›› Health Policy Essentials Covered California and Individual Health Insurance MARCH 2019 FAST FACTS Exploring the basics of health policy in California Signed into law in March 2010, the federal California became the first state to create a Patient Protection and Affordable Care Act state-based ACA exchange,1 and Covered (ACA) imposes sweeping changes in the rules California is now the largest state-based governing private health insurance and expands exchange in the nation. eligibility for Medicaid (Medi-Cal) among Since 2014, enrollment in Covered California 2.2 Million other provisions. For individuals who do not (and the expansion of Medi-Cal) reduced the have employer coverage, and are not eligible rate of uninsured Californians under age 65 to Californians purchase private for public coverage programs, the individual 8.5 percent in 2017.2 market is often the last available option to individual coverage secure health coverage. This issue of ESSENTIALS reviews the basics of California’s state-based exchange and the market for individual coverage. Overview 1.3 Million The ACA establishes a federal floor that ensures individuals in every state have basic protections Figure 1. PROFILE OF in common with respect to the availability, CALIFORNIA’S INDIVIDUAL Californians on average are affordability, comparability and transparency of enrolled in Covered California health coverage. A central theme of the ACA MARKET, 2017 is to organize markets and products in ways that both protect consumers and make it easier for them to compare and choose among their 1,096,490 coverage options. A cornerstone of the ACA is the establishment 970,871 of state-level health insurance exchanges that 90% serve as marketplaces to support individuals and Unsubsidized small employers in comparing coverage options. Exchanges also administer federal financial Subsidized of Covered California assistance that helps low-income individuals consumers receive federal and families purchase coverage. subsidies Individual coverage is for most people a last resort. Absent financial assistance, they must pay the full premium and cost sharing for 152,660 their coverage, unlike job-based coverage Off Exchange Covered where employers contribute to the payment California of premiums. For this reason, affordability and strategies to encourage individuals to sign-up Source: Katherine Wilson, “State Releases Data on California 2017 Health Insurance Enrollment” California Health Care 3 are especially critical in the individual market. Foundation, August 2018, companion Excel file. 2 in 5 Covered California enrollees report difficulty paying monthly premiums3 1 HEALTH POLICY ESSENTIALS | COVERED CALIFORNIA Pre-ACA Individual Market most sweeping changes affecting coverage in the individual and small group markets. DEFINITIONS Prior to the ACA, individual coverage was expensive, often with very limited benefits The ACA changed the individual market ACA Premium Tax Credit is a federal, and high out-of-pocket costs. Health plans by removing barriers to coverage, setting refundable tax credit that reduces selling individual policies routinely denied minimum standards for coverage and funding exchange monthly premiums for eligible coverage or hiked premiums based on an federal premium and CSR subsidies. New ACA individuals and families at or below 400 applicant’s health status or medical history market rules include: percent of the Federal Poverty Level (FPL) or imposed coverage exclusions for pre- Insurers can no longer deny coverage ($48,560 in annual household income existing health conditions. based on health status, medical history, or for one person) who are not eligible for Health plans in California and most other pre-existing conditions and must offer and Medi-Cal. states had total discretion to collect and renew coverage to all eligible applicants (known as guaranteed issue and renewal), Actuarial Value (AV) is the average use medical and health information to percent of benefit costs covered by a evaluate individual applicants (known as No coverage or benefit limits can be health plan product compared to the medical underwriting); no two health plans imposed because of pre-existing health out-of-pocket costs paid by the covered had identical criteria for making coverage conditions, and rating decisions. Common conditions person. A 70% AV plan covers 70% of No annual or lifetime dollar limits on triggering a denial of coverage included benefit costs and the enrollee pays 30%. benefits, The ACA assigns metal labels to specific AVs: cancer, diabetes and mental health disorders, but also less obvious conditions such as Children can stay on a parent’s health bronze (60%), silver (70%), gold (80%) and asthma, acne, and obesity. insurance plan as dependents until age 26, platinum (90%). Coverage in the individual market often Premiums must be based solely on age Cost Sharing Reductions (CSRs) are included annual and lifetime dollar limits on and geography (using state developed federal payments to qualified health benefits, fixed limits on coverage (e.g., regions), plans that reduce out-of-pocket costs maximum 60 days of hospital coverage) and Premiums cannot vary by more than a for individuals between 138 and 250 no upper limit on consumer out-of-pocket three-to-one ratio from the youngest percent FPL (between $16,753 and costs. Some policies excluded coverage for enrollee to the oldest, $30,350 in annual household income basic primary and preventive care and for one person) purchasing a silver Health plans must cover all ten essential focused primarily on high-cost services like level plan in the exchange. In 2017, the health benefits, including mental health hospitalization. federal government eliminated the CSR and substance use treatment, payments to health plans. Regardless of ACA Individual Market Health plans must meet federally defined the federal contribution, plans are still minimum values and disclose the actuarial required to reduce cost sharing for low- Before ACA, states assumed the primary role value of products, and income enrollees under the ACA. See the in setting market rules and regulating most Consumer cost sharing is limited to a California Story for how the state aspects of private health insurance. Under the ACA, states continue to have the lead in maximum out-of-pocket amount set responded to the federal action. 4 oversight but now also enforce ACA federal annually by federal formula. Essential Health Benefits (EHBs) are ten standards affecting virtually all aspects of categories of health services that must be health insurance—including eligibility for covered in individual and small employer coverage, benefits, premium rates, market health plans under the ACA. conduct, quality, and transparency—with the Out-of-Pocket Costs are the amounts an Figure 2. COMPARISON OF CONSUMER SHARE OF PREMIUMS, enrollee pays for covered services at the Average Annual Premium Contributions for Single Coverage point of care, also known as cost-sharing. EMPLOYER-SPONSOREDCovered California AND vs. Job-Based INDIVIDUAL Coverage, COVERAGE 2017 Out-of-pocket costs typically come in the form of coinsurance, copayments, and US Job-Based $1,213 $5,477 deductibles. Qualified Health Plan (QHP) is a health CA Job-Based $996 $6,255 plan that meets state and federal ACA Covered California $1,530 $4,049 marketplace requirements and is certified (Subsidized) by Covered California to offer health Covered California $4,771 coverage through the exchange. (Unsubsidized) $0 $2,000 $4,000 $6,000 $8,000 Employee or Individual Consumer Employer Share or Federal Subsidy Source: California Health Care Foundation, California Employer Health Benets: Workers Shoulder More Costs, June 26, 2018. Covered California, June 2017 Membership Prole. Chart prepared by Insure the Uninsured Project. 2 HEALTH POLICY ESSENTIALS | COVERED CALIFORNIA Federal Framework Health Insurance Oversight in California Guaranteed Issue and Grandfathered Plans. Under the ACA, For more than 50 years, two state agencies individual and small group health plans that Coverage Requirement have shared responsibility for regulating existed on March 23, 2010 – the day the health insurance in California. The ACA requires health plans (referred to as ACA was enacted – known as grandfathered “issuers” in federal law) that offer individual plans, are subject to only certain provisions Currently, the Department of Managed coverage to guarantee issue (accept for of the law. For example, grandfathered Health Care (DMHC) regulates Health coverage) all eligible applicants regardless health plans are limited to those enrolled Maintenance Organizations (HMOs) and of health status or claims history, gender, prior to the ACA but can charge more based some Preferred Provider Organization age or other specified factors, subject to on pre-existing conditions. Grandfathered (PPOs) under the Knox-Keene Health Care annual open enrollment periods and special plans are not required to meet all of the Service Plan Act of 1975 (Knox-Keene). enrollment periods.6 ACA’s essential benefits requirements. The California Department of Insurance Open enrollment periods are set time Grandfathered health plans can lose this (CDI), led by the elected Insurance periods when individuals can apply for status if certain significant changes are made Commissioner, regulates some PPOs and and secure coverage, typically on an to the coverage that reduce benefits or traditional indemnity coverage (fee-for- annual basis. The current federal open increase consumer