uninsured people who do not qualify for subsidies are also eligible to purchase insurance from the exchange, directly from insurers or through other sources.   

Based on preliminary estimates, Hidalgo said the annual premium for an exchange-purchased insurance would be about $1,400 for a person earning $35,137, after applying a tax credit of about $13,000.  

Covered California has been well received by insurance companies, which view the new marketplace as a means to increase their business. Thirty-three insurers have submitted preliminary notices to participate in the exchange. Administrators of California Coverage plan to sign contracts with qualified health plans and announce their participation in the exchange on June 30.

One particularly interested company is Kaiser Permanente, the state’s largest health care insurer, whose Southern California regional offices are located in Pasadena. A spokesperson said Kaiser is “currently analyzing and forecasting the potential impact of new members on our care delivery system,” and “studying what changes to staffing and other resources we will need to make before the exchange launches next year.” It was premature to release estimates or projections at this time, the spokesperson added.

Insurers offering health care coverage through Covered California can provide a range of services, from relatively simple “bronze” plans to more extensive and expensive “platinum” plans, as stipulated in the federal law. The law also requires insurers to provide a minimum of “essential services,” including emergency services, hospitalization, maternity, newborn and pediatric care, mental health and substance abuse services, prescription drugs and preventive and wellness plans.

The exchange is financed solely from federal grants, not state funds.

This spring, Covered California will launch an extensive statewide marketing campaign featuring television advertisements, billboards and community outreach to publicize its products before they are marketed in October.
In addition to Covered California, the state is creating a separate Small Business Health Options exchange to enable businesses with fewer than 50 employees to purchase health care coverage. Small businesses will receive federal subsidies if they purchase insurance through this exchange.

On Jan. 17, Covered California received a federal grant of about $674 million to finance its development for the next two years. The grant, said Peter V. Lee, Covered California’s executive director, “is a critical investment in the health and well-being of millions of Californians to finally have access to affordable, quality health care.”

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