Capitol Alert

California insurance chief: 5 million in state could lose health coverage under ‘Trumpcare’

California Insurance Commissioner Dave Jones took a hard-line stance this week against the Obamacare repeal House Republicans are staking out, saying it could reverse advances California has made under the Affordable Care Act and strip 5 million Californians of their health coverage.

The American Health Care Act that some are referring to as “Trumpcare” would gradually scale back federal dollars for Medicaid, known as Medi-Cal in California, and eliminate funding for the program’s expansion under Obamacare that allowed low-income adults without children to qualify for coverage. The Republican proposal would dole out tax credits to people based on age rather than income or geography – a shift that would cut benefits for poor people and assist wealthier Americans. In total, Jones said California could face a $20 billion cut in federal health care dollars.

Jones, also running for California attorney general in 2018 against Xavier Becerra, sat down with The Sacramento Bee’s Capitol Bureau this week to discuss the impact Republicans’ health care proposal could have on the Golden State.

Q: You’ve said the path that Republicans are pursuing on health care will lead to a death spiral for the health care market in the United States. Explain how that can happen.

A: The actions that the Trump administration has taken already are creating a great deal of instability. One of the first executive orders the president issued was a direction to federal agencies not to enforce the (individual mandate). ... It’s that provision of the Affordable Care Act that makes sure that healthy people get insurance. As a consequence insurers know that they can spread risk and cost over a larger pool, and then they’re not faced with just insuring sick people at a very, very high cost. So undermining the enforcement of the individual mandate is very destabilizing.

The House leadership bill goes a step further and eliminates the individual mandate. It does so not only prospectively but also retroactively to 2016. I’m hearing from health insurance companies already how destabilizing this is ... not knowing what the risk pool is going to look like in 2018. So I am very, very concerned that the House leadership bill, eliminating as it does the individual mandate, will result in healthy people staying out of the market ... and then some number of insurers concluding that they can no longer stay in the individual market and specifically that they should get out.

That will then reduce choice and lead to additional complications because less choice means less competition and can ultimately lead to a spiral downward in terms of the availability of individual market health insurance.

Now the House leadership bill has this 30 percent surcharge provision which would apply if you allow your individual health insurance to lapse. I submit after looking at that, that that would not keep healthy people in the market. Healthy people will continue – a sizable number of them – to conclude that they’re going to remain healthy forever. They’ll roll the dice ...

Q: Where is California compared to the rest of the nation? We’ve seen a landscape where people are very unhappy with Obamacare.

A: National polls indicate that at least at this moment that a majority of Americans think this is a pretty good thing and would like to keep it. It is true that a number of states decided not to fully implement Obamacare. They either didn’t do the Medicaid expansion, which dramatically reduced their prospects for success. Or they didn’t do a state-based exchange – they had a federal exchange and then they threw up other impediments. In Georgia on every policy form there was in large font a statement that the state of Georgia really thinks the Affordable Care Act sucks and you shouldn’t participate in it – I’m paraphrasing that. There were concerted efforts by certain red states to undermine the Affordable Care Act, so should we be surprised that it failed in these places? Not so much.

It is true that there are also market differences. One of the advantages that we have is we’re a really big market.

Q: What happens under this bill for California?

A: Very bad things.

By any measure it fails the test of making sure the same number of people are insured, at the same level of affordability, for the same coverage.

Most immediately we face the prospect of destabilization of our market as a result of the individual mandate going away. It also provides that the premium tax credit subsidy will be reduced on average by about 36 percent. .. We have about 1.2 million in Covered California who buy individual health insurance – 90 percent of them rely on the premium tax credit subsidy to afford the health insurance.

Most of those 1.2 million will not be able to afford their health insurance in the exchange. Add to that the House bill also eliminates entirely the cost-sharing provisions that cover a large portion of people’s out-of-pocket costs inside the exchange. In all likelihood many people if not all people who buy in the exchange will not be able to afford health insurance even though we have currently a vibrant exchange.

Medicaid: There we’ve taken advantage of the expansion. We’ve insured another 3.7 million Californians. The House proposal eliminates the Medicaid expansion by 2020. That means, essentially, 3.7 million people are going to lose their health insurance. Now, the House leadership will argue ‘Well but in fact if they’re enrolled before 2020 they can keep the Medicaid past 2020.’ But in fact, many people on Medicaid (have) incomes that fluctuate – they go up and down ... and they’ll be ineligible to get Medicaid past 2020.

It also caps the amount of money that California gets both for the Medicaid expansion population, as well as the overall Medicaid population. This is really bad for California because it’s a per-capita cap. The current system allows us to get federal dollars based on the number of people who are actually enrolled and their costs. So while our costs go up for Medicaid – the medical costs go up – this cap ratchets down and means we’ll have less money for the general Medicaid population as well.

Q: There are some out there who hope that this plan falls through, that Democrats retake the house and also the Senate, then work with the president to actually pass a single-payer system. Do you think there’s any possibility of that happening?

A: There’s no question ... I think all the evidence indicates that a single-payer approach would be a more efficient way of delivering health care in the United States of America. We have that evidence in our Medicare system. It doesn’t mean the elimination of private health insurance. We have Medicare, which is single-payer for seniors, and then you can buy health insurance above Medicare.

So certainly that would be the way to go ultimately.

As we know from our own experience here in California where we debated single-payer some years ago, that there’s significant up-front costs ... but more immediately we’re talking about the loss of $20 billion in federal subsidies today that we get for Medicaid and for people who buy health insurance in the exchange. And that is where our principle focus has to be ... about the impact of tearing up the Affordable Care Act.

Q: What specifically can your office do to stem the loss of coverage?

A: There’s very little that my office or the (Department of Managed Health Care) or the state of California can do without a significant expenditure of state general fund dollars to backfill what the feds are planning to eliminate. I can’t do that unilaterally. That’s a conversation that will have to occur in the Legislature at that time.

We don’t have $20 billion lying around somewhere. What is being proposed at the federal level is going to impose a lot of harm on people. ...

Theoretically we could do our own version, but it’s hard to do without the resources. That’s the biggest problem.

Q: Would you support a type of new revenue source like a tax initiative to backfill funding losses?

A: It’s way too early to talk specifically about backfilling. I haven’t given up on stopping Congress from doing the bad thing it intends to do. It’s noteworthy that at least four Republicans have expressed grave reservations about the House proposal.

Q: You say you want to preserve what we have, but the president has issued an executive order against the individual mandate ... Aren’t we already on the path to the Affordable Care Act unraveling?

A: Potentially yes. ... You’ve seen some major national carriers announce that they’re out – Humana for example ... it is not a good thing when a national carrier says ‘Look, we’re concerned about the stability of this market, we’re not going to sell on the individual market anymore.’ And I lay that at President Trump’s feet.

Q: Are there ideas that Republicans have that could work? The idea, for example, of making it easier to sell across state lines?

A: The Affordable Care Act is a Republican idea.

Because it was a Democratic president named Obama who championed it they decided to be against it, but it began as a conservative Republican idea. It was embraced by two Republican governors (Arnold Schwarzenegger and Mitt Romney). It’s a market-based reform.

And you can sell across state lines.

We have many insurers, including health insurers in this state, that are domiciled, headquartered, incorporated elsewhere and they sell across state lines and they sell in California. So it’s not as though there isn’t already the ability for health insurers from other parts of the country to sell into markets and to add additional competition.

What they’re really talking about when they say they want to sell across state lines – that is the Republicans – is they want to eliminate the ability of a state like California to decide what the appropriate level of consumer protection is. They want to eliminate the ability of the state Legislature and the governor of California to pass laws and protect consumers. What they would really like to have is basically no state-based regulation of health insurance, or just regulation of a single state where all the carriers incorporate.

That idea won’t enhance competition, but what it will do is eliminate the ability of states to protect consumers from bad insurance practices, and that’s why I’m opposed to it.

Angela Hart: 916-326-5528, @ahartreports

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