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California health insurance marketplace: history and news of the state’s exchange

January 31, 2018 , , ,

Highlights and updates

California exchange overview

California has a state-run health insurance exchange — Covered California — that is widely considered one of the most successful. And on the first day of open enrollment for 2018 coverage, California’s exchange enrolled nearly 6,000 people — an increase of 25 percent over their first-day enrollment the prior year.

By January 21, with 10 days remaining in open enrollment, Covered California had more than 342,000 new enrollees for 2018, which was trending higher than last year’s enrollment pace. An additional 1.2 million people had renewed their coverage for 2018, which was similar to the prior year’s volume. In all the 1.542 million enrollees by January 21 was just slightly lower than the exchange’s total enrollment volume for 2017, putting Covered California on track to potentially exceed 2017’s enrollment, and possibly exceed even 2016’s enrollment, when they ended up with 1,575,340 enrollees. Covered California’s open enrollment continues until January 31, 2018, so the duration of open enrollment is unchanged from 2017.

Covered California is one of ten state-run exchanges that uses an “active purchaser” model, meaning that they negotiate directly with carriers to make sure that rates, networks, and benefits are as consumer-friendly as possible (the remaining state-run exchanges and the federally-run exchange simply set minimum standards that carriers must meet, and then allow the sale of any plans that meet those guidelines).

Covered California is also the only exchange in the country that requires all health plans to be standardized, which means that within a single metal level, all plans have the same benefits (with the exception of HSA-qualified plans, which are also standardized but with benefits that are different from the other bronze and silver plans; Covered California’s board approves changes to the standardized HSA-qualified benefit design, as needed to comply with IRS regulations pertaining to HSA-qualified plans).

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Eleven insurers offer plans in Covered California, but three of them had 80 percent of the market share as of the end of 2016: Blue Shield had 389,480 enrollees (31 percent). Anthem had 310,690 enrollees (25 percent), and Kaiser Permanente had 297,030 enrollees (24 percent). Those same three insurers continued to make up a large portion of the exchange market in 2017, but they’re not quite as dominant as they were in the past: Kaiser had 28 percent of the market share, Blue Shield had 25 percent, and Anthem had 19 percent (a little over half of those Anthem enrollees had to select new coverage for 2018 due to Anthem’s shrinking coverage area; more details below). Molina had 12 percent of the Covered California market in 2017, and Health Net had 11 percent (the other six insurers had a combined 6 percent of the market share).

Open enrollment for 2018 coverage continues until January 31; people who begin enrollment by midnight on 1/31 will have until 2/2 to finish

Nationwide, open enrollment for 2018 coverage began on November 1, 2017, and ended on December 15, 2017. But state-run exchanges had some flexibility with the dates, as HHS revised the scheduled open enrollment period in April 2017 (it had previously been slated to last three months), and acknowledged that state-run exchanges might not be able to make the changes necessary to switch to the new schedule by the fall of 2017.

Covered California confirmed in mid-August that they were planning to keep the previously-scheduled open enrollment period unchanged. So open enrollment for 2018 coverage in California began November 1, 2017, and continues until January 31, 2018. And in mid-December, Covered California announced that they would extend the deadline to enroll in a plan with a January 1 effective date: California residents were able to pick a plan up until December 22, with coverage effective January 1, 2018.

And on January 31, Covered California announced that due to high volume, people who begin the application process by midnight on January 31 will have until February 2 to complete the application process. The Covered California call center will be open until midnight on January 31, and until 8pm on February 1 and February 2, to assist people who need to finish their enrollments.

In all, ten of the 12 state-run exchanges opted to extend open enrollment to some extent. California is one of three exchanges that kept the originally-scheduled January 31, 2018 end date for open enrollment (the others are New York and DC).

California allowed insurers to file two sets of rates for 2018

California Insurance Commissioner announced on April 28 that insurers in California could file two sets of rates for 2018 plans: “ACA rates” and “Trump rates.” Commissioner Dave Jones pulled no punches in his assessment of the Trump Administration’s impact on the ACA, noting that “the actions of the Trump Administration to undermine enforcement of the ACA’s individual mandate and the failure of President Trump and Republican House leaders to ensure funding of the Cost-Sharing Reductions in the Affordable Care Act have created immense uncertainty and instability for 2018’s health insurance market.”

Rate filings were due on May 1 in California, so the Commissioner’s announcement came just three days ahead of the filing deadline. Although there is significant uncertainty in the individual insurance market under the Trump Administration, California was encouraging insurers to submit additional, lower rates “in the hope that President Trump might reverse course and stop undermining the Affordable Care Act.”

The question of ongoing funding for cost-sharing subsidies (aka cost-sharing reductions, or CSR) has played a major role in causing instability in the insurance market. After months of dithering on the issue, the Trump Administration announced in mid-October that CSR funding would end immediately. Every state grappled with this issue — either over the summer, or in last-minute discussions in October once the funding had been eliminated. Covered California took an innovative approach to mitigating the uncertainty and potential premium increases (details below), and numerous states ended up following suit over the ensuing months.

No subsidy? Can’t afford Obamacare? Get up to 360 days of short term coverage for as little as $50 a month.

Covered CA retained all 11 insurers. Average rate increase would have been 12.5% if CSR funding had continued

Although there has been considerable uncertainty nationwide regarding the stability of the individual market and continued insurer participation, Covered California announced in early August the all 11 of their insurers plan to remain in the exchange in 2018.

At that point, the weighted average rate increase across all 11 insurers was 12.5 percent, which was lower than 2017’s average rate increase, but higher than the average increases for 2015 and 2016. But the 12.5 percent average rate increase was based on the assumption that cost-sharing reduction (CSR) funding would continue to be provided by the federal government.

The exchange noted that if the CSR funding was not committed by the federal government, the rate increase for silver plans would be larger (details below). Ultimately, Covered California decided to implement the CSR surcharge (ie, the larger rate increase for silver plans) on October 11, the day before the Trump Administration announced that CSR funding would indeed end immediately. The average surcharge on silver plans was an additional 12.4 percent, on top of the rate increase that would have applied otherwise (details below about Covered California’s approach to CSR funding).

Average rate increases are calculated before any premium subsidies are applied (for people eligible for subsidies, the subsidies grow to offset some or all of the rate increase), and before people switch plans during open enrollment.

In each of the three prior years, plan switching during open enrollment has resulted in a smaller effective rate increase than there would have been if people had simply kept the same coverage from one year to the next.

Coverage areas changed for some insurers; off-exchange Anthem members in most of the state have a SEP

Nearly all counties in California have three or more insurers offering coverage in the exchange for 2018, and some areas have eight or more (see page 29 of Covered California’s report). But there were some coverage area changes, notably Anthem’s shrinking coverage area:

  • Anthem is continuing to participate in Covered California, but with a sharply reduced coverage area. Their individual market plans are available in 28 counties in Northern California, Santa Clara County, and the Central Valley (three of the state’s 16 rating areas). In 207, Anthem offered coverage statewide. [Throughout 2017, there was uncertainty over whether Anthem would remain in the exchanges in 2018 in the 14 states where they offered exchange plans. Anthem ultimately announced that they would exit the exchanges in Indiana, Maine, Nevada, Ohio, and Wisconsin, and scale back their exchange coverage area in California, Georgia, Missouri, and Virginia.] Covered California Anthem enrollees were able to switch to a different plan during open enrollment. Those who didn’t return to the exchange to pick a new plan were auto-enrolled into the least expensive plan in the same metal level in which they were already enrolled. There were 252,560 Anthem enrollees in Covered California as of early 2017, and the exchange estimated that 153,000 of them needed to select new plans for 2018 (there were roughly another 150,000 Anthem members with off-exchange coverage who needed to select new plans — on or off-exchange — due to Anthem’s shrinking coverage area).
  • Blue Shield expanded their coverage area into Solano, Contra Costa, Alameda, and Ventura counties.
  • Health Net added a PPO option in Sacramento, Placer, Yolo, Los Angeles, San Diego and “other parts of Southern California”, but they reduced their HMO coverage area.
  • Oscar, which offered 2017 coverage in San Francisco, Santa Clara, and San Mateo counties, began offering coverage in Northeast Los Angeles for 2018 (Oscar also expanded their exchange footprint in Texas in 2018).

Anthem enrollees on ACA-compliant plans in California who are not in rating areas 1, 7, or 10 were not able to keep their Anthem coverage for 2018. If they had coverage through the exchange, they were mapped to a comparable plan from another insurer if they didn’t select their own plan by December 22 (the extended deadline for enrolling in a plan with a January 1 effective date). But open enrollment continues through the end of January in California, so these enrollees also had the month of January to pick a different plan.

Off-exchange Anthem members whose coverage was discontinued were uninsured as of January 1 if they didn’t pick a new plan, as there was no entity available to automatically map them into a replacement plan (Covered California is doing that for on-exchange members). These individuals are eligible for a special enrollment period (SEP) triggered by loss of coverage. The SEP continues until March 1, but enrollees need to be sure that they enroll in time to have coverage effective by March 1, in order to avoid a penalty for being uninsured in 2018.

If you're eligible for a special enrollment period, you can still shop for ACA-compliant plans. Compare plans and premiums here by ZIP code.

Covered California’s approach to CSR uncertainty: average 12.4% additional rate increase on silver plans, to cover the cost of CSR

Nearly half of Covered California’s enrollees were receiving cost-sharing reductions (CSRs) in 2017, and they’re a vital part of making health care accessible and affordable for lower-income enrollees (premium subsidies make insurance more affordable, but if the plan has a $7,000 deductible, it may not be a realistic option for a low-income person, even if the premium is mostly covered by a subsidy; CSRs keep out-of-pocket costs affordable). House Republicans sued the Obama Administration in 2014, alleging that the money to fund CSRs was never explicitly appropriated by Congress (their case had merit in terms of the appropriation issue, although it was questionable in terms of whether Congress had standing to sue in a situation like this).

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House Republicans won the case in 2016, but the Obama Administration appealed and CSR funding continued to flow to insurers to offset the cost of providing more robust coverage to lower-income enrollee. The case was pended after Trump won the 2016 election, but he repeatedly threatened to cut off CSR funding, and funding was only committed on a month-to-month basis in 2017. Ultimately, the Trump Administration cut off CSR funding in mid-October. But during the rate filing and approval process (generally May – September), states and insurers didn’t know what would eventually happen with regards to CSR funding. This made it particularly hard for insurers to plan ahead and set appropriate rates for 2018 (insurers are still legally obligated to provide better coverage to low-income enrollees, but without federal funding to cover the cost, they have to charge higher premiums to cover the extra cost — or simply exit the market).

Some states directed insurers to assume that CSR funding would continue (these states generally had to scramble to revise rates in October, when funding was cut off), while others asked insurers to base rate proposals on the assumption that CSR funding would be cut off. Covered California took an approach designed to protect consumers as much as possible:

  • All insurers that offer plans in Covered California were instructed to file rates with the assumption that CSR would continue to be funded, but to also calculate a surcharge that could be added to cover the cost of CSR (assuming federal funding is eliminated), but that would only be added to on-exchange silver plans. California insurers filed an average surcharge of an additional 12.4 percent for on-exchange silver plans (this surcharge was ultimately added to the premiums on October 11, the day before the Trump Administration definitively cut off the funding for CSR).
  • The insurers were also instructed to file “virtually identical” silver plans that would be marketed off-exchange, without the CSR surcharge. Under the ACA, if an identical plan is sold on and off-exchange, the price must be the same. But if the plans are slightly different (ie, “virtually identical”), they can have different premiums. So the off-exchange silver plans have lower premiums.
  • Premiums are higher for silver on-exchange plans now that CSR funding has been eliminated, but the vast majority of silver plan enrollees are receiving premium subsidies, which grew to offset all or most of the premium increase for 2018 (in other words, since the federal government isn’t funding CSR, they’ll have to pay more in premium subsidies, since the premium subsidies are based on keeping the after-subsidy premium of the second-lowest-cost silver plan affordable).
  • People who buy gold, bronze, or platinum plans and qualify for premium subsidies are eligible for larger subsidies due to the surcharge that’s been added to silver exchange plans (since subsidies are tied to the cost of silver plans), so they could end up seeing a premium decrease in 2018, depending on the plan they have.
  • Covered California conducted outreach to ensure that people who don’t receive premium subsidies (15 percent of their enrollees in 2017) are not subject to the additional surcharge. They’re encouraging unsubsidized silver-plan enrollees to either switch to a bronze, gold, or platinum plan — which don’t include the surcharge — or to the “virtually identical” off-exchange silver plan, which also don’t include the surcharge.

California was the first state to clarify this approach (adding the cost of CSR to on-exchange silver plans and creating similar off-exchange-only silver plans without the surcharge), but numerous other states eventually took the same approach, as it’s the one that protects the greatest number of consumers, shifting most of the burden of the cost of CSR onto the federal government, rather than consumers.

From the beginning, California’s approach was to urge the Trump Administration to continue to fund CSRs, and they maintained that position even after the funding was eliminated. Their press release and 2018 rate/plan overview reiterated the fact that the best scenario would be for the federal government to simply commit to funding CSRs so that Covered California’s surcharge backup plan doesn’t have to be implemented. And after the funding was eliminated, California sued the Trump Administration, seeking an injunction on the funding cut.

But the judge rejected California’s argument, ruling that California and the other states that were party to the suit had taken enough preemptive actions (such as California’s strategy described above) to protect consumers, that their case was essentially hollow. The state’s lawsuit hinged on the supposition that consumers would be harmed by the CSR funding cut, but the judge found that very few consumers would actually be harmed (and in most cases, those whose premiums were increasing to cover the cost of CSR would be able to pick a different plan instead).

California retained +/-2% de minimis range for metal level actuarial value

Under the ACA, all new plans have to conform to one of four metal levels (in addition to catastrophic plans). The metal level delineation is based on actuarial value: bronze plans cover 60 percent of average costs across a standard population, silver plans cover 70 percent, gold plans cover 80 percent, and platinum plans cover 90 percent. But because it’s difficult to hit that number exactly, there’s an allowable de minimis range of +/-2%.

The market stabilization regulations that HHS finalized in April 2017 allow the de minimis range to expand to +2/-4%. So a plan with an actuarial value of 66 to 72 percent would be considered a silver plan, and the new rules took effect for the 2018 plan year.

But California has its own state law that allows de minimis variation of only +/-2%, so the less stringent federal regulation does not apply in California. Plans submitted for 2018 still had to comply with the existing rules (ie, silver plans must have an actuarial value of 68 to 72 percent, for example).

Plans sold within Covered California are standardized, and the exchange has noted that the proposed standard silver plan for 2018 has an actuarial value of 71.9 percent. The standardization of plans within the exchange won’t change based on de minimis rules for actuarial value.

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But the exchange has explained that if the de minimis rules are relaxed in California via new state legislation aligning with the new federal rules, insurers could eventually offer “stripped-down” off-exchange plans with lower actuarial value. The expectation is that people who don’t receive premium subsidies would then be less likely to purchase plans through Covered California, and would instead be drawn to off-exchange plans with lower actuarial value and correspondingly lower premiums (subsidies aren’t available off-exchange, but for people who don’t qualify for subsidies, that doesn’t matter). As a result, Covered California was considering various options, including a lower-AV standard silver plan, in order to be able to compete with off-exchange plans.

For 2018, however, the state did not change the +/-2% de minimis rule. Covered California confirmed that as a result, no changes were planned to the standard plans offered within the exchange.

Will California be the first state to implement single payer? Maybe, but Assembly has pended legislation until it’s more complete

No U.S. states have single payer health care systems, although some have tried to implement single payer. Vermont was working towards single payer under a 1332 waiver, but pulled the plug at the end of 2014, amid concerns that the costs would be higher than expected. In Colorado, single payer advocates pushed for reform in 2016, but voters defeated Amendment 69 (which would have established a single payer system in the state) by a wide margin.

Will California eventually succeed where others have failed? Perhaps, but it won’t be in the immediate future.

On February 17, 2017, State Senators Ricardo Lara (D, Bell Gardens) and Toni G. Atkins (D, San Diego) introduced S.B.562, the Californians for a Healthy California Act.

S.B.562 is sponsored by the California Nurses Association, and would transition California to a single-payer system at a not-yet-determined future date (a Senate Appropriations Committee analysis indicates that it would take “many years” to fully implement the system called for in S.B.562). The program, which would be overseen by a nine-member board of directors, would not have deductibles, copays, or coinsurance, and would cover “all medical care determined to be medically appropriate by the member’s health care provider” on a fee-for-service basis.

On April 26, the Senate Health Committee passed the measure, sending it on to the Senate Appropriations Committee. And on June 1, the legislation passed the full Senate, by a vote of 23-14.

The legislation then went to the California Assembly, where it met with considerable skepticism over the price tag (estimated at $400 billion per year, although much of that would be offset by the elimination of current health insurance premiums and out-of-pocket costs). On June 23, Assembly Speaker Anthony Rendon (D, 63rd Assembly District, southeast Los Angeles) issued a statement in which he noted that while he’s supportive of the push for single-payer, S.B.562 was “woefully incomplete” as passed by the Senate. He explained that the bill would remain in the Assembly Rules Committee “until further notice,” and urged the Senate to “fill the holes in SB 562 and pass and send to the Assembly workable legislation that addresses financing, delivery of care, and cost control.”

Incidentally, Rendon’s statement came the day after Senate Republicans unveiled the Better Care Reconciliation Act (the BCRA, which ultimately failed to pass in late July). Rendon described the BCRA as a “cynical plan to repeal the Affordable Care Act, posing a real and immediate threat to millions of Californians who only have health coverage because of the ACA.”

On May 22, the California Senate Appropriations Committee published an analysis of the fiscal impact of S.B.562:

  • The total price of the single-payer system envisioned in the bill is projected to be $400 billion per year.
  • $200 billion of that would come from existing federal, state, and local funding that could be reallocated to fund California’s single-payer system.
  • The other $200 billion would have to come from new taxes; the analysis indicates that a 15 percent payroll tax on earned income would cover it.
  • A significant portion of the new payroll tax would be offset by the elimination of current health care spending by employer and employees. That current spending is estimated at between $100 billion and $150 billion, so the new tax would only have a net impact of $50 billion to $100 billion. In other words, it would not increase employer/employee health care spending by $200 billion.
  • Additional legislation would be necessary in order to implement the 15 percent payroll tax (or whatever tax-based system is deemed necessary to fund the program). And voters would have to weigh in. Currently, the Gann Limit restricts state spending growth based on inflation and population growth. But the single-payer system’s additional $200 billion tax price tag (even though much of it is offset by reductions in current private spending) is more than California’s total proposed budget for the coming fiscal year. Voters would either have to agree to repeal the Gann Limit, or exempt the single-payer tax funding from the Gann Limit.
  • Overall utilization of health care services is expected to be higher than current utilization in Medi-Cal (Medicaid) or employer-sponsored plans. The analysis projects a 10 percent increase in utilization over the current Medi-Cal system, but notes that this is likely conservative. The increased utilization is expected because people will be able to see any willing provider, and receive coverage for any treatment that the provider says is medically appropriate, all without any cost-sharing (copays, deductibles, coinsurance).
  • Reimbursement rates for providers would be similar to Medicare rates. Medicare reimburses at a higher level than Medicaid, but generally at a lower level than private insurers.
  • People currently enrolled in Medicare would be transitioned to the California system. This is different from the approach that Colorado proposed in 2016, which would have kept Medicare beneficiaries in their existing federal plan. But federal employees, military personnel, and veterans would retain their existing coverage rather than transitioning to the new California system.
  • “essentially all” of the people who work in California’s health insurance industry would lose their jobs if the state transitions to single-payer, as would many people who currently serve in administrative positions. The bill provides for job retraining programs, but it’s unclear whether it would be enough to successfully re-employ everyone.
  • There are questions about whether the federal government would cooperate with the waiver process that would be required to wrap Medicare and Medi-Cal into the single payer system, along with self-insured large employer plans that are currently regulated by federal law (ERISA) rather than state oversight.

California has been down this road before. Voters rejected a single-payer proposition in 1994, and then-Governor Arnold Schwarzenegger vetoed two bills, in 2006 and 2008, that would have created a single-payer system in the state.

California withdrew proposal to allow undocumented immigrants to buy coverage through Covered California

SB10 was signed into law in California in June 2016. The law allows undocumented immigrants to purchase unsubsidized coverage in the exchange, but a waiver from HHS was necessary in order to move forward, since the ACA forbids undocumented immigrants from purchasing coverage in the exchanges.

California’s waiver proposal was complete as of January 17, which was the start of a 30-day public comment period. But on January 18, the state withdrew the waiver at the request of California State Senator Ricardo Lara (D, Bell Gardens), the senator who had introduced and championed SB10 (Lara is the senator who introduced S.B.562, described above, to bring single-payer to California). Governor Jerry Brown agreed with Lara’s decision to withdraw the waiver proposal.

The state withdrew the proposal because they were concerned that the Trump Administration might use information from the exchange to deport undocumented immigrants. Lara said that he didn’t “trust the Trump administration to do what’s best for California and to implement the waiver in a way that protects people’s privacy and health.” He called the withdrawal of the waiver “the first California casualty of the Trump presidency.”

Undocumented immigrants can already purchase full-price coverage outside the exchange. It’s not clear how much SB10 would have decreased the uninsured rate among undocumented immigrants if it had been implemented.

1.57 million enrolled for 2017

By October 6, 2016, more than three weeks before the official start of open enrollment on November 1, Covered California had enabled window shopping for 2017 plans. During the 2017 open enrollment period, 1.57 million people enrolled in private plans through the exchange.

As of November 2016, Covered California had nearly 20,000 enrollment assisters (agents, navigators, certified enrollment counselors, etc.) helping people enroll in coverage.

In early February, after open enrollment had ended, Covered California reported that they had 1,568,000 people enrolled. That total included 368,000 new customers, and 1.2 million renewals. Young adults age 18 to 34 made up 37 percent of the enrollments.

In 2016, there were 1,572,074 enrollees in Covered California, so the total ended up slightly lower in 2017.

Normally, enrollments have to be submitted by the 15th of the month in order to have coverage effective the first of the following month. But Covered California extended their deadline to get January 1 coverage out to December 19 at midnight. And they also extended the deadline to get a February 1 effective date: enrollees who signed up by January 20 at midnight had coverage effective February 1.

Additionally, Covered California extended open enrollment by a few days, for people who began the enrollment process by January 31. Those applicants had an extra four days to finish their enrollments.

In additional to individual market enrollees, there are 33,029 people enrolled in Covered California’s small business exchange in 2017. They’re enrolled in plans from six insurers, although Kaiser Permanente has two-thirds of the small business enrollees.

13.2 percent average rate increase for 2017

On July 19, Covered California announced that the statewide average rate increase for 2017 would be 13.2 percent. They noted that when that rate increase is averaged with the rate hikes for 2015 and 2016, the three-year average is 7 percent per year, which is lower than the average annual increase in the pre-ACA years.

Covered California also pointed out that the majority of enrollees are receiving subsidies, and will not experience a rate increase if they’re willing to shop around during open enrollment. They also noted that some insurers are expanding their coverage areas, which may make shopping around more productive for some enrollees.

In May, the California exchange was predicting average rate increases of about 8 percent for 2017; that was still very preliminary, though. Even an 8 percent average increase would have been double the average rate hikes in California for 2015 and 2016. The 13.2 percent average increase that was finalized in July is more than triple the past two yearly average rate increases. But it is also considerably lower than average proposed rate increases that have come in across the rest of the country for 2017.

SHOP exchange: 5.9 percent average rate increase

In September 2016, Covered California announced that premiums in the state’s SHOP exchange for small businesses would increase by an average of 5.9 percent in 2017. For 2016, the average rate hike in the state’s SHOP exchange was 7.2 percent.

As of October 31, 2016, Covered California had 3,979 small groups enrolled in the SHOP (small business) exchange, with a total of 29,544 people (employees and family members) enrolled in coverage under the small business plans. This is far higher than most states’ SHOP enrollment.

There are six carriers that offer SHOP plans through Covered California in 2016, and all six are continuing to offer plans in 2017: Blue Shield of California, Chinese Community Health Plan, Health Net, Kaiser Permanente, Sharp Health Plan, and Western Health Advantage.

2017 carriers and rates

The following 11 carriers were selected to offer coverage through Covered California in 2017:

  • Anthem Blue Cross of California
  • Blue Shield of California
  • Chinese Community Health Plan (only San Francisco county and San Mateo county)
  • Health Net
  • Kaiser Permanente
  • L.A. Care Health Plan
  • Molina Healthcare
  • Oscar Health Plan of California
  • Sharp Health Plan (only San Diego county)
  • Valley Health Plan (only Santa Clara County)
  • Western Health Advantage (only North Bay area and Greater Sacramento)

Anthem and Blue Shield are the only carriers that have plans available through Covered California in every region of the state in 2017 (Kaiser does offer plans in every region, but not across the full regions in all areas).

In some ZIP codes just a single company offered plan options in 2015, although for 2017, the exchange notes that nearly every county in the state has at least three carriers from which to choose. Peter Lee, executive director of Covered California, notes that the lack of competition in rural areas is a long-standing issue and not one created by the formation of Covered California.

Covered California has compiled an extensive rate booklet for 2017 that details average rate changes across all 19 rating areas in the state. Average rates are significantly higher in Northern California than in Southern California.

With the exception of UnitedHealthcare, the carriers that are offering plans through Covered California in 2017 are the same carriers that offered plans in 2016. UnitedHealthcare exited the individual market in California at the end of 2016, as was the case in most of the states where they offered plans in 2016. By February 2016, UnitedHealthcare had about 1,400 enrollees in Covered California (less than a third of a percent of the exchange’s total QHP enrollment).

UnitedHealthcare and Oscar were both new to the exchange for 2016. United Healthcare applied in January 2015 to join Covered California state-wide, but the exchange initially rejected the proposal, citing a rule that requires carriers to wait at least three years to enter the marketplace if they didn’t offer plans for sale starting in 2014. In February 2015, the exchange issued a compromise, allowing United Healthcare the opportunity to sell plans in five of the state’s 19 regions where fewer than three carriers offer coverage.

Although the plans offered through Covered California are standardized, premiums, drug formularies (covered drug lists) and provider networks can vary from plan to plan. Narrow networks for Covered California plans have come under fire from consumers and advocacy groups, and Anthem Blue Cross has faced lawsuits over the legality of its narrow network.

Budget cuts for 2017 fiscal year

The 2017 fiscal year — which began July 1, 2016 — is the first time that Covered California must operate without any federal funding (the exchange still had leftover federal funding at the end of the 2015 fiscal year, and was able to incorporate it in the 2016 fiscal year budget).

In May, Covered California proposed a $308 million budget for the 2017 fiscal year. In June, it was revised to almost $321 million, and the exchange board of directors approved the revised budget at their June 2016 board meeting. The approved budget is a reduction of more than 4 percent in spending from the 2016 fiscal year’s $335 million, which was already a decrease of $58 million from the 2015 fiscal year budget.

Consumer advocates have challenged the spending cuts, but Covered California CEO,  Peter Lee, notes that “belt-tightening [means] relooking at what we do.”

Covered California caps monthly prescription costs

The cost of high-end prescription drugs is a growing problem for healthcare cost sustainability, and the rising cost of prescriptions is cited repeatedly in justifications provided by insurers requesting double-digit rate increases.  But the cost of specialty medications can also be an insurmountable burden for patients, even when they have health insurance.  For high-end specialty medications, like Sovaldi, it’s not uncommon for patients to reach their maximum out-of-pocket exposure very quickly, paying thousands of dollars per month in coinsurance for their medications.

In May 2015, Covered California rolled out a cap on prescription costs that went into effect in 2016, along with various other benefit enhancements that allow consumers access to more care without having to meet steep deductibles.  Because Covered California requires plan standardization on and off-exchange, the prescription copay cap is also available to many consumers purchasing plans outside the exchange.  The cap is linked to the metal level of the plan purchased; for the majority of consumers, the cap is $250 per specialty medication per month, but it ranges from $150 to $500, with bronze plan enrollees having the highest specialty drug copay cap.

The California legislature also created a similar cap state-wide, to include non-grandfathered group and individual plans sold only outside Covered California.  Assembly Bill 339 was signed into law in October 2015, and took effect January 1, 2017. It applies to all non-grandfathered individual and small group plans in the state, and limits the copayment for a 30 day supply of any medication to no more $250, until January 1, 2020.  For plans designated as high deductible policies, the copay limit would apply after the deductible is met.

2016 effectuated enrollment more than 1.4 million

During the 2016 open enrollment period, 439,000 NEW enrollees signed up for private plans through Covered California, total enrollment in private plans – including renewals and new enrollees – reached 1,572,074, an increase of 163,712 over enrollment at the end of the 2015 open enrollment period.

On January 29, Covered California put out a press release announcing that anyone who began the enrollment process by January 31 would have until February 6 to finish. The exchange ended up helping about 14,000 new enrollees finish their enrollments during the extension, increasing the new enrollee count from 425,000 to 439,000.

The exchange also confirmed in early February that another 1,149,000 people who had 2015 coverage had remained enrolled for 2016, either by renewing their existing plans or by switching to a new plan through the exchange. But in the statement they released on February 17, total plan selections stood at 1,572,074, including 439,000 new enrollees. So the renewal enrollment count declined slightly, to 1,133,074.

As of March 31, HHS reported that effectuated enrollment through Covered California stood at 1,415,428. 87.6 percent of those enrollees were receiving premium subsidies that averaged $309 per month.

Until open enrollment begins again in November 2016, enrollment is only available (on or off-exchange) if you have a qualifying event (Native Americans can enroll year-round, as can anyone eligible for Medi-Cal or CHIP).

Competition creates shifting market share

Although there are 12 carriers that offer plans through Covered California in 2016, four of them dominate the market: Anthem Blue Cross of California, Blue Shield of California, Health Net, and Kaiser Permanente. Those four carriers still have the majority of the enrollments in 2016, but their overall market share has decreased as other carriers have picked up more enrollees.

During the 2014 and 2015 open enrollment periods, 94 percent of Covered California’s enrollments were through one of those four carriers, but that dropped to 83 percent during the 2016 open enrollment period. Molina decreased their premiums for 2016, and nearly quadrupled their market share since 2015. And Blue Shield of California replaced Anthem Blue Cross of California as the carrier with the most market share in Covered California.

The exchange has noted that their “aggressive negotiations” with insurers contributed to the competitive marketplace, and also explained that Covered California enrollees tend to be content with their coverage, as only about 12 percent of renewals involved a plan change; the other 88 percent kept the same plan they had in 2015. But the 439,000 new enrollees in Covered California for 2016 contributed to the more diverse market share this year.

Dental and Vision

148,000 consumers had enrolled in one of Covered California’s new stand-alone dental plans by January 27, 2016. Covered California now offers adult dental coverage, but enrollees must also purchase health insurance through Covered California in order to be eligible to enroll in a dental plan through the exchange.

Vision coverage became available through Covered California – via an agreement with VSP Vision Care – as of February 17, and an additional agreement with EyeMed Vision Care in April. There’s no open enrollment for vision coverage – plans can be purchased at any time during the year (pediatric dental and vision coverage are embedded in all health plans purchased through Covered California, but adult dental and vision are not essential health benefits, so they are rarely embedded in health plans, and must generally be purchased separately).

Benefits for 2 million in first 2 years

From January 2014 to September 2015, Covered California provided private health insurance to two million people. 1.3 million of them were still enrolled as of September, while 700,000 were no longer with Covered California. But the good news is that of those 700,000 people, 85 percent simply switched to other health insurance coverage. People who gained access to employer-sponsored coverage accounted for the largest segment of those who left Covered California. The individual health insurance market has always served a segment of the population that’s in flux between employer sponsored plans; the difference is that now they can get an individual plan to cover them during that gap without having to worry about pre-existing conditions.

2016 rates and carriers

After negotiating a six-week delay for publicizing 2016 rate proposals, California became one of the first states to release final approved rate for 2016. Covered California announced on July 27 that the final weighted average rate increase for their plans would be a mere 4 percent in 2016, and that consumers who shopped around (which should be everyone!) would have the opportunity to lower their premiums by an average of 4.5 percent, and as much as ten percent in some areas of the state.

In addition to making rates available months in advance of open enrollment, Covered California also began allowing existing policy-holders to renew or make changes to their coverage starting October 12 – nearly three weeks before the start of open enrollment.

Covered California had announced in August 2014 that they would have stand-alone adult and family dental plans available for purchase in 2015, but that was delayed until 2016 because of problems with the exchange website. Stand-alone dental coverage is available from Covered California for 2016, and five carriers are offering coverage: Access Dental Plan, Anthem Blue Cross, Delta Dental of California, Dental Health Services, and Premier Access.

Undocumented immigrant children can get Medi-Cal

California lawmakers considered options in 2015 for providing access to health insurance for the state’s undocumented immigrants.  As it was originally written, SB4 would have extended Medi-Cal to undocumented immigrants who qualified based on income, and would also have allowed undocumented immigrants with higher incomes the opportunity to purchase health insurance through Covered California, albeit without access to subsidies.  But this would have required a federal waiver because the ACA does not allow undocumented immigrants to enroll in coverage through the exchanges, even if they pay the entire premiums themselves.

SB4 passed the Senate in June 2015, the Assembly in September, and was signed into law by Governor Jerry Brown on October 9, 2015. But the final version of the legislation – renamed the Health for All Kids Act – focuses solely on Medi-Cal access for undocumented immigrant children under the age of 19. Four other states – New York, Illinois, Washington, and Massachusetts – along with Washington D.C.. have established similar eligibility rules for children, but California’s immigrant population is the largest among them, and encompasses a quarter of the whole country’s undocumented immigrant population (in 2013, there were an estimated 2.67 million undocumented immigrants in California).

SB4 took effect in May 2016, and an estimated 170,000 undocumented immigrant children became newly-eligible for Medi-Cal. Their eligibility is based solely on household income, without regard for immigration status.

Coverage options for pregnant women

Currently, under federal regulations, the birth or adoption of a child is a qualifying event, but pregnancy is not (HHS revisited this question in early 2015, and reiterated their position that pregnancy is not a qualifying event at the federal level).  This means that although the mother and baby both have access to health insurance once the child is born, they do not have access to coverage during the pregnancy if the mother lacks insurance and doesn’t qualify for any of the other special enrollment periods.

In early 2015, New York and California made headlines as lawmakers in both states considered legislation that would make pregnancy a qualifying event and allow pregnant women the option to purchase coverage in the exchange outside of the annual open enrollment period. As it was originally written, CA AB1102 would have allowed a pregnant woman access to a new health plan when she becomes pregnant, but only if she did not already have minimum essential coverage.  AB1102 passed the Assembly in June, but in July the text of the legislation was altered significantly. The revised version (which is now filed as inactive with the Senate) simply says that an applicant who is rejected for coverage – for any reason, including attempting to enroll outside of open enrollment – shall be directed to MRMIP and/or Covered California for more assistance.

MRMIP (California Major Risk Medical Insurance Program) is the state’s high risk pool. AB1102 was introduced by Assembly member Miguel Santiago, and I spoke with his office about the changes to the bill. They said that the language of the bill was adjusted once it was brought to their attention that MRMIP is still available in California, and serves as an option for a pregnant woman – or anyone else – who’s trying to enroll in a plan outside of open enrollment. It doesn’t give enrollees the level of choice or premium subsidy that they would get if pregnancy were to be made a qualifying event, and MRMIP still has annual and lifetime benefit maximums. But it’s better than nothing (in most states, the high risk pools are no longer operational now that the ACA has eliminated the concept of pre-existing conditions; high risk pools existed in order to provide coverage for people who were uninsurable in the private market prior to 2014).

In addition to MRMIP, California integrated MCAP enrollment into Covered California as of October 2015. MCAP (Medi-Cal Access Program) offers coverage to uninsured pregnant women who aren’t eligible for no-cost Medi-Cal, and whose income is between 213 percent and 322 percent of the federal poverty level (213 is the upper threshold for no-cost Medi-Cal for pregnant women). A pregnant woman is counted as two people for Medi-Cal and MCAP eligibility, so a single pregnant woman would qualify for MCAP with an income up to $51,294. And MCAP recently eliminated a requirement that women enroll by the 30th week of pregnancy, so women in California who meet the income requirements for MCAP can enroll at any point during their pregnancy.

MRMIP, Medi-Cal, and MCAP all have year-round enrollment for eligible applicants, so they offer options for uninsured women who become pregnant outside of general open enrollment.

Exchange has fixed pregnancy glitch

For part of 2015 and 2016, a glitch in Covered California’s system had been automatically transferring privately-insured pregnant women to Medi-Cal if their income made them eligible for Medi-Cal while pregnant. Medi-Cal is available to all adults with income up to 138 percent of the poverty level, but for pregnant women, the income threshold extends up to 213 percent of the poverty level.

So a woman with income between 138 percent and 213 percent of the poverty level would be eligible for a subsidized qualified health plan (QHP) in the exchange if she’s not pregnant, but for Medi-Cal if she is pregnant. And a pregnant women counts as two people for Medi-Cal eligibility determination, but just one person for QHP subsidy eligibility determination, further increasing the number of women whose eligibility status could change with a pregnancy.

Some women had been reporting their pregnancies to Covered California, and the exchange had been automatically switching them to Medi-Cal without confirming that the woman wanted to switch. This caused about 2,000 women to lose access to their healthcare providers because of network changes, and the exchange began working as quickly as possible to remedy the problem. By September 2016, the issue had been resolved, and pregnant women are now given a choice of remaining on their QHP or switching to Medi-Cal

Some women prefer to switch to Medi-Cal, since they save a considerable amount of money on premiums and out-of-pocket costs with Medi-Cal. But switching can mean having to choose a new doctor, which some women are uncomfortable doing mid-pregnancy.

Outreach targets remaining uninsured

There were still more than 3.8 million uninsured residents in California in 2015, and two million of them were eligible for Medi-Cal or subsidies in the exchange. Covered California ramped up their outreach to focus on those two million people and enroll as many of them as possible during the 2016 open enrollment period. The exchange has noted that while 84 percent of uninsured California residents are aware of the ACA’s penalty for being uninsured, 36 percent don’t know about the subsidies that are available through the exchange to offset the cost of coverage.

Education and outreach continued to be important in round three of Obamacare open enrollment. Covered California has been focusing particularly on Latinos and African Americans, as they have the highest uninsured rate in the state. The exchange is also targeting young, healthy individuals, who are more likely to have put off getting coverage until now. The exchange notes that insuring this population is particularly important in terms of keeping rates sustainable, as they tend to be healthier than people who have already enrolled.

The ACA’s penalty for not having insurance has increased again for 2016. The Kaiser Family Foundation estimates that for people subject to the penalty, it will average $1000 per tax household in 2016 – five times higher than 2014’s average penalty. For people who are uninsured in 2016 and not eligible for an exemption from the penalty, the penalty calculation in 2016 will be 2.5 percent of your household income above the tax filing threshold, OR $695 per adult (plus $347.50 per child under 18, with a household max of $2,085), whichever is more. Use this calculator to see how much you may owe. In many cases – particularly for people who qualify for subsidies – the cost of the penalty would cover several months of health insurance premiums.

Heading into the 2016 open enrollment period, Covered California hired 500 temporary call center workers who are augmenting the exchange’s permanent call center.

Budget and projections for 2016

In May 2015, Covered California revised its 2016 enrollment projection down to 1.48 million people, growing to nearly 2 million by 2019. The exchange had projected 1.7 million enrollees for 2015, but ended up with 1.4 million – a 1 percent net growth over 2014, which put them among the worst-performing exchanges in terms of year-over-year growth. Ultimately, they ended up with 1.57 million enrollees at the close of the 2016 open enrollment period, which was an increase of almost 164,000 over the prior year.

In addition to a smaller estimated enrollment, the exchange is also tightening its budget for fiscal year 2016, which started July 1, 2015. The budget for the 2016 fiscal year was $332.9 million, which represented a $58 million spending cut when compared with 2015. Covered California still had $100 million in federal start-up money that could be used during the 2016 fiscal year, but no further federal funds are available. The bulk of the exchange’s revenue comes from a $13.95/month fee on every policy, and that source is unchanged from the 2015 fiscal year.

2015 enrollment

Total private plan enrollment in Covered California exceeded 1.4 million people by April 19. The exchange had a goal of enrolling half a million new applicants in private plans for 2015, and more than 495,000 new consumers selected health plans through Covered California between Nov. 15, 2014, and Feb. 22. Between February 23 and May 10, another 117,024 people enrolled in coverage through the exchange as a result of various qualifying events.

By the end of March, total effectuated enrollment in private plans through Covered CA stood at 1,364,659 people (attrition is a normal part of the individual health insurance market – some enrollees don’t pay their premiums, and others cancel their coverage early in the year).  In the press release regarding 2016 rates, the exchange noted that effectuated enrollments were still “more than 1.3 million” as of late July (during the second quarter of 2015, total effectuated enrollment grew slightly, reaching 1,393,567 by the end of June).

Covered California is touting better signup rates among Latinos and African-Americans during the 2015 open enrollment period. Enrollment by minorities lagged in 2014, prompting a reallocation of marketing dollars, the launch of a Spanish-language enrollment website, and an increase in bilingual customer service representatives.

Despite the tax credits that are designed to keep exchange coverage affordable, a recent survey found that 44 percent of Covered California enrollees have difficulty paying their premiums, compared with 25 percent of those with employer-sponsored insurance or private coverage purchased outside the exchange.  Covered California CEO Peter Lee noted that the ACA’s premium tax credits don’t give enrollees a “free lunch” and explained that even heavily subsidized premium are a heavy lift for low-income enrollees.

2015 renewals… 92% or 65%?

In addition to new enrollees, about 917,930 existing exchange enrollees re-enrolled for 2015. In late January, the exchange reported that they had implemented the renewal process for about 92 percent of people who were eligible to re-enroll.  They put the total number eligible to re-enroll at a little over 1 million people; there had been 1.1 million private plan enrollees as of December, but about 85,000 of them were determined eligible for Medi-Cal for 2015.  Of those who re-enrolled for 2015, approximately 386,000 people actively shopped for a renewal policy while about 576,000 people were automatically re-enrolled in the same plans from 2014.

In April, however, Avalere Health reported that Covered California had retained only 65 percent of their 2014 enrollees for 2015, which could leave people wondering which number to believe. In reality, they were both correct – it just depends on how you look at it. Avalere’s calculation is based on total enrollment as of April 2014, and the percentage of that number that renewed for 2015. Although the exchange reported that they had renewed coverage for 92 percent of their eligible enrollees, that doesn’t count attrition throughout 2014 (attrition is normal in the individual market, and is to be expected), and is based on the number of people who were enrolled in December who re-enrolled for 2015. But the two re-enrollment data points – 65 percent and 92 percent – are an example of how numbers don’t tell the whole story.

If we just look at total private plan enrollment at the end of the 2014 open enrollment period (1,405,102) versus total private plan enrollment at the end of the 2015 open enrollment period (1,412,200), Covered California increased their private plan enrollment by about 7,000 people in 2015.

California’s SHOP exchange

California’s Small Business Health Options Program (SHOP) exchange lets small employers sign up and offer coverage to their employees year round. Six insurers are offering medical plans through the SHOP: Blue Shield of California, Chinese Community Health Plan, Health Net, Kaiser Permanente, Sharp Health Plan, and Western Health Advantage. As of October 2015, Covered CA’s SHOP exchange has 2,865 participating employers, and provides coverage for 19,465 people.

Small businesses must submit a completed application and the first month’s premium at least five business days before the end of the month to have coverage starting the first day of the following month. Employers determine the amount they’re willing to pay for health insurance, and employees can then select from among all the plan options available in the SHOP exchange; the employer gets one bill each month, but employees have a wide range of plan choices.

In 2015, Covered CA’s SHOP exchange was open to businesses with one to 50 employees. That changed in 2016 however, and businesses with up to 100 employees are now able to purchase coverage. That was supposed to be the case nationwide, but in October 2015, President Obama signed HR1624 into law, keeping the definition of “small group” at businesses with up to 50 employees (the ACA had called for expanding “small group” to include businesses with up to 100 employees starting in 2016).

States were still allowed to expand their definitions of small businesses, and California had already aligned their laws with the ACA. California is one of only four states to expand the definition of small group in 2016. California businesses with up to 100 employees fall under the category of small groups starting in 2016.

Covered California and the state’s private exchange, California Choice, both confirmed that they would open up their exchanges to businesses with up to 100 employees starting in 2016.

2014 enrollment

The U.S. Department of Health and Human Service’s final 2014 enrollment report showed that 1,405,102 Californians signed up for commercial health insurance between Oct. 15, 2013, and April 19, 2014.

About 800,000 Californian households received premium subsidies to help pay for 2014 coverage. On average, each household received $5,200 in subsidy assistance. About 480,000 of the households also received cost-sharing assistance valued at about $1,200.

The Gallup-Healthways Well-Being Index found that California’s uninsured rate dropped 6.3 points, from 21.6 percent to 15.3 percent, from 2013 to 2014. By mid-2015, it had dropped to 11.8 percent – nearly half of what it had been in 2013.

History of California marketplace

California was the first state to authorize an exchange under the Affordable Care Act, with former Gov. Arnold Schwarzenegger signing legislation in 2010.

While Covered California had the nation’s most successful 2014 open enrollment period in terms of the number of signups (and continues to lead the country in effectuated enrollments in 2015), it has faced some persistent criticisms and issues.

Enrollment by minorities was low in 2014. To address the issue, Covered California boosted funding and resources to better reach minority communities. According to a Covered California press release, the exchange spent more on advertising that targets Latinos, launched a Spanish-language enrollment website, added more than 200 bilingual customer service representatives, and partnered with several organizations for improved outreach. The exchange is continuing their outreach and enrollment efforts in minority communities for 2016.

Limited physician networks and inaccurate physician directories have been an issue for Covered California and for individual health plans. A Health Affairs study found that although Covered California plans do have relatively narrow networks, geographical access to care is not impaired, and providers are not lower-quality than those found in commercial insurance networks outside the exchange.

But in term of the provider directory issues, Covered California and the individual health insurance carriers in the state have faced significant criticism. Covered California removed its online physician directory due to errors for several weeks in October 2013 and again in February 2014; it has not yet been restored.

Class-action lawsuits were filed against several insurers in July and September 2014 alleging that the companies provided incomplete or inaccurate information about networks or provided network information too late to allow consumers to switch to other plans. In November 2014, the California Department of Managed Health Care (DMHC), the state agency that regulates health plans, ruled that Anthem Blue Cross and Blue Shield of California misled consumers about the size of their physician networks. Both companies disputed the findings.

In August 2014, the California Legislature passed SB 964, which authorized the DMHC to scrutinize the networks for plans sold on Covered California as well the networks of Medi-Cal plans. Gov. Brown signed the bill in October 2014, despite opposition from the California Department of Finance as well as the California Association of Health Plans, a trade association. A 2015 audit of the provider directories maintained by each health insurer found multiple errors in directories for several carriers.

In January 2015, the California Department of Insurance issued emergency regulations to address network access. The regulations specify standard wait times for various medical procedures, require insurers to provide information about physicians, and mandate that provider directories be updated weekly and that directories be available online and in hard copy. The regulations also require insurers to arrange out-of-network care if an in-network provider isn’t accessible.

Legislation was introduced in response to the criticisms of provider directory accuracy, and in October 2015, Governor Brown signed SB137 into law. SB137 took effect in July 2016 and requires health insurance carriers to maintain accurate and updated provider directories.

California health insurance exchange links

Covered California
888-975-1142

California Health Benefit Exchange
Information about exchange planning and development

State Exchange Profile: California
The Henry J. Kaiser Family Foundation overview of California’s progress toward creating a state health insurance exchange.



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