News Release

Date Posted

Covered California’s Board Takes Action to Protect Consumers and Maintain Market Stability


  • Given the ongoing uncertainty at the federal level, and the potential for Congress and the administration to enact policy changes next month, the exchange will delay until Sept. 30 a decision on whether it must add a cost-sharing reduction surcharge to Silver plans.
  • Covered California will amend its contracts with carriers to promote participation and lower prices in 2018 by allowing for multi-year adjustments to their margins.
  • Covered California will increase its marketing budget by $5 million, for a total of $111 million, to provide additional outreach and help to consumers.


SACRAMENTO, Calif. — Covered California’s Board of Directors took action Thursday to promote stability of the individual health insurance market and to continue to provide consumers with choice and the lowest rates possible in the face of persistent national uncertainty.

“The lack of clarity and direction at the federal level continues to be a challenge, and Covered California is doing everything it can to stabilize the market and protect consumers,” said Peter V. Lee, executive director of Covered California. “A stable market is critical for millions of consumers, and Covered California is showing how it can be done.”

“We have a way to protect consumers, but it is complicated and will cause unnecessary confusion and anxiety. Therefore, we are extending our deadline to give Congress time to act when they return in September,” said California Health and Human Services Secretary and Covered California Board Chair Diana Dooley. “We are heartened by the bipartisan discussions that put consumers first, but we can’t wait past Sept. 30.”

Covered California announced three items that are all geared toward providing certainty and stability to consumers:

  • Covered California will wait until Sept. 30 to decide whether its health plans must add a cost-sharing reduction (CSR) surcharge to Silver-tier plans. Health plans are required to offer cost-sharing reductions to lower-income consumers, in the form of lower copays and deductibles, which help reduce out-of-pocket costs when consumers access care. For the past four years, the federal government has directly reimbursed the health insurance companies for those costs, but that continued funding remains in question. Without any firm commitment to continue those reimbursements through 2018, Silver-tier consumers will see an additional CSR surcharge — averaging 12.4 percent — on the gross price of their premiums. If Congress and the president decide to fund CSRs by Sept. 30, rates for Silver-tier plans could move forward without the added CSR surcharge.
    • If no decisions on CSR funding are made by Sept. 30, the gross or total premium would reflect this CSR surcharge for consumers with Silver-tier plans who receive subsidies. However, in most cases, consumers would not see a “net” change in what they would pay since their premium tax credit would also increase.
  • The board adopted new contract language to provide carriers with more assurances during this time of unprecedented uncertainty in order to maximize consumer choice and participation in 2018 with the lowest rates possible. If a carrier incurs unanticipated losses in 2018 due to changes in existing federal policies or other uncertainties, such as the lack of enforcing the individual mandate, the carrier will be able to request a recoupment of those losses over a three-year period (plan years 2019 to 2021). Also, if a carrier experiences unanticipated profits due to changes in existing federal policies, such as the resumption of a reinsurance fund, they will factor those profits into their rates over the next one to three plan years.
  • The board approved an increase to Covered California’s marketing and outreach budget for 2018 of approximately $5 million, for a total of $111 million. The additional funding will be used to increase the number of television and radio ads around key dates throughout the upcoming open-enrollment period, which will run from Nov. 1 through Jan. 31. Covered California will also engage in a more robust regional marketing direct-mail campaign for consumers affected by the CSR surcharge.

“These actions will protect our consumers and give our carriers the certainty they need to continue providing choice at a good price,” Lee said.

“While we are doing our best to manage a difficult situation, we hope Congress and the administration will provide clear guidance on how it intends to stabilize the individual insurance market.”

This week the Congressional Budget Office issued a report that found that ending the CSR reimbursements would raise premiums by about 20 percent in 2018 and 25 percent in 2020 and subsequent years. In addition, since the premium tax credit would rise along with the premiums, ending the CSR reimbursements would increase the federal deficit by $194 billion over the next 10 years.


Covered California Releases 2018 Rates: Continued Stability and Competition in the Face of National Uncertainty


  • Covered California remains stable, with an average weighted rate change of 12.5 percent. The change is lower than last year and includes a one-time increase of 2.8 percent due to the end of the health insurance tax “holiday.”
  • The competitive market allows consumers to limit the rate change to 3.3 percent if they switch to the lowest-cost plan in the same metal tier.
  • Health plans also submitted rates for a potential “cost-sharing reduction surcharge” that would be added only to the premium for Silver-tier consumers. The increase averages 12.4 percent, which is what is required to address continued uncertainty over the federal funding that lowers out-of-pocket costs for more than 650,000 enrollees in California.
  • All 11 health insurance companies will return to the market in 2018, and 82 percent of consumers will be able to choose from three companies or more. However, Anthem will be leaving some markets that comprise about half of its enrollment.
  • Downloadable comments from Executive Director Peter V. Lee: (Video).

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SACRAMENTO, Calif. — Covered California unveiled proposed rates for the 2018 individual market, announcing that all 11 of its participating health insurance companies will be returning for the upcoming year. Covered California continues to be a stable marketplace where consumers can find affordable coverage.

“Covered California remains robust and strong, and we are pleased to welcome back all 11 plans to compete in regions across the state,” said Covered California Executive Director Peter V. Lee. “While there is ongoing uncertainty and a lack of clarity at the federal level, consumers who need affordable health insurance will continue to have good choices in Covered California next year.”

Covered California Rate Change for 2018

Lee said the average statewide rate change for 2018 will be a 12.5 percent increase and noted that consumers can reduce that amount to less than a 3.3 percent increase if they shop for the best value and switch to the lowest-priced plan in the same metal tier.

“Covered California’s competitive market means consumers have the power to shop and find the best value,” Lee said. “We know our consumers look for the best deal and often end up paying less than the initial rates suggest.”

In addition to shopping, most consumers enrolled through Covered California will not pay the entire rate change because the amount of financial help they receive from the federal government will also increase. The federal subsidy is tied to the price of the second-lowest-cost Silver plan and as rates rise or fall, so does the subsidy, which will help offset a significant portion of the rate changes for consumers.

The rate change varies by health plan and region, with some plans having decreases in their premiums and others having increases, which means shopping is more important than ever. Across all plans, one factor that is built into these rates is a one-time adjustment because of the end of the “holiday” on health plans’ having to pay the Patient Protection and Affordable Care Act’s health insurance tax (HIT). This factor alone was worth an average of 2.8 percent. Without the one-time increase for the HIT, the average increase for the health plans Covered California contracts with would have been less than 10 percent.

Both the proposed rate change and the CSR surcharge are currently under review by state regulators, the Department of Managed Health Care and the California Department of Insurance.

Federal Uncertainty Continues to Challenge Health Insurance Companies and Consumers Across the Country

The announcement of 2018 rates and plans comes in the midst of ongoing uncertainty at the federal level surrounding key elements of the Affordable Care Act, particularly in regard to cost-sharing reduction (CSR) payments.

The law requires health insurance companies to offer cost-sharing reductions to lower-income consumers, in the form of lower copays and deductibles, which help reduce out-of-pocket costs when consumers access the care they need. For the past four years, the federal government has directly reimbursed the health insurance companies for those costs. While health plans are required to help these consumers lower their out-of-pocket costs, those payments are in jeopardy because the administration has stated it will only commit to making these payments on a month-to-month basis.

Covered California instructed health insurance companies to submit their rates assuming direct payment to fund the CSR subsidies would be continued, but to also submit a separate CSR surcharge to “load” any costs to fund this program onto Silver-tier plans for those who receive subsidies. As a result, Silver-tier consumers may see an additional “CSR surcharge” that averages 12.4 percent — ranging from 8 percent to 27 percent on the gross price of their premiums — if there is no commitment from the administration to fund these payments through 2018. However, while the gross or total premium for consumers receiving subsidies would reflect this CSR surcharge, in most cases, consumers would not see a “net” change in what they would pay since the premium tax credit would also increase.

“This action allows Covered California to keep the market stable and protect consumers from this uncertainty,” Lee said. “While most Silver-tier consumers will not see the full impact of the ‘CSR surcharge,’ and every consumer could avoid paying any additional premium by shopping, we hope that we do not need to implement this work-around that would cause unnecessary confusion and ultimately cost the federal government more than it would to continue to make the payments directly.

“A decision by the federal government is needed in the next few weeks,” Lee continued.
“Without clear confirmation from the administration that these payments are secured, we will be forced to have health insurance companies in California add a CSR surcharge to the Silver-tier rates.”

In releasing these rates, Covered California also communicated to Secretary of Health and Human Services Tom Price and the Centers for Medicare and Medicaid Services Administrator Seema Verma the need for clear guidance regarding the ongoing funding of the CSR subsidy program. (The letter is available at: http://www.coveredca.com/news/pdfs/CoveredCA_CL_2018_Rates-HHSLetter.pdf)

Silver-tier consumers who receive no subsidies will be encouraged to explore purchasing a different metal-tier product in Covered California — none of which have prices that include the CSR surcharge — or consider buying a nearly identical Silver plan offered outside Covered California, which would not have the CSR surcharge.

“We’ll be working diligently with health plans, insurance agents, community partners and others as we approach open enrollment to make sure consumers know how to shop smart this fall for 2018 coverage,” said Lee.

Moving forward, Covered California will continue to look for ways to stabilize the market to reassure health insurance companies, provide robust competition and choice and protect consumers.

A Stable Market, Consumer Choice and the Reduction of Anthem’s Coverage Footprint

Covered California has built a competitive market that continues to attract a good risk mix — the second best in the nation — by using robust marketing to attract consumers to the plans and benefits that address their needs. The stability of the individual market was confirmed by recent reports from the Centers for Medicare and Medicaid Services and the Kaiser Family Foundation, which respectively reported that the health status of consumers in the individual market nationally remains steady and health insurance companies are becoming profitable.

For 2018, all of the 11 health insurance companies offering plans in 2017 are returning to the market for a second straight year. The uncertainty at the federal level, however, is affecting some companies. In particular, Anthem Blue Cross of California is withdrawing from 16 of California’s 19 pricing regions where it serves approximately 153,000 consumers, while remaining in three regions (regions 1, 7 and 10) where it covers more than 108,000 consumers (41 percent of its current enrollment).

While this change will mean about 10 percent of those enrolled in Covered California will need to pick a new plan, the individual market in California remains very competitive, with more than 82 percent of consumers being able to choose from three or more health insurance companies. There will be no “bare” counties or areas where consumers have no plan options. In addition, 88 percent of hospitals in California will be available through at least one Covered California health insurance company in 2018. The fact sheet “Covered California’s Individual Market in 2018: Competition and Choice” can be found here: http://www.coveredca.com/news/PDFs/CoveredCA_Consumer_Choice_2018.pdf.

“The enrollees who are affected by Anthem’s decision to pull out of some regions should know that their existing coverage will remain intact throughout the remainder of 2017, and they will have good options when they switch plans for 2018,” Lee said. “We will assist these consumers in shopping around for the right plan, which will be helped by the fact that 84 percent of doctors contracted by Anthem are also available through another health plan.”

During the renewal process, all consumers will have an opportunity to shop for a new plan by working with a Certified Insurance Agent, the Covered California Service Center or another certified enroller. Those Anthem consumers who need to move to a new plan and choose not to actively shop will be renewed automatically into the lowest-cost plan in their same metal tier. They can change that plan during open enrollment if they choose.

Covered California will take robust steps in the months ahead to assist the affected Anthem consumers as they transition to another plan, including: regular communication with agents so they can communicate options to their consumers, a new provider directory that will allow consumers to see which doctors are available in which plans, regular marketing emails explaining to consumers their options, and updates to CoveredCA.com with the latest information.

Providing Consumers With the Right Care at the Right Time

In announcing the new rates, Covered California also reiterated its continued commitment to making sure consumers are getting the care they need and addressing the underlying problem of high health care costs. “We are about more than just getting people an insurance card,” said Lee. “In 2018 we will build on the work of the past four years to make sure people with insurance through Covered California are getting the right care and the right time.”

For example, 2017 marked the first year of a policy requiring all health plans to assign those who sign up with them to a primary care clinician within 60 days of enrolling. This new initiative aims to help consumers get the right care when they need it by connecting them to providers who can serve as the point of entry into an often complex and daunting health care system. The result was that 99 percent of consumers were matched to a primary care physician or clinician.

In addition, Covered California is making additional improvements to its patient-centered benefit design. In 2018, consumers in Silver 94, Gold and Platinum plans will have lower out-of-pocket maximums. Platinum consumers will have a lower copay to see a specialist. Gold consumers will see lower copays for primary care and urgent care visits, and consumers in Silver and Silver 73 plans will see a lower pharmacy deductible.

These improvements build on features already in place that ensure 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. In addition, some Enhanced Silver plans have little or no deductible and very low copays, such as $5 for an office visit. 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.

“Covered California is a model that is working,” Lee said. “I applaud the many health insurance companies, doctors, hospitals and other providers who are in it for the long haul of making sure Californians can count on them for affordable, quality health coverage and care.”

Covered California’s 2018 Rate Booklet can be found here: http://www.coveredca.com/news/PDFs/CoveredCA_2018_Plans_and_Rates_8-1-2017.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.

Statement From Peter V. Lee on Senate’s “Skinny Repeal” Vote

“Elimination of the individual mandate without having a viable replacement would have immediate impacts on the individual market in California. The recently released Congressional Budget Office analysis of the so-called “skinny repeal” under consideration in the U.S. Senate this morning validates independent research that Covered California sponsored on this same issue in 2016.

“The implications for 2018 are stark. The individual insurance market would be far less stable, with about 700,000 fewer Californians with individual coverage. Many of those people would drop coverage not because there is no penalty but because the increase in premiums could be as much as 20 percent more due to a less healthy risk mix. In addition to coverage losses in the individual market, 300,000 Californians would likely not enroll in Medicaid due to the elimination of the individual mandate.

“Removing the mandate would take California backward in terms of the coverage gains achieved over the last four years, leading to renewed increases in uncompensated care that would affect all Californians.

“This analysis is consistent with prior estimates of the elimination of the mandate developed for Covered California by PricewaterhouseCoopers.”

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.