Covered California finished 2018 open enrollment with 423,484 new enrollees signing up for coverage, so the agency’s leader isn’t worried about his agency’s continued existence.
What worries Peter Lee is the fate of the roughly 800,000 Californians who don’t get financial help and who buy their insurance, not through Covered California, but on the individual market.
“The 1.1 million Californians who get financial help, they will be protected from premium spikes,” Lee said. “With removal of the (tax) penalty ... the people who aren’t shielded are the working, middle-class Californians who make on average $75,000 a year. They are the ones who don’t get the benefits of employer-based coverage, who aren’t old enough for Medicare and don’t get the financial help of subsidies in the Affordable Care Act. They’re the ones who will be at risk.”
The tax penalty, also called the individual mandate, is a fine imposed on taxpayers if they do not purchase health insurance. It remains in effect this year but was repealed in future years as part of the tax bill passed late last year by Congress.
That mandate, Lee and others have said, was critical to ensuring that consumers who paid no subsidies could count on a broad pool of people buying insurance along with them. The broader the pool, the more likely it would supply a healthy mix that would keep insurance rates low.
“If you look at those unsubsidized folks over the last four years, their premiums went up on average 7.2 percent (in California),” Lee said. “Now, 7.2 percent is about the rate of medical inflation. Before the Affordable Care Act, rates in the individual market would very often go up in double digits.”
Still, Lee said, unsubsidized consumers will pay an average of $503 a month for health coverage in 2018, while those who receive subsidies will pay out an average of $116. Lee said he doesn’t want to minimize the size of the check, but he does want unsubsidized enrollees to know that their peers in Tennessee, Arizona and Louisiana have it worse.
“I talk a lot to people who don’t get subsidies,” Lee said, “and they’re going, ‘My God, this is too expensive. You’ve failed me,’ and I feel bad. It doesn’t feel like they’re getting help.”
But Lee pointed to a study of 2016 data, the most recent available, that showed that the population enrolled in the individual market as a whole in California was 20 percent healthier than the people who enrolled in the 35 states in the federal marketplace.
“What does that mean? That means that health care for that average person that is paying $500 in 2018, if not for our good health mix, it would have been $600,” Lee said. “It would have been 20 percent more, and I know, if you’re the person writing that check for $500, you say, ‘It doesn’t seem cheap to me. I don’t see the benefit.’ The reality is that our enrolling more people lowers their premium because we have a better risk mix.”
Without the individual mandate, in essence a stick, Lee said he expects enrollment will be difficult to maintain at current levels. Looking out to 2019, he said, premiums nationwide are expected to increase 15 to 30 percent.
Here in California, he said, he expects Covered California’s marketing effort and strong partnerships with insurers, nonprofits and other agencies to mitigate the impact, but if no new federal policy emerges, premiums could rise an average of 13 percent for the 800,000 Californians who buy their insurance on the individual market.
The federal government drastically reduced its marketing budget for 2017, and enrollment in the federal marketplace dropped 38 percent to 2.5 million for 2018 from 4 million in 2016. Covered California reported Wednesday that its enrollment grew by 3 percent this year.
Since 2014, the first year for open enrollment under the Affordable Care Act, more than 3.4 million people have purchased health insurance through Covered California, and nearly 4 million have enrolled as part of Medi-Cal. Together, those gains have slashed the rate of uninsured residents to 6.8 percent in June 2017, from 17 percent in 2013.
Sacramento-based tech entrepreneur George Kalogeropoulos created a portal called HealthSherpa that agents and individual consumers nationwide use to buy policies through the ACA marketplaces. He attributes California’s success to Lee’s decision to use every possible resource –consumer advocates, insurers, insurance agents, nonprofits and others – to reach potential buyers. He cultivated those connections and then supported their efforts with a relentless marketing blitz.
“There’s a lot of nuance and complexity to this market,” Kalogeropoulos said. “California has done such a very good job of engaging the insurance companies and keeping the markets stable and encouraging the enrollment of healthy people. Insurers feel like they’re doing well in this market.”
California is a model that a lot of states should follow when it comes to how to administer a public exchange, he said. When you look at the challenge of finding the nation’s uninsured, you need multiple tools in your kit: a utilitarian website, independent brokers or agents, caring nonprofits.
Lee said he set out with the goal of meeting people where they were: “For people that are tech-savvy, we made a website as good as possible, so they can enroll and never talk to a human being. Forty percent of our people enroll through the website (www.coveredca.com). We also said insurance agents in California know this business. Let’s work with them actively. Forty-five percent of our sales are through insurance agents.”