News Release

Date Posted

Covered California Releases Three New Reports to Inform Federal Health Policy Decision-Making

Potential Destabilizing Effect on Markets and Inadequacy of Stabilization Funding in Senate Proposals Highlighted
  • Analysis finds the updated “Better Care Reconciliation Act” (BCRA) could cause collapse of individual markets within three to five years (especially if the Consumer Freedom Option is included).
  • Health insurance under the BCRA would cost consumers much more and cover far less.
  • Stabilization funding included in the bill would need to be five times higher than proposed to offset new policies that would make markets less stable.
  • Federal policy makers can improve markets and save money in the short term by providing risk stabilization support through reinsurance, which helps keep premiums affordable for all.
  • Individual market stabilization would be fostered by assuring the ongoing provision of direct federal funding of cost-sharing reduction payments for consumers through 2017 and 2018. 
SACRAMENTO, Calif. — As federal policymakers continue considering sweeping changes to the nation’s health care system, Covered California on Friday released three in-depth policy reports on key elements of changes under consideration in the U.S. Senate, offering warning flags on some proposals and suggestions for short-term steps that can improve health coverage in the individual market.

Activities in Washington are moving quickly, but the reality on the ground is moving even faster,” said Peter V. Lee, executive director of Covered California. “The need to stabilize the markets in 2018 requires immediate action — before the summer recess.”
The reports issued highlight important issues for federal policymakers affecting the individual market for health coverage:

·       The quality and value of coverage. Covered California’s analysis released Friday shows the Better Care Reconciliation Act (BCRA) includes changes that would increase the price of care and diminish the quality of health coverage available to Americans who buy coverage in the individual market. In particular, the new “benchmark” plan would mean that for those getting subsidies, the deductible would increase to $13,000 for an individual and $26,000 for a family. (See, “Stability Lost – Implications for Consumers and the Individual Insurance Market Under the Senate Proposal”).
·       Adequacy of stabilization funding. While “risk stabilization” funding mechanisms can be effective, the resources proposed in the BCRA are insufficient. Stabilization funding would need to be increased by many times over the levels proposed in the BCRA for 2022 and beyond to offset the destabilizing effects of other policy elements in the bill. (See, “Stability Lost – Implications for Consumers and the Individual Insurance Market Under the Senate Proposal”).
·       Ongoing funding of cost-sharing reduction payments. The mechanics and value of the cost-sharing reduction payments are outlined in the paper, How Cost-Sharing Reductions Work and the Critical Role They Play in the Individual Market,” which describes how these payments lower costs for millions of Americans who receive them, lower costs for everyone in the individual market by improving the risk mix, and help the federal government save money.
·       The value of using reinsurance as a risk stabilization tool. The report, Funding Reinsurance to Support Risk Stabilization and Potentially Reduce Federal Spending on Advanced Premium Tax Credits,” shows how reinsurance lowers premiums for everyone in the individual market, as well as the financial mechanics that underlie the fact that a $20 billion reinsurance fund that could lower premiums for everyone in the individual market by 12 percent to 18 percent and would cost the federal government less than $7 billion since the cost of premium tax credits borne by the government would be greatly reduced.
Reinsurance and funding for cost-sharing reductions are short-term, immediate changes that could improve health care markets in 2018 for Americans needing affordable coverage.  Covered California’s Chief Actuary noted the efficacy of reinsurance programs: Reinsurance programs could be administered virtually overnight and the payoff for consumers could be to immediately reduce premiums for 2018,” said John Bertko. He added, “One of the nice financial benefits is that a reinsurance program of $20 billion would only cost the government about $7 billion because of the reduced federal subsidy payments — that’s good math.”

Cost-sharing reduction payments also ensure the individual market works for all consumers. “Far from being a ‘bailout,’ cost-sharing reductions ensure that health coverage has value for low-income consumers,” Lee said. “The federal government making clear its ongoing commitment to make these payments is vital to the stability of the individual markets across the nation.”

Among the highlights in the reports, Covered California reports on how the quality of health care coverage would dramatically diminish under the BCRA because the bill proposes a new, lower “benchmark plan” with a 58 percent actuarial value (AV). Consumers would bear additional costs in the form of significantly higher deductibles compared to employer-based coverage and the current 70 percent AV Silver benchmark plan available on the individual market today (See Figure 1: Benchmarking Consumer Impact of Plan Design Deductibles)
Figure 1:  Benchmarking Consumer Impact of Plan Design Deductibles

In addition, under both the typical employer plan and the current 70 percent AV Silver benchmark plan, several services, such as primary care visits, specialist visits, prescription drugs, outpatient mental health and substance use treatment, are excluded from the deductible. Benefits excluded from the deductible mean that consumers have immediate access to the benefit but need to pay the plan co-payment or coinsurance.

Table 1 shows how two current forms of health coverage compare with the proposed benchmark coverage in the BCRA:

Table 1: Benchmarking Consumer Impact of Plan Designs

In addition, the reports point out other challenging elements of the BCRA. Table 2 looks at how the proposed stabilization funding in the BCRA would affect a variety of scenarios. In each case, stabilization funding offered in the BCRA is a fraction of what would be necessary to account for the upheaval caused by the bill and results in a multi-billion dollar shortfall during every year between 2022 and 2026.

“The stabilization funding appears to be inadequate and many times the current level would be needed to protect consumers,” Lee said.

Table 2: Modeling Impacts of BCRA State-Administered Stabilization Funds

The reports also highlight the value of two provisions that could have immediate positive effects for 2018 in keeping premiums down and help consumers access the coverage they need. “A risk stabilization fund of $20 billion, paid as reinsurance, helps lower premiums by up to 18 percent which helps make coverage more affordable,” Lee said, “while cost-sharing reductions help consumers who are covered get the care they need by lowering their out-of-pocket expenses.”


The reports show that both programs not only promote a healthier risk pool and lower premiums, but they provide good value for the federal government.


Finally, the report examines the Consumer Freedom Option amendment offered by U.S. Senator Ted Cruz that would allow health insurance companies to offer cheaper plans with much fewer benefits off exchange as long as they also offer a plan that complies an Affordable Care Act compliant plan on exchange. The analysis found this would significantly destabilize and possibly collapse the individual market by splitting the risk pool, with healthy consumers transitioning to off-exchange coverage, leaving sicker consumers enrolled in exchanges.


“Allowing bare bone plans destroys the risk pool,” said Bertko. “The Consumer Freedom Option would have a devastating effect on the market.”


Lee said the changes being considered come at a time when many states are actually seeing their individual markets stabilize. He said a recent study by the Centers for Medicare and Medicaid Services shows risk scores stabilizing across the nation, while an analysis by the Kaiser Family Foundation found that  health plans’ first-quarter 2017 profit margins have reached breakeven or modest profit levels.


“While there are improvements that can be made, the individual market is functioning better in many places than it was before the Affordable Care Act was enacted,” Lee said. “Rather than improving the market, the changes being considered in the U.S. Senate would put it in grave danger and threaten access to health coverage and care for millions of people.”

About Covered California


Covered California is the state’s health insurance marketplace, where Californians can find affordable, high-quality insurance from top insurance companies. Covered California is the only place where individuals who qualify can get financial assistance on a sliding scale to reduce premium costs. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Depending on their income, some consumers may qualify for the low-cost or no-cost Medi-Cal program.
Covered California is an independent part of the state government whose job is to make the health insurance marketplace work for California’s consumers. It is overseen by a five-member board appointed by the governor and the Legislature. For more information about Covered California, please visit www.CoveredCA.com.

New Federal Report Shows the Individual Markets Across the Nation Are Stable

California Continues to Benefit From a Healthier Population, Leading to Lower Costs

  • The healthier risk mix in California’s individual market results in about 20 percent lower costs compared to the national average, and the other state-based marketplaces’ healthier populations meant 10 percent lower costs.
  • Contrary to claims of collapse, the report finds that the risk mix in the individual market was stable in 2016.
  • The report highlights how “reinsurance” worked effectively to protect consumers, and the risk-adjustment program moved billions of dollars among carriers to foster a market based on value instead of risk selection.

SACRAMENTO, Calif. — A new report from the Centers for Medicare and Medicaid Services (CMS) on two key premium-stabilization programs in the Patient Protection and Affordable Care Act provides national data that details the stable health mix across the country and the positive impact of the reinsurance program.

The report, “Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2016 Benefit Year,” found that the two programs “functioned smoothly” in 2016 as the Affordable Care Act-compliant market “continued to grow.”

“This report provides hard evidence that contradicts those who would wrongfully claim that individual markets are collapsing,” said Peter V. Lee, executive director of Covered California. “The picture provided by the federal government is one of individual markets that are stable and maintaining a balanced risk mix of those insured, which should inform Congress as it considers what policy steps to take next.”

The report shows the “average risk score” across federal marketplace states, state-based marketplaces and California was nearly the same from 2015 to 2016 (see Figure 1 – Average Risk Score Comparison). More importantly, California’s individual market had a risk profile far better than the national average, which meant health care costs would be nearly 20 percent lower based on health status than the national average.

Further, the report provided important information about which markets are functioning well and how the tools of the current law have worked, including:

  • The other state-based marketplaces collectively had a healthier risk mix than the national average, which meant that health care costs in those 10 states would be 10 percent lower than the national average (the analysis excludes Massachusetts and Vermont because risk-score data was not available for these states).
  • In summarizing the risk-adjustment program, which is an ongoing feature of the current law, health plans that had “healthier” populations paid a total of nearly $3.6 billion nationally ($392 million in California) to those plans that had less-healthy enrollees.
“California continues to attract a healthy mix of enrollees, and this federal report is further evidence that the individual market in California and across the nation is stable and strong,” said John Bertko, Covered California’s chief actuary. “Generally, the risk profile of a large group gets worse over time, and the fact that across the nation the risk mix stayed constant is clear evidence that relatively healthier individuals are continuing to sign up for insurance.”

Lee identified three key reasons why California and other state-based marketplaces were relatively successful in attracting and keeping a healthier mix of consumers than the national average:

  • Covered California and state-based marketplaces appear to be investing proportionately more in marketing and outreach than the federal government, which is responsible for promoting enrollment in the Federally Facilitated Marketplaces.
  • State-based marketplaces like California were more likely to convert all health coverage in the individual market into “compliant” plans and created one common risk pool as of 2014.
  • California and other states that operate state-based marketplaces were more likely to expand their Medicaid program, which has a positive impact on the health status of the individual market.
In addition to these common factors, Lee noted that in California, health plans offer patient-centered benefit designs, which allow consumers to access a wide variety of care that is not subject to a deductible. That means consumers get more value from their coverage, which is believed to lead to maintaining a better risk mix.

However, Lee says the consumer pool in California and across the nation could be damaged in the face of continued uncertainty on the policy front, in particular regarding the direct payment of the federal cost-sharing reduction subsidy and continued enforcement of the penalty for not having insurance.

“The requirement to have health insurance boosts enrollment, builds a healthier pool of consumers and lowers premiums for everyone,” Lee said. “We are negotiating rates with our carriers right now and the uncertainty about the ongoing payment of the cost-sharing reduction subsidy and enforcement of the mandate risks hurting consumers.”

The report also looked at how “reinsurance” and “risk adjustment” benefit consumers. Similar to the premium-stabilization programs in Medicare Part D, these programs help ensure that health insurance carriers do not avoid enrolling consumers with pre-existing conditions, and they protect carriers that enroll a disproportionately sicker pool of consumers.

The report states, “Both the transitional reinsurance program and the permanent risk adjustment program are working as intended in compensating plans that enrolled higher-risk individuals, thereby protecting issuers against adverse selection within a market within a state and supporting them in offering products that serve all types of consumers.”

In 2016, health insurance companies within California’s individual market received more than $573 million in reinsurance payments, which had the direct effect of lowering premiums for all consumers. The money for reinsurance came from a fee on all private health insurance coverage (in the individual, small-employer, large-employer insured and large-employer self-insured markets), and the risk-adjustment payments are from the health insurance companies themselves and do not include taxpayer dollars. This year, 2016, marked the final year of the reinsurance program.

“The risk-adjustment mechanism is working to move insurers to compete on providing better care at a better price, rather than being rewarded for avoiding sicker people,” said Lee.

The table below shows the amounts each of California’s carriers received through reinsurance and how much they either paid or received through risk adjustment.



The full CMS report can be viewed here: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Summary-Reinsurance-Payments-Risk-2016.pdf.

About Covered California
Covered California is the state’s health insurance marketplace, where Californians can find affordable, high-quality insurance from top insurance companies. Covered California is the only place where individuals who qualify can get financial assistance on a sliding scale to reduce premium costs. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Depending on their income, some consumers may qualify for the low-cost or no-cost Medi-Cal program.

Covered California is an independent part of the state government whose job is to make the health insurance marketplace work for California’s consumers. It is overseen by a five-member board appointed by the governor and the legislature. For more information about Covered California, please visit www.CoveredCA.com.



New Analysis Shows the Better Care Reconciliation Act Would Mean Dramatically Higher Costs for Most Consumers, Putting Care Beyond Reach of Many

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  • Benchmark plans offered under the Better Care Reconciliation Act (BCRA) would nearly triple a Covered California enrollee’s deductible, from $2,500 per year to $7,350, with a deductible for a family increasing to more than $14,700.
  • Reductions in subsidy levels would result in dramatic increases in coverage costs for lower-income and older Americans.

SACRAMENTO, Calif. — The National Academy of State Health Policy, in consultation with Covered California, released an analysis on Wednesday of the value of health coverage and subsidies across the nation that compares current law under the Patient Protection and Affordable Care Act and the Better Care Reconciliation Act (BCRA), which is under consideration in the U.S. Senate.

The analysis, “Barely Covered: Initial Analysis of Coverage and Affordability Impacts to Consumers Under the Proposed Better Care Reconciliation Act,” is available at: http://nashp.org/wp-content/uploads/2017/06/Barely-Covered.pdf.

The analysis looks at what consumers would need to spend to keep comparable coverage to what they have today, given the reduction in subsidies proposed in the BCRA. The analysis describes the coverage available on the individual market in California, Ohio and Pennsylvania.

“While the Congressional Budget Office (CBO) analysis makes clear that 22 million Americans would lose coverage under the Senate’s proposal, this report puts a spotlight on the fact that for the millions of Americans who would remain insured, the skimpier benefits are coverage in name only,” said Peter V. Lee, executive director of Covered California. “Many consumers would face huge financial hurdles to get needed care.

“The term ‘high deductible’ would take on a staggeringly high new meaning under the BCRA, with subsidies tied to a benchmark plan that would mean families would need to meet a deductible of more than $14,000 before most, if not all care, was covered,” Lee said. “Consumers would be stuck with thousands more in out-of-pocket costs — and 100 percent of the cost of their medications — if they enroll in the benchmark plan being proposed in the BCRA as it is written.”

Under current law, health insurance products offered through Covered California are linked to a “benchmark” product with an actuarial value tied to a Silver-tier plan, which has a 70 percent actuarial value. Actuarial value is a measure of the expected health care costs a specific health plan will cover for a standard population. Higher actuarial value generally means lower cost sharing for enrollees.

The Better Care Reconciliation Act (BCRA) sets the benchmark product at an actuarial value of 58 percent, which means the plan designs would need to have deductibles of $7,350 for an individual or $14,700 for a family — leaving consumers on the hook for huge out-of-pocket costs when they access care.

“Covered California has worked hard to make sure benefit designs are patient-centered, with primary care, specialty visits, needed tests and prescription drugs that are not subject to any deductible,” Lee said. “Putting wildly high deductibles between patients and the care they need is a recipe for disaster.”

The BCRA also makes significant changes that could make coverage extremely expensive to consumers, including:
  • Adds age as a premium contribution factor and increases the maximum contribution from 9.5 percent of income to more than 16 percent of income for individuals 59 and older.
  • Reduces the ceiling for receiving subsidies from 400 percent to 350 percent of the federal poverty level — meaning that these consumers would bear the full cost of annual rate increases.
  • Allows states to permit insurers to charge the oldest enrollees (age 64) five times what the youngest adult enrollees (age 21) are charged for their monthly premiums.
  • Allows states to get waivers to the current essential health benefits, which the CBO estimates would mean that half of Americans would be living without the existing protections from lifetime limits or “gotcha” coverage gaps in states that exclude entire categories of care.
The findings were contained in a study that Covered California sent with a letter to all 100 members of the United States Senate on Wednesday. You can see the letter here: http://hbex.coveredca.com/data-research/library/CoveredCA_Senate_Ltr_re_NASHP_Analysis_6.28.17.pdf.

“Barely Covered: Initial Analysis of Coverage and Affordability Impacts to Consumers Under the Proposed Better Care Reconciliation Act” also compares the subsidies provided under the BCRA to those available under current law to purchase Silver-tier health plans, the most commonly selected coverage level currently available. The study provides estimates of costs for individuals of different ages and income levels, assessing what their costs would be if they live in lower-cost or higher-cost regions of each state.

The study uses Kaiser Family Foundation data and shows that the BCRA tax credit structure would modestly lower “net premiums” — what consumers pay after receiving a subsidy — for some younger enrollees in lower cost regions. However, many consumers, especially those who are lower income and older and live in higher-cost regions, would see dramatically higher net premiums under the BCRA due to the tax credit changes.

The following chart shows the difference in premium costs for a Silver plan under the Affordable Care Act and the BCRA for a 27-year-old and a 60-year-old in Los Angeles County (a relatively low-cost county) and Monterey County (a high-cost county).



“At a basic level, we now have confirmation of what we feared: Lower enrollment would follow if the BCRA were approved as written,” Lee said. “What’s even more troubling is that healthier individuals would be more likely to drop coverage first, leading to higher premiums for the remaining enrollees.”

Further, the shift toward lower-actuarial-value plans and the loss of cost-sharing reduction subsidies would mean low-income consumers would likely struggle to pay the significant out-of-pocket costs for health care services when they need them, even if they are able to afford the monthly premiums. This could result in either consumers declining to seek care at all, or being unable to pay for services after they have been received.

Information on Covered California’s patient-centered benefit designs is available here: https://www.coveredca.com/PDFs/2017-Health-Benefits-table.pdf.

About Covered California
Covered California is the state’s health insurance marketplace, where Californians can find affordable, high-quality insurance from top insurance companies. Covered California is the only place where individuals who qualify can get financial assistance on a sliding scale to reduce premium costs. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Depending on their income, some consumers may qualify for the low-cost or no-cost Medi-Cal program.

Covered California is an independent part of the state government whose job is to make the health insurance marketplace work for California’s consumers. It is overseen by a five-member board appointed by the governor and the legislature. For more information about Covered California, please visit www.CoveredCA.com.

New Analysis Shows That Coverage That Is Being Promoted as Part of Proposals in Washington Would Put Coverage Out of Reach for Many Americans


  • A recent report from CMS found that skimpier coverage under the American Health Care Act (AHCA) would have the effect of more than doubling deductibles from $3,000 per year to $7,250.
  • Analysis finds that using AHCA subsidies to fund “no-cost premium plans” would leave many consumers with no access to care because of high deductibles and reduced benefits.
  • Deductibles could range from $10,000 to $39,000 a year for consumers in median-cost counties, and up to $58,000 in high-cost regions with AHCA subsidies as the basis for purchasing coverage.

SACRAMENTO, Calif. — Covered California released an analysis Wednesday that shows that some deductibles would need to be as much as $58,000 a year under one proposal being floated during the current health care debate in Washington. The proposal introduces the concept of “no-cost health plans” that are fully funded by the reduced financial assistance offered under the American Health Care Act (AHCA).

“All health insurance coverage is not created equal,” said Peter V. Lee, executive director of Covered California. “The low subsidies and ability of states to waive benefit rules in the AHCA would result in coverage that is far worse than what many consumers saw prior to the Affordable Care Act. The prospect of fewer benefits and dramatically higher deductibles than the least expensive plan currently offered by Covered California means all too often coverage would be in name only.”

A recent report from the Centers for Medicare and Medicaid Services’ (CMS) Office of the Actuary (OACT) found that cost sharing under the AHCA would be about 61 percent higher. Using current Patient Protection and Affordable Care Act benefit designs, this means that a Silver-tier plan would move from having an annual deductible of $3,000 to an annual deductible of more than $7,250 under the AHCA.

Covered California’s analysis also examined the idea of automatic enrollment into “no-cost” health plans, an idea suggested in a recent Health Affairs blog, to provide one window into whether the subsidies proposed in the AHCA would be adequate to meet consumers’ needs. The analysis found that deductibles could actually be much higher than the OACT projection. In this system, insurers would need to dramatically raise deductibles and reduce benefits so the plans could be completely paid for by the tax credits provided in legislation designed to replace the Affordable Care Act.

The chart to the right shows the impact the new deductibles would have on consumers in three age groups (27, 40 and 60) who live in low-cost, median-cost and high-cost counties. In a median-cost county, consumers would have to cover the first $10,000 to $39,000 in expenses before their deductibles would be met and the insurance would cover the costs of needed care. In a high-cost county, the deductibles could range from $17,000 to $58,000.

“This analysis is timely as the Senate considers making a proposal to reform the Affordable Care Act,” Lee said. “A central question that needs to be asked of any replacement legislation is not just how many Americans stand to lose coverage, but to what extent would we return to the pre-Affordable Care Act days when millions who thought they had coverage faced the reality of exclusions, very high deductibles and gaps in coverage that made care unaffordable.”

Health plans available through Covered California have patient-centered benefit designs, which increase the number of services that are available without being subject to a deductible.

Most outpatient services in Silver, Gold and Platinum plans are not subject to a deductible, including primary care visits, specialist visits, lab tests, X-rays and imaging. Even consumers in Covered California’s most affordable Bronze plans are allowed to see their doctor or a specialist three times before the visits are subject to the deductible.

The lead author of the analysis, “The American Health Care Act Would Deliver Coverage in Name Only for Many With Unaffordable Deductibles,” is Covered California’s Chief Actuary, John Bertko.

“In the coming days, analysts need to scrutinize the nature of coverage being offered given the size and structure of the subsidies,” Bertko said. “This analysis seeks to spotlight those issues, and based on what we know today, the policies being discussed in Washington would be practically worthless to the vast majority of consumers.”

About Covered California
Covered California is the state’s health insurance marketplace, where Californians can find affordable, high-quality insurance from top insurance companies. Covered California is the only place where individuals who qualify can get financial assistance on a sliding scale to reduce premium costs. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Depending on their income, some consumers may qualify for the low-cost or no-cost Medi-Cal program.

Covered California is an independent part of the state government whose job is to make the health insurance marketplace work for California’s consumers. It is overseen by a five-member board appointed by the governor and the legislature. For more information about Covered California, please visit www.CoveredCA.com.



Covered California’s Board Takes Action to Provide Stability to the Market in the Face of Federal Uncertainty


  • Covered California adopted a $314 million budget which highlights its ongoing stability and includes a continued commitment to maintaining a healthy mix of consumers which helps keep premiums low.
  • Covered California moved to protect consumers, whether they are on or off-exchange, from premium increases caused by uncertainty at the federal level.
  • New data from CMS shows California and other states retained a far higher percentage of consumers than those in federal marketplaces.

SACRAMENTO, Calif. — Covered California’s board approved a budget that highlights its ongoing stability and continues its significant commitment to marketing and outreach to reach consumers. The board also adopted a new policy that provides stability to the market and helps reassure health insurance companies that have expressed concern about participating in 2018 in the face of continued uncertainty regarding the federal government’s funding of cost-sharing reduction (CSR) reimbursements.

“In the face of federal uncertainty, Covered California is doing everything we can to stabilize the market and protect consumers,” said Peter V. Lee, executive director of Covered California. “Today’s action allows Covered California to give our plans clear direction and assurances for the coming year – while insulating consumers from the higher premiums caused by a lack of direction at the federal level.”

The Patient Protection and Affordable Care Act includes two types of financial support for those who qualify: monthly premium support (the Advanced Premium Tax Credit, or APTC) and cost-sharing reductions which are available only to Silver plan members when they seek care. Currently the federal government has only committed to funding CSRs through the month of May 2017, with no guarantee it will continue.

Without a commitment to fund the CSR reimbursements, some health plans may not participate in 2018. The plans could leave midway through the year or raise their rates. In the absence of a clear and reliable policy from the federal government that it will provide CSR funding through 2018, Covered California’s board acted to place any rate increases caused by the uncertainty only onto Silver plans. While Silver level consumers will see an increase in the gross cost of their premiums, they will also see an increase in the amount of financial assistance they receive, leaving their net payment virtually the same. (Full detail and board materials are available here: http://board.coveredca.com/meetings/2017/06-15/index.shtml.)

However, a previous Covered California analysis found the federal government would spend $4 billion more on funding the increased subsidies than it would on funding the CSR reimbursements in 2018 alone, and tens of billions of dollars would be added to the federal budget over 10 years.

“There is no logic in the federal government not continuing the way it currently funds cost-sharing reductions,” Lee said. “Not only do they help low-income consumers afford health care, but they also save billions of dollars in federal taxpayer money.”

In addition, Covered California will require plans to offer a separately rated, non-mirrored Silver plan off exchange that is nearly identical to the Covered California patient-centered benefit design. These plans would not include any premium increase connected to the lack of CSR reimbursements and should mitigate the impact of any rate increases on approximately 1 million unsubsidized consumers.

Covered California’s board also approved a $314 million budget for Fiscal Year 2017-2018 that contains no state funding and highlights its ongoing stability. Covered California’s revenue comes exclusively from a small monthly surcharge that health plans pay for each enrollee. The budget includes a continued commitment to building and maintaining one of the healthiest consumer pools in the country, with $106 million devoted to marketing, sales and outreach.

“We continue to hear claims that our health care system is collapsing, but we know that this is not the reality in California,” said Covered California Board Member Paul Fearer.

“This is a rock solid budget, one that highlights our stability and keeps us on a path for continued success.” Lee added. “Marketing is not only important to getting people to sign up for coverage, it is important to getting people to stay covered.”

At the board meeting, Covered California also reviewed new data from the Centers for Medicare and Medicaid Services that confirms the importance of some of the exchange’s policy decisions, including its commitment to marketing and outreach. Data analysis slides can be found here: http://www.coveredca.com/news/pdfs/Effectuation_Report_to_the_Board_of_Covered_California-6-15-17.pdf. The data shows:
  • California and other state-based marketplaces retained a higher percentage of paying consumers in 2016, 94 percent, compared to those retained in the 35 states served by the federally-facilitated marketplaces (FFM), (85 percent).
  • Of those who left the marketplaces, Covered California survey data has found that 85 percent of Covered California consumers moved to another source of coverage; the just released CMS data found the comparable rate for consumers enrolled in states supported by the FFM was only 49 percent – meaning, far more left those markets to be uninsured.
“More research is needed to fully understand the reasons why state-based marketplaces are performing better than those through the federally-facilitated marketplaces,” Lee said. “One clear lesson appears to be that marketing pays off.”

Covered California identified a variety of reasons that could be responsible for the dramatic differences in results.
  • Marketing matters: Covered California has invested in year-round marketing based on the fact that consumers come in and out of Covered California as their needs change. This “churn” is why marketplaces must continue to market coverage during open enrollment and special enrollment.
  • Special enrollment engagement: Covered California actively promotes special enrollment, ensures agent compensation and engages service channels throughout the year to lead to strong enrollment during this time.
  • Benefit designs: Covered California’s patient-centered benefit design allows consumers to access health care services that are not subject to a deductible, which provides value and leads to high levels of consumer retention.
  • Individual market stability: Covered California has had a stable group of health plans since our launch in 2014, leading to plans investing to retain their members.
“This report highlights the important role and responsibility of the federal government and shines a light on a disturbing trend,” Lee added. “What is clear is that Covered California is doing a good job for consumers – and our hope is that the Administration will take steps toward stabilizing all the marketplaces by not only funding the CSR reimbursements, but doing the marketing that is an essential benefit.”

About Covered California
Covered California is the state’s health insurance marketplace, where Californians can find affordable, high-quality insurance from top insurance companies. Covered California is the only place where individuals who qualify can get financial assistance on a sliding scale to reduce premium costs. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Depending on their income, some consumers may qualify for the low-cost or no-cost Medi-Cal program.

Covered California is an independent part of the state government whose job is to make the health insurance marketplace work for California’s consumers. It is overseen by a five-member board appointed by the governor and the legislature. For more information about Covered California, please visit www.CoveredCA.com.



New Analysis Shows Covered California’s Risk Mix Improving and Remaining Stable and Strong


  • California’s risk score improved from 2016 to 2017, indicating a healthier mix of consumers who have enrolled in coverage.
  • Analysis shows what health insurance exchanges like Covered California can do when they work on behalf of consumers.
  • Covered California has shared data with health plans in advance of rate negotiations for the past three years, helping plans “price right” — but unprecedented federal policy uncertainty makes 2018 premiums potentially more variable than ever.



SACRAMENTO, Calif. — A new analysis shows that Covered California continues to attract a healthy mix of enrollees, and the overall health of its enrollees improved from 2016 to 2017. This data is key to Covered California’s stability and will be used to help shape and inform rate negotiations with its 11 qualified health plans for 2018.

“We continue to attract a healthy mix of enrollees, and this is further evidence that the individual market in California is stable and strong,” said Peter V. Lee, executive director of Covered California. “A healthy pool of consumers means lower premiums, resulting in lower costs to those who do not receive financial help and receive less federal spending.”

The study, titled “Amid ACA Uncertainty, Covered California’s Risk Profile Remains Stable,” was posted earlier this week on Health Affairs, a prominent website devoted to health policy and issues affecting health and health care. Covered California released an expanded description of the results of the analysis, “Covered California Continues to Attract Sufficient Enrollment and a Good Risk Mix Necessary for Marketplace Sustainability.”

According to the data, California’s risk score dropped from 1.11 in 2016 to 1.09 in 2017, indicating that the current population is healthier, with respect to chronic conditions, than it was a year ago.

In addition, new enrollees in 2017 have an approximately 16 percent lower mean risk score than renewing enrollees, which is an improvement of 4 percent between 2016 and 2017. This suggests that Covered California is successfully attracting healthy enrollees to stabilize the risk pool.

The analysis continues California’s trend of having a healthy pool of consumers. While it used a different methodology, the Centers for Medicare and Medicaid Services determined California had the lowest “average plan liability risk score” in the individual market in both 2014 and 2015. In 2016, California continued to have one of the lowest risk scores in the nation.

Lee pointed to four key reasons why California has been successful in attracting a healthy mix of consumers:
  • The expansion of coverage linked to providing financial help through federal tax credits is bringing a healthy mix of consumers into the individual market and keeping them there.
  • Covered California continues to invest significantly in marketing and outreach, recognizing that there is high turnover in the individual market.
  • Unlike many other states, California converted all health coverage in the individual market into “compliant” plans and created one common risk pool as of 2014.
  • Health plans through Covered California offer patient-centered benefit designs, which allow consumers to access a wide variety of care that is not subject to a deductible, meaning consumers get more value from their coverage.
“Doing early analysis of California’s risk mix is important because we can share this information with health insurance carriers during rate negotiations to get the best value for California’s consumers,” Lee said. “While we are doing what we can to provide health plans with the certainty they need to set their premiums as low as possible, there is still significant uncertainty among health plans because of the lack of clarity around whether there will be direct federal funding of cost-sharing reduction payments and continued enforcement of the individual mandate.”

Last month Covered California released an analysis that showed health plan premiums could rise up to 49 percent, and up to 340,000 Californians would drop from coverage, if cost-sharing reduction reimbursements were no longer directly made to carriers, and the individual shared responsibility payment were not enforced.

Health insurance carriers have begun the process of negotiation in California to develop rates for 2018.

“Health insurance carriers need certainty, and without confidence that the federal support for cost-sharing reduction payments will be made for 2018 as they have for the past four years, they will need to raise their rates and it will actually cost the federal government billions of dollars more,” Lee said. “There is still time to remove this specter of uncertainty and take the concrete steps necessary to keep the marketplaces stable, protect consumers and preserve coverage for millions of people.”

About Covered California
Covered California is the state’s health insurance marketplace, where Californians can find affordable, high-quality insurance from top insurance companies. Covered California is the only place where individuals who qualify can get financial assistance on a sliding scale to reduce premium costs. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Depending on their income, some consumers may qualify for the low-cost or no-cost Medi-Cal program.

Covered California is an independent part of the state government whose job is to make the health insurance marketplace work for California’s consumers. It is overseen by a five-member board appointed by the governor and the legislature. For more information about Covered California, please visit www.CoveredCA.com.