Policy-Speak Translated to Consumer Impact: An evaluation of the Senate Bill

Since the Patient Protection and Affordable Care Act launched six years ago, California has shown how a competitive market can work for consumers and health plans, as well as the state and federal governments. Millions have gained coverage through the expansion of Medi-Cal and the subsidies provided through Covered California. California’s uninsured rate is now 7.1 percent, less than half of what it was in 2013, with an uninsured rate of those eligible for financial help of about 3.5 percent. In many ways, California is on the edge of providing universal coverage.

In addition, millions of consumers who receive no subsidies have also benefited from historically low rates of increases in health insurance premiums that have averaged 7 percent over the past three years. Consumers have benefited from protections against the denial of coverage and staggering health care costs because vitally needed care can no longer be defined as a “non-covered benefit.” Many of these achievements have come in California because the state has put consumers first in terms of policy making, benefit design and creating competitive markets.

However, the gains enjoyed by California and the rest of the nation could be significantly impacted the bill currently being debated in the Senate. Some impacts are clear, such as the proposed cuts in financial support to states to support the Medicaid program. These cuts would leave millions uninsured, increase uncompensated care to providers and place a heavy strain on state budgets. Other policy changes are more complicated: changes to actuarial value (AV),  repealing funding for cost-sharing reduction (CSR) subsidies, the reduction or elimination of essential health benefits, the elimination of the medical loss ratio (MLR), and swapping the individual mandate penalty for a six-month waiting period. These issues are complex, but each of them raises critical potential impacts for consumers.

What follows is an attempt to provide a quick road map to how these “wonky” elements have very real implications for consumers. The Senate Bill would:

• Reduce the “benchmark plan” to a 58 percent actuarial value, leading to reductions in covered benefits: The benchmark plan provides one of the key factors on which subsidy levels are calculated. Currently, the Affordable Care Act bases subsidies on the Silver tier, 70 percent AV plan. At the Silver tier, deductibles in California are $2,500 for an individual and $5,000 for a family — and no outpatient care, tests or prescription drugs are subject to the deductible.
  
  By contrast, as detailed in a recent report issued by the National Academy of State Health Policy, “Barely Covered: Initial Analysis of Coverage and Affordability Impacts to Consumers under the Proposed Better Care Reconciliation Act,” a 58 percent AV plan would have a deductible of $7,350 for an individual and more than $14,000 for a family — with nothing likely covered before the deductible is met.  As such, the Congressional Budget Office concluded, “few low-income people would purchase any plan.”
  
  To provide context, the average employer-sponsored health plan today has an AV of about 83 percent; the blended AV of all 1.4 million people who have insurance through Covered California is about 77 percent. The reduction of coverage to cover only 58 percent of the cost of care would do more than require   more skin in the game” from consumers — it would likely put care beyond reach.
• Limit innovation for HSA accounts: One concept that deserves further inquiry is expanding the use of health savings accounts (HSAs) for those with lower income, which can put more responsibility on consumers. However, without providing the funding for those accounts — particularly for lower-income Americans — HSAs are a concept that cannot deliver the tax advantages that HSAs can provide to Americans with higher incomes. Providing low-income individuals with funding for their HSAs through subsidy dollars (as has been done with Indiana’s Medicaid program) is a theory that the subsidy levels in the current Senate Bill put out of reach. Covered California has begun evaluating the concept of providing pre-funded HSAs. It would offer annual funding of an HSA account of $600 (either in a lump sum or at $50 per month) with a $2,500 deductible plan that would have an AV of 81 percent. However, the level of subsidies proposed in the Senate Bill would not provide states with the resources to support real patient-centered innovation for HSAs. 
• Repeal funding for cost-sharing reduction subsidies would result in higher costs when people get care: The Senate Bill would fund CSRs for 2018 and 2019, but then repeal the CSR program which brings direct care within reach of millions of Americans. The CSR subsidy program is based on the recognition that income matters — charging the same $40 office visit fee to someone who earns $20,000 a year and someone who earns $200,000 will lead to different impacts. The lower-income individual will often skip needed care because they can’t afford the cost-sharing. In California, because of the CSR subsidy, the office visit charge for the lower-income individual is only $5. They still have “skin in the game,” but not so much that they will forgo care. As discussed later, the “stability funding” does not provide a way to make up for the loss of CSR funding, which will mean the low income consumer will face financial barriers at the point of care.
• Remove the individual mandate penalty with no viable replacement: Many policy discussions revolve around removing the penalty for not maintaining coverage that is part of the Affordable Care Act. However, it is important to bear in mind the intent of the penalty and what would happen if it were removed. First, the reason the vast majority of consumers do or do not get health insurance is based on affordability. Covered California has surveyed thousands of consumers and held innumerable focus groups across the state and the results are clear: Consumers want health insurance, and will buy and keep it if they can afford it and if that insurance provides them with peace of mind. Affordability, however, is about both the monthly premium and what is covered by the policy. The penalty is about fairness. When someone goes without insurance, the rest of us end up paying the bill through increased costs from hospitals and other providers who are forced to spread the expense of uncompensated care. In addition, the biggest beneficiaries of the improvement of the risk pool that results from covering a greater number of healthier individuals — the group the penalty encourages to enroll — are those who get no subsidy but gain from lower premiums. The Senate Bill recognizes that removing the penalty will have an impact, and in its place calls for a six-month “waiting period.” However, it is unclear that the proposed waiting period will sufficiently encourage enough enrollment to have an impact on reducing premiums for those without subsidies.
• Provide insufficient “stability funding” over the long term: The Senate Bill calls for $15 billion in both 2018 and 2019 (decreasing to $10 billion for 2020 and 2021) to “address coverage and access disruption.” Generally, if spread nationally in the form of reinsurance, each billion dollars would result in a one percent drop in premiums — meaning that these funds could result in up to 15 percent premium decreases in 2018 and 2019. This would likely be close to offsetting the premium impact of the non-enforcement of the penalty. But what happens after 2021, when the “short-term” funding goes away? “Long-term” funding is available starting in 2019, and is $14 billion in both 2020 and 2021, then decreasing to $6 billion in 2022 (with state matching requirements kicking in). Taken together, these funds would provide up to $23 to $24 billion annually for 2018 through 2021, and then drop to $6 billion. The impact of healthy individuals’ dropping their coverage does not stop in 2022. Additionally, the CBO estimates that “few low-income people would purchase any plan.”  There are discussions in the Senate regarding “targeted” support in the tens of billions to fund efforts to address the opioid epidemic may address a real public health issue. However, this targeted funding will not likely bolster stability in the insurance market or make coverage more affordable for Americans who need it.
• Allow for elimination of essential health benefits for millions of Americans: The Senate Bill would allow states to modify the essential health benefits standards using waivers, and would even provide billions of dollars in incentives for states to do just that. But waiving essential health benefits for consumers could mean a return to the pre-Affordable Care Act coverage world in which whole categories of care were not covered and no annual or lifetime limits applied. The Congressional Budget Office projects that this could impact half of Americans. Additionally, millions of Americans who have lose or leave job coverage and come to the individual market will be faced with a very uncertain coverage world outside of their employer.
• Allow states to remove medical loss ratio (MLR) standards: The Senate Bill also contains a provision that would allow states to eliminate the MLR standards established by the Affordable Care Act. For five years, we have spent countless hours negotiating rates with a dozen health plans. We know, based on our experience, that health plans can “make it work” very well with at least 80 percent of the premium dollar they collect spent on actual health care.

Many of the elements of the Senate Bill would result in significant changes to scope and affordability of coverage currently available to millions of Americans. We know from our own analysis, coverage and benefit designs will be impacted; and, premiums will likely rise particularly for low-income and older Americans and those who live in high-cost regions. Those who can afford to remain covered will likely pay more for less comprehensive coverage.

The details in the potential revisions to Senate Bill will need to be thoroughly examined - not only in how the changes differ from the original bill but also in how they compare to the protections and benefits that consumers have under current law. As the proposal evolves, we will continue to assess the potential impacts with the goal of helping to inform the ongoing dialogue on health reform.

California's Real World Experience Informing the National Debate

In the midst of the national discussion of what is next for the Affordable Care Act, Covered California just wrapped its fourth open enrollment period. Once again we’ve shown that when you thoughtfully foster market forces — powered by consumers with the financial help they need — you can build a healthy market.

We finished open enrollment with 412,000 new consumers selecting a plan, including nearly 50,000 who signed up over the last two days. In addition, the number of young adults in the 18-to-34-year old demographic continues to remain a strong source of plan selections, giving Covered California a good mix of younger and older consumers, which helps keep rates down for everyone and keeps the entire individual market stable. We also reported, that using federal methodology, counting both new and renewing enrollees, Covered California closes Open Enrollment with over 1.5 million consumers. You can read the entire release here.

During my time traveling across the state, I have had the honor of meeting many of our consumers and hearing their stories. Whether it was about a diagnosis that led to early treatment, or receiving access to medication that allowed them to get back on their feet, I heard how Covered California is working and improving lives. You can see some of their stories here. I encourage you to watch these stories, share them, and let us know if you or someone you know may have a story of their own to tell.

While we continue to work on the day-to-day operations at Covered California, we are also engaged in the national discussion surrounding health care. With a new President and Congress in place, there are plenty of politics in play. The politics, however, are not our concern. What IS our concern is that we believe Covered California has a responsibility to communicate our lessons learned and how a successful model, using market-based solutions, can provide affordable coverage and access to high-quality care.

In California, we have built a competitive market where the consumer is in the driver’s seat, where patient-centered plan designs increase a consumer’s ability to access care and we have committed to an extensive marketing campaign, which has helped us enroll the healthiest mix of consumers in the nation. We believe that policymakers around the nation can benefit from our real world, on-the-ground experiences in making a health care market work for consumers.

We are actively tracking what is happening in Washington D.C. and looking for opportunities to engage constructively in the national discussion in the weeks, months and years ahead. With that goal in mind, to inform the national discussion, Covered California is regularly issuing reports that can support that discussion being better anchored in facts. Three of those that were recently released are:

• An Integrated Quantitative and Qualitative Study on Post-Election Attitudes Toward Enrolling in and Renewing Health insurance Coverage Covered California commissioned a post-election survey and focus groups, conducted by Greenberg Strategy, of consumers eligible for coverage — new and renewing. The studies found that while consumers eligible to enroll have some concern about future of the Affordable Care Act, their big concern is finding coverage that is affordable. Covered California used this information as we went into our big marketing push in January — and the lessons were borne out by our big new enrollment and renewal numbers.
• Consumer and Market Implications of Affordable Care Act Repeal Without a Viable Replacement Covered California issued a report that examined the potential consumer and market impacts should a “repeal” of the Affordable Care Act occur without viable changes to transition consumers, health plans and providers to new arrangements. The report makes clear that absent a clear path forward, the individual market — for both those who do and do not receive subsidies — would be in jeopardy, with millions facing immediate loss of coverage.
• Evaluating the Potential Consequences of Terminating Direct Federal Cost-Sharing Reduction (CSR) Funding Covered California commissioned a study by researchers at the University of California, Los Angeles to assess what would happen if federal officials eliminated direct federal funding to reduce cost sharing that currently benefits more than 50 percent of consumers in Covered California. This study was done to help Covered California plan for potential policy changes in 2018 and found such a policy change would lead to sharp increases in premiums for products at the “Silver tier” (the most popular level selected), while also resulting in approximately 30 percent higher costs for the federal government which would pay these costs under the Advanced Premium Tax Credit.

Covered California is pursuing these educational efforts because we believe we must be constructively engaged in the process of exploring ways to improve and repair the Affordable Care Act, so it works as well as it can for Californians and all Americans. As

we look at the policies being proposed at the federal level we will examine how the policies impact consumers and how they impact coverage, affordability, access to care and consumers’ health status and the economic impact on federal and state budgets, employers and providers.

As major changes in federal policy occur, we will keep our consumers informed. We look forward to both being part of shaping the future of health care and to being nimble, flexible and transparent as we continue our efforts to build a health care system that puts consumers at its center.

Covered California in Changing Times

Elections matter and result in real change. While we cannot predict the future, we believe that Covered California can and should play an active role in both continuing to serve Californians and helping shape the future of health care for their benefit.

Five years ago, the Covered California Board of Directors set our course by establishing a mission that was anchored in expanding coverage for Californians by creating a consumer-centered marketplace. At the same time, the board said that we needed to be part of changing the way health care is delivered and accessed in our state — promoting the “triple aim” of better care, lower costs and improved health.

Today, with a new president and Congress about to take office, the prospect of change is on the horizon. Many questions are emerging about what the future holds for health care coverage and how it is delivered.    

Since day one, Covered California has been a learning organization, and over the past several months we have been looking ahead and planning for the certainty that we would be facing a new administration, whether it be Republican or Democratic.  

We began with an extensive study that Covered California released last summer that examined numerous scenarios that might be part of either a new Republican or Democratic administration and their potential impacts.

In November, two weeks after the election, Covered California brought together health experts with a range of perspectives to help our board consider the possible paths forward related to the future of health care in both the United States and California. 

Two panels explored in depth the state of health care reform implementation, the potential changes in the health care marketplaces and top issues that we as a nation need to consider — such as promoting health equity, ensuring consumers are given tools to be active partners in choosing and getting the care they need, and recognizing the complex interactions between the many parts of the health care system. (The presentations are linked with the name of each speaker, and a summary of the day’s proceedings with references recommended can be found here.)

The first panel included John Bertko, one of the nation’s most prominent actuaries, who spoke about insurance trends in health care for 2017 and beyond, specifically focusing on policies that drive affordability. Larry Levitt, senior vice president for special initiatives from the Kaiser Family Foundation, walked through what has changed since the passage and implementation of the Patient Protection and Affordable Care Act in terms of the number of uninsured and potential changes to the law that may be debated by Congress. Sandra Hernandez, M.D., president and chief executive officer for the California Health Care Foundation, focused on the relation of health care to the broader Californian and national economies. The panel ended with a presentation from Ian Morrison, Ph.D., a noted health care futurist, who detailed the challenges ahead as the nation continues its path of evolving how our health care system should look in the future, especially considering the current political divide.

The second panel considered how to improve wellness, population health and consumer engagement. The panel included Karen Smith, M.D., M.P.H., director and state public health officer for the California Department of Public Health, who focused her presentation on the “triple aim.” Finally, Doris Peter, Ph.D., director of the Health Ratings Center at Consumer Reports, spoke about how to engage consumers in the process of affecting change and helping them “shop with their feet.”

Covered California will use this input as well as our own experiences as we seek to adapt to the changing environment. At the same time, we look forward to continuing our effort to share what we have learned, what has been proven to work, and what has not worked to help inform the discussions over the future of health care. 

Some of the lessons we have learned can and should provide important reference points for the discussions that will be forthcoming. These lessons include how Covered California:

·      Built a competitive marketplace that puts consumers in the driver’s seat, giving them a power that they did not previously have when it comes to the plans they pick and the providers they can access.

·      Developed patient-centered benefit designs that offer a good value for consumers and keep care affordable by including a wide variety of services not subject to the deductible.

·      Fostered a good risk mix by engaging and promoting access to primary care in robust and extensive marketing and community outreach with partners that include insurance agents and members of communities across the state that number in the tens of thousands.

·      Effectively managed the federal tax credits that have brought health coverage within reach of millions of Californians.

·      Established an infrastructure to examine patient data to evaluate the relationship between consumers’ income, benefit designs, health status and other factors on the quality of care and costs of services.  This Healthcare Evidence Initiative is just now collecting data to begin deep analysis. 

There has been a dramatic reduction in those without health insurance because of Covered California and the expansion of Medi-Cal (California’s Medicaid program). The latest data from the Centers for Disease Control and Prevention shows California’s uninsured rate has been slashed by nearly 10 points, from 17 percent in 2013 to 7.4 percent in the first half of 2016. 

We have also kept premium rate changes in the individual market moderate compared to the rest of the country and historical trends in California. We have built the healthiest risk pool in the nation, which means lower costs in federal tax credits and benefits for Californians who do not receive financial assistance. At the same time, Covered California has sought to partner with private employers and work with the health insurance companies we contract with to change the delivery system to promote quality care that is delivered cost effectively.

These are lessons and experiences that can extend well beyond our borders. They are relevant not just for federal and state policy, but for the employer-based and private health insurance markets as well.

Over the past four years, Covered California has become woven into the fabric of how health care is provided in the state, with nearly 3 million consumers benefiting from coverage for some portion of the past three years. Many of those consumers now have employer-based coverage. Many have lived for the first time without the fear that they would be turned away by a health plan because of having a pre-existing health condition. Many of those individuals — like those who now benefit from getting coverage through Medi-Cal — are the reason we have seen hospitals’ uncompensated care rates plummet.

Our work is not done and our mission is as vital today as it was when our board set our course five years ago. In the coming months our task will be twofold: We will focus on the here and now by making sure Californians get the best possible coverage and care they can through our programs; and, we will share our experiences with the new administration, Congress and policy leaders in California and nationally as we work to build upon what we have accomplished so far to foster a health care system that works for all Americans.

Our Work is Not Yet Done

Covered California helped celebrate the life and legacy of one of my personal heroes, the Rev. Martin Luther King Jr., this week. Many of you know that, because of King’s fight for justice and equality, I have always thought of his birthday as the best point each year to pause and celebrate the Affordable Care Act. That celebration is about what we are doing at Covered California and across the nation to expand access to health care, and about how that work is making us a better, more just nation.

During this week, King’s legacy reminded me of two important things: We do not walk alone on this incredible history-making journey, and we have more work to do.

Peter’s Blog: The Arc Bends Toward Justice

Every day, I think about the historic nature of change that Covered California is a part of, how it does not take place overnight and how it is the product of the work of thousands of people in California and across the nation.

Peter’s Blog: The Journey Continues

The trip may be over, but the journey continues.

After nearly two weeks on the road, Covered California wrapped up its 2,000-mile-long “Spotlight on Coverage” bus tour in Sacramento last Thursday. We traveled the entire state, from San Diego to Eureka, and spread the word about open enrollment and how those insured are not only saving money, but also getting access to needed health care. We literally handed out spotlights to storefronts and clinics. We also put spotlights on many iconic California buildings — from LAX to city halls in Los Angeles, Sacramento and San Francisco and to the Tower Bridge in Sacramento — to raise awareness about open enrollment.

Peter's Blog: The Bus Tour Comes to a Close

The Spotlight on Coverage Bus Tour officially ended on Thursday after logging more than 2,000 miles crisscrossing the state. Along the way, we had the chance to commend our partners for their great work, as well as hear inspiring stories about how getting covered has impacted people’s lives.

One woman, who did not want her name to be shared, came to one of our events on the tour just to say thanks. She could not afford coverage until she signed up for a Covered California plan with premium assistance. A doctor’s visit for her free preventive services led to a diagnosis of uterine cancer. She was transferred from Redding to a top-notch oncologist in Sacramento. Today, she is cancer free and grateful for the excellent care she received.