Covered California Moves To Steady Market Nerves
With the Trump administration still telegraphing uncertainty about its intentions toward funding cost subsidies under the Affordable Care Act, the Covered California health insurance exchange, citing what it called a “time of unprecedented uncertainty,” has taken steps to ensure that its enrollees are not rocked with unexpected costs as it nears the crucial open enrollment period for 2018.
The exchange, which provides individual commercial healthcare coverage to more than 1 million Californians, put off until Sept. 30 a decision as to whether plans must offer a surcharge to cover the potential loss of cost-sharing reduction payments (CSR) from the federal government. The CSRs, which cover some out-of-pocket costs for lower-income consumers who purchase silver-tier level coverage, is funded to the tune of $7 billion a year, but Republicans challenging the Affordable Care Act won a legal decision in federal court forcing Congress to appropriate funding for the payments. The decision was being appealed by the Obama administration, but the Trump administration could merely drop the appeal and the payments would stop. For now, it is making the payments on a monthly basis, often accompanied by grudging rhetoric.
A recently released report by the Congressional Budget Office concluded that ending the CSR payments would cause premiums to climb by about 20% and would add approximately $194 billion to the federal deficit over the next decade, as premium tax credits would have to rise to meet the shortfall.
“We have a way to protect consumers, but it is complicated and will cause unnecessary confusion and anxiety. Therefore, we are extending our deadline to give Congress time to act when they return in September,” said California Health and Human Services Secretary Diana Dooley, who chairs the Covered California board of directors.
Covered California also cut a deal with the participating carriers that would anticipate any potential financial turmoil that may strike the health insurance market in the coming years. For example, if there is a repeal or lack of enforcement of the ACA’s individual mandate that every individual American buy health insurance or pay a tax penalty, recoupment of losses would have to be built in to its rates over a three-year period in order to shield consumers from the shock of a dramatic rate hike. Conversely, if there is an unanticipated profit, that would also have to be factored into future rates over the next three years. That is in response to a potential bipartisan deal being struck by lawmakers in Congress to stabilize the ACA, through initiatives such as creating a reinsurance pool. Although there has been discussion of such measures in the Senate, it remains to be seen whether the House would agree to such changes.
“We are heartened by the bipartisan discussions that put consumers first, but we can’t wait past Sept. 30,” Dooley said.
Additionally, Covered California bumped up its media budget about 5%, to $111 million from $106 million. The extra money will be used for more television and radio ads, as well as a direct-mail campaign for consumers that might be impacted if the CSRs are eliminated. The beefed up media expenditures are in contrast to the Trump administration’s decision to cut back on marketing in states where the federal government operates the exchange during the last week-and-a-half of the last enrollment period, which ended on Jan. 20. Some policy experts say that likely contributed to a modest dip in enrollment for 2017 compared to 2016.
“While we are doing our best to manage a difficult situation, we hope Congress and the administration will provide clear guidance on how it intends to stabilize the individual insurance market,” said Covered California Executive Director Peter V. Lee.
