Head of Covered California says state will suffer from ACA assaults — just not as much as everywhere else

This past year has been one of chaos and uncertainty for health insurance plans in the individual market, but California’s full embrace of the Affordable Care Act has in many ways insulated the state from larger national trends of lagging enrollments, skyrocketing premiums and slashed marketing budgets. Other states have it far worse.

That was one of themes Peter Lee, executive director of Covered California, stressed to reporters at the 2018 California Fellowship this week. Health care is still local, he said. “The issues facing California are very different than those facing Tennessee.”

For example, California has fared better than most other states on the so-called “empty-shelf” problem, in which insurers won't enter or stop selling plans in some counties. While about 30 percent of Americans have only one plan to choose from in their marketplaces, only 5 percent of Californians share that predicament (residents of Monterey County, for instance). 

Or consider ACA marketing budgets, which play a pivotal role in helping health exchanges recruit new enrollees, in turn creating a more balanced insurance risk pool and lower premium hikes. The federal government spent $10 million for 39 states that rely on the federal marketplace this past enrollment season. California, by comparison, spent more than $111 million on its own. “The federal government cut back dramatically on marketing — phenomenal cutback,” said Lee, adding that new enrollees dropped from 4 million to 2.5 million in federal marketplace states this past enrollment season. “They kept people in, but didn’t get new people in.”

The big spending deal announced by Congressional leaders this week didn’t include measures to stabilize the Obamacare markets. Lee says such a package “is really, really needed.” Without such steps to reinforce the markets, premiums will soar, according to Lee.

“Absent stabilization, over the next three years premiums could go up, on the low end, 35 percent in California,” Lee said. “But in much of the nation, premiums double — a 94 percent increase.” 

Lee identified 17 states facing such “catastrophic” premium increases, including Michigan, Pennsylvania and New Jersey.

While the threats to the stability of the exchange markets are many, ACA plans could be further imperiled by new rules put forth by the Trump administration that permit “skimpy” short-term insurance plans as well as association health plans. 

“These I think are bad, on the record,” Lee said. 

Such plans can deny policies — or charge more — for sicker enrollees, impose lifetime spending limits, and leave out benefits for categories such as mental health care. Critics see them as a return to the bad old days of health insurance. Plus, these cheaper plans could siphon off healthier people, tilting the risk pool for ACA plans to sicker people, in turn triggering further rounds of potentially drastic premium hikes. “Healthy people will buy crappy products,” Lee said.

Or worse, a growing number of healthy people may decide not to buy any products at all. Lee called the repeal of the health insurance mandate by Congress in December “very, very bad news.” About 18 percent of California’s individual market won’t sign up without the penalty, he said, “and that may impact our premiums by 7 percent.” Other states could see hikes closer to 15 percent in one year, he added.

In Maryland, legislators have proposed replacing the repealed federal mandate to buy health insurance with a state version. Might California follow their lead? Despite California’s overwhelmingly Democratic legislature, Lee wasn’t bursting with optimism.

“The penalty as a matter of policy makes a world of sense,” Lee said. “That said, the politics are not as easy. No one wants to be the author of the legislation, which is, 'Eat your spinach.' It’s not fun legislation to pass.”

Despite Lee’s optimism about California's ability to weather efforts to undermine the Affordable Care Act, he says Covered California’s exchange could be in peril over the long run if the individual market collapses in much of the rest of the country.

“We do a lot of policy education nationally, not because we think we’re about to go down the toilet,” Lee said. “That’s not California. We’re going to do OK. But if we don’t have a national working solution, California is at risk.”

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