Time of Uncertainty

Covered California Executive Director Peter Lee on the nuts and bolts of health insurance in our state

Back Q&A Nov 9, 2017 By Rich Ehisen

No essential industry in the U.S. is in as much turmoil or facing as much uncertainty as health care, especially as it relates to health insurance and the Affordable Care Act. We sat down recently with Covered California Executive Director Pete Lee to discuss how the uncertainty surrounding health care impacts California.

The Trump administration recently announced it would no longer pay the federal subsidies that help low-income enrollees pay their premiums. What happens now?  

There is no change for consumers for 2017 — their benefits and premiums remain the same. Health plan premiums for 2017 were based on the federal government paying for the subsidies that lower costs for about 650,000 Californians, as they’ve been paying for the last three and a half years. The federal government stopping these payments the last three months of 2017 means health plans will have a big financial loss — over $180 million. The bigger issue is what happens in 2018. In California, we’ve actually got a workaround that would build in a surcharge on the silver plans we offer to people who get subsidies. It’s not a great solution, but the good thing is we planned for this months ago, so all the health plans could decide to continue serving Californians and the cost of the subsidy for consumers will be picked up by the federal tax credit. Right now, the individual market in California and much of the nation is quite stable. With these policies, I sadly think we can now foresee large rate increases in 2019 and many areas outside of California struggling to keep health plans.

A recent presidential executive order would, among several things, remove many current restrictions on association health plans used by some small business groups. What impact will these policy changes have on California?

It’s really not at all clear at this time what impact, if any, the executive order would have on California. California has a long history of seeking to protect health insurance consumers. But to the extent the subsequently developed policies takes America back to a time when plans could sell thin insurance that doesn’t protect consumers, and that encourage health plans to provide different coverage for those who are healthy and those who are sick, we would be very concerned that it is taking us in the wrong direction. The main thing for today is, whatever the effect may be in the future, consumers can be confident their options and benefits for 2018 are rock solid. Change is going to take time and California as a state would work to make sure consumers are protected over the long-term. We’re going to be studying the provisions of the next steps that come from the order, which is regulations, to see what they mean. But our top priority right now is really focusing on open enrollment which starts Nov. 1 and runs through Jan. 31.

A single-payer health plan made it through the California Senate this year before dying in the Assembly. That plan had more holes than a block of Swiss cheese. Is there any realistic plan for single payer you could see working here?

We haven’t taken a position on single payer. Our job is to implement the law on the books. … Single payer is a great discussion about a payment mechanism. But let’s be clear as to what we’ve achieved in California: Four years ago, 17.5 percent of our state was uninsured. As of just over a year ago, we had 7 percent, and half of that is undocumented or not eligible for federal programs, which means we have an eligible uninsured rate of 3.5 percent as of a year ago. That’s approaching universal coverage … Now, universal doesn’t mean we don’t still need a viable safety net.

Nevada recently considered and rejected a plan that would have allowed any resident to buy into the state’s Medicaid program. Is this something that could work in California?

We have over 13 million Californians that are in our Medi-Cal program, 1.4 million Californians in Covered California and several million more with employer-based coverage. Our issue today is: Do you need Medicaid for all or do you need to make sure people seamlessly have coverage [for] their changing life circumstance? We have people that have a drop in their income and become eligible for Medi-Cal. Well, I want to make sure they don’t have a gap in coverage. Similarly, we have people that today have Medi-Cal, and hallelujah they get a raise. They still don’t have employer-based coverage but they’re no longer eligible for Medi-Cal, but they’re now eligible for Covered California. Let’s make sure they continue coverage.

Marketing to the public is crucial. The feds have already reduced outreach funding once and may well do it again. How is California set up to handle this if it happens again?

One thing California did right from day one was to set up Covered California to be independent and totally self-funded. We actually assess a small percentage of the premiums we collect to run our operations, including our marketing spending. Next year, we’ll be spending over $110 million on marketing. We don’t get any federal or state funding. The federal government supports 35 states, but not California. So it affects us only in that the advertising the feds do ripples into California, but what we do dwarfs that impact. We’re spending in California close to what the federal government is spending to support enrollment in the rest of those 35 states combined.

There is no shortage of possibilities for improving the ACA. One would be allowing states to take steps to reduce prescription drug prices. What could California do in this area?

The starting point for us isn’t prescription drugs. The starting point is that people get the proper care at the right time. We actually have a contract with our 11 health plans with requirements on how they encourage people to get in to see a primary care doctor that’s going to coordinate their care. We also have requirements in our contract for [health plans] to tell us what they are doing in their negotiations with the big pharmaceutical companies to be sure they are in the best interest of consumers.

One of the biggest problems we face now is the flight of insurers from the exchanges. What can be done about this?

We’ve had remarkable stability in California. We had 11 health plans when we opened our doors in 2014 and we have 11 today — and the reason is they’re making money in California. If you have an environment that provides certainty to health plans, they’re going to play. And certainty is knowing we’re spending $110 million on marketing. They know we have [an expanded] Medicaid program so they aren’t faced with the uncertainty of what happens to lower-income people like what they’re facing in Texas and Florida. Many states also had [health plans] that were brand new. Health care is a really complicated business and setting up a new plan to enter the market is really tough. Many of them failed. … The 11 plans in Covered California understand the individual market and that we’ve created a competitive environment for them.

One significant complaint many employers have had with the ACA is the mandate to provide insurance for their workers. Is there a realistic way to ease this mandate without compromising coverage for those who need it?

Large employers are all in for providing health insurance for their employees. A mandate makes no difference. For smaller employers with between 50-100 people, it may make a difference on the margins. To remove the employer mandate for smaller businesses would likely mean that more individuals would be in the individual market and maybe be eligible for subsidies. The effects aren’t all that clear to me. It’s very clear though that the individual penalty makes a difference. But there may be options, such as auto enrollment, such as continuous coverage requirements that could serve many of the purposes of the individual mandate. Those are good discussions that I’d hope a functional Congress would be talking about in a bipartisan way.

What possibilities would you suggest the U.S. Senate look at to bolster the ACA?

If there are things that don’t work in the Affordable Care Act, throw those out. But keep the elements that work, which .. is about keeping people well, delivering effective care and creating a marketplace for consumers.​

One thing would be permanent funding of the current health care and reduction subsidies. Having something that health plans can count on over the long term will provide stability. No. 2, a national reinsurance program [to help health insurers pay for the most expensive care they cover]. The third thing is marketing dollars. Now this isn’t an issue for California … but promoting and selling insurance is a core essential element of making markets work and the federal government should be leaning in, in a big way.

We also need to remind ourselves that just six years ago, if you had allergies you could be denied ever getting health insurance on the individual market. If you had diabetes, kiss health insurance in the future goodbye unless you got a job to get it. If you had cancer, you wanted to keep your job forever because if you lost your job you lost insurance. If you were an insurance company six years ago in the individual market, you won as a business by avoiding sick people. Now insurance companies win by having good prices, providing quality care and keeping people in regardless of health status. If there are things that don’t work in the Affordable Care Act, throw those out. But keep the elements that work, which … is about keeping people well, delivering effective care and creating a marketplace for consumers.

What are your biggest concerns involving health insurance? Tweet us @COMSTOCKSMAG.

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