A Look At Covered California’s Future
As California prepares for the launch of Covered California, the question on everyone’s mind is, “so what does this mean for me?”
The impact of Covered California will not be fully realized until well into 2014, but below are some initial implications that can be drawn based on what we do know about the exchange, the recent announcement of the participating health plans and rates for individuals, California’s population, and the current healthcare environment.
Will non-subsidized individuals choose to go into the exchange? Qualified health plans (“QHPs”) are expected to offer narrow networks (half to a third of regular networks), from which certain doctors and hospitals have been excluded.
Beneficiaries might prefer to follow a specific doctor, rather than enroll in the exchange where their choice is limited.
The exchange is a new concept and new can be perceived as unfamiliar or daunting. Significant outreach and education will be necessary (as planned), especially within minority communities. The penalty for not obtaining health insurance is relatively minimal (lower than the cost of insurance) and may not serve as a deterrent to younger, healthier individuals. The majority of interest in the exchange will likely come from individuals who are eligible for a significant subsidy and most closely resemble the Medi-Cal population.
So, who will benefit from this increase in the insured population?
Current Medi-Cal providers in close proximity to enrollees, and low-cost medical groups and hospitals will benefit the most. Medical groups with an extensive commercial patient base most likely will not contract with a bronze or silver plan due to the low reimbursement and will not see a significant volume bump.
Plans with Medi-Cal experience, many of which will be offering PPO products, are offering more attractive bronze and silver plans with the lowest premiums (maybe fully subsidized). Aggressive, up-front collection policies on co-pays and deductibles for providers will need to be instituted, particularly for those beneficiaries whose out-of-pocket costs are high.
PPO-contracted medical groups may experience a significant burden when working to comply with the rigorous Covered California QHP requirements (e.g., reporting, wellness, prevention, physical exam) and may not have enough infrastructure to appropriately manage care. The QHP contract is daunting; groups without robust electronic medical records (“EMR”), previous collaborative quality initiative experience, extensive reporting, or well-developed care management programs may not successfully meet the QHP requirements. It will be an onerous task to develop these programs and make the necessary financial investments.
In response to the exchange (movement of volume, pricing, pressure and required infrastructure) physician organizations will continue to consolidate. As groups expand, interest will be directed toward medical groups or IPAs with Medi-Cal experience and infrastructure.
Mid-sized to larger employers most likely will move to self-funded plans with fewer benefits, if they haven’t already.
Non-exchange health plans will target self-funded products and the small employer market. A growth in the plan-to-plan contracting model (requiring an Knox-Keene license in California), with many medical groups and most non-profit health systems owning a health plan, has occurred and will continue to increase.
As the first year of Covered California begins, health plans (both in and out of the Exchange), hospitals, and physicians will be analyzing and evaluating its impact. With achievement of the triple aim as its goal, Covered California will be a monumental step for California and will effectively change its healthcare delivery system for many years.
Steven T. Valentine is president of The Camden Group, an El Segundo-based healthcare consulting firm. He is also a member of the Payers & Providers editorial board. Megan Calhoun is a Camden Group analyst.
