SACRAMENTO, Calif. — Covered California unveiled its proposed budget for fiscal year 2015-2016 and highlighted the prudent fiscal planning that has gone into establishing the largest state health exchange in the nation.
“In the last two years, we established a solid foundation, and we are confident as we transition now from startup mode to ongoing operations,” said Covered California Executive Director Peter V. Lee. “Covered California is changing lives and giving consumers affordable access to the best doctors and hospitals in our state. As we move ahead, we are glad to have the resources we need, and we will continue to work to bring affordable health coverage within the reach of all Californians.”
The proposed budget, which will be reviewed and revised before being finalized by the Covered California Board of Directors in June, calls for Covered California to start the new fiscal year with nearly $200 million in unrestricted reserves and the ability to use $100 million in federal establishment funds to complete its initial launch. In fiscal year 2015-2016, Covered California will transition to relying solely on the fees it collects from health insurance companies and the extensive reserves it has saved while using federal funds.
Because many of the startup expenses required during Covered California’s opening days — such as the information technology build and some of the outreach, education and marketing expenses — are no longer needed, the proposed budget for fiscal year 2015-2016 is approximately $58 million less than the current fiscal year’s projected expenditures. This 15 percent reduction is part of Covered California’s managed launch and is consistent with the exchange’s vision that it would always need to spend more in the early years to lay the foundation for this historic effort.
Other highlights in the proposed budget include the following:
Fiscal year 2015-2016 marks the year Covered California transitions from using federal establishment funds to ongoing self-sufficiency.
- Thanks to an extension from the federal government, Covered California anticipates having approximately $100 million in federal funding to spend in fiscal year 2015-2016. Spending will be in accordance with federal rules that allow marketplaces to use grant funds for establishment costs for design, development and implementation, but not to support ongoing operations.
Prudent fiscal planning results in a positive balance sheet.
- While Covered California continues to use federal grant establishment funding, the exchange is streamlining its operations and banking the fees collected from contracted health plans to ensure the exchange’s ongoing financial health. Currently, Covered California is on solid financial footing, and this budget calls for ending fiscal year 2015-2016 with nearly $194 million in unrestricted reserves — more than six months’ worth of operating funds.
- Covered California has a positive operating balance, and it projects having more than $150 million in reserves as of the beginning of fiscal year 2017-2018.
- Moving forward, Covered California will maintain its positive balance sheet by relying less on contracted services and instead relying more on the talents of state personnel to accomplish its goals and serve its customers.
- Covered California remains committed to providing great value to the consumers it serves and being part of a broader effort to reduce health care costs for all Californians. The health insurance premiums that will be collected during the 2015 coverage year are an estimated $6.5 billion. The proposed budget is a small percentage of that amount and represents a good value for consumers, given that Covered California provides the marketing and support to generate enrollment, manage a constantly changing pool of enrollees, coordinate a network of tens of thousands of partners, and carry out various other duties that would otherwise increase health insurance costs.
Covered California recognizes that the precise mix of enrollment during open enrollment versus through special-enrollment periods will vary and is hard to predict with precision but that these overall markers — and the annual growth projected to reach those levels — are well supported by the exchange’s experience to date and the experience of other programs.
Covered California is serving a critical need in the community. This budget calls for making ongoing substantial investments in marketing and outreach, and working with agents and others, to make sure that consumers know Covered California is here for them.
The document “Proposed Fiscal Year 2015-2016 Budget” is available at http://hbex.CoveredCA.com/financial-reports.
About Covered California
Covered California is the state’s marketplace for the federal Patient Protection and Affordable Care Act. Covered California, in partnership with the California Department of Health Care Services, was charged with creating a new health insurance marketplace in which individuals and small businesses can get access to affordable health insurance plans. Covered California helps individuals determine whether they are eligible for premium assistance that is available on a sliding-scale basis to reduce insurance costs or whether they are eligible for low-cost or no-cost Medi-Cal. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Small businesses can purchase competitively priced health insurance plans and offer their employees the ability to choose from an array of plans and may qualify for federal tax credits.
Covered California is an independent part of the state government whose job is to make the new market 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.