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/pdfs/newsroom/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.