Covered California Announces Plans and Rates for 2014

Consumers will have access to more than 80% of practicing physicians, 80% of acute care hospitals through 13 commercial health plans

SACRAMENTO, CA – Covered California™ today announced 13 diverse health insurance plans that will offer in 2014, affordable, quality health care coverage to millions of Californians. The plans reflect a mix of large non-profit and commercial plan leaders, along with well-known Medi-Cal and regional plans.

The tentative selection of health plans is subject to a rate review by state regulators. It is impossible to make a direct comparison of these rates to existing premiums in the commercial market because in 2014, there will be new standard benefit designs

under the Affordable Care Act, and the actual change in an individual’s premium will depend on the person’s current insurance coverage. However, Covered California believes that a valuable frame of reference for its premiums, is comparing them to the small employer market in California. Both the small employer market and Covered California are competitive markets, and offer guaranteed issue- you cannot be denied for pre-existing condition.
The rates submitted to Covered California for the 2014 individual market ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions. This is impressive since the 2014 products include doctor visits, prescriptions, hospital stays and more essential benefits; protecting consumers from the “gimics and gotchas” of many insurance policies.

“This is a home run for consumers in every region of California,” said Peter V. Lee, Executive Director of Covered California. “Our active negotiating will not only benefit potential enrollees to Covered California, but will benefit all Californians by making health care affordable,” he said.
Additionally, there is financial protection like a maximum out-of-pocket cost of $6,350 which will dramatically

reduce the chance of someone going bankrupt because of medical bills not covered by insurance.

“Californians should be proud of how not only health plans in this state, but doctors,medical groups and hospitals have stepped up– and creating a market that will allow
millions of consumers to enroll in affordably priced products. Because of that, we will be able to deliver exceptional value, low rates, access to health care in every region of the
state, and a solid platform to achieve the dream of providing quality health care for all Californians.”

Covered California’s rigorous review and selection process resulted in a portfolio of plans that achieve three objectives: a robust choice of offerings throughout the state,
affordable prices, and access to doctors and hospitals. The terms of Covered California’s relationship with its partnering health plans means they will collaboratively
work to promote care improvements, foster prevention, and seek to reduce costs by promoting better care.

Once plan rates are approved by state regulators, Covered California looks forward to signing final contracts and begin the work of enrolling millions of Californians in the
following health plans:

 Alameda Alliance for Health  L.A. Care Health Plan
 Anthem Blue Cross of California  Molina Healthcare
 Blue Shield of California  Sharp HealthCare
 Chinese Community Health Plan  Valley Health Plan
 Contra Costa Health Services  Ventura County Health Care Plan
 Health Net  Western Health Advantage
 Kaiser Permanente
“Covered California plans include the largest current plans in the individual market, as well as new entrants, regional plans and local Medi-Cal plans that want to be part of
making history,” said Lee. On average, there will be five plans from which to choose. Even in rural areas where choice has been historically sparse, there will be two or three
health plans. Throughout the state consumers will have a choice of Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Exclusive
Provider Organizaitons (EPOs).

To get prices at such competive points, winning health plans built their bids around the expectation of high enrollment, not high profit. Plans reduced profit margins down to
two and three percent; embraced Affordable Care Act programs such as Accountable Care Organizations and Patient-Centered Medical Homes, that seek to improve care
while lowering costs; found common ground with doctors, medical groups and hospitals on lower reimbursement rates to make care affordable.

Virtually every health plan designed a custom network for Covered California. Negotiations included a detailed review of each plan’s rates, their mix of hospitals, physicians and other providers, and their contingency plans for expanding networks in the event more consumers sign up than expected.

The current list of insurers is for individual policies only. Covered California will announce its options for small businesses to buy health insurance in June.

With a substantial portion of the Patient Protection and Affordable Care Act set to go into effect in 2014, employers are working to determine how the law will impact them, their business and their employees. Because the law will require most employers to provide affordable minimum essential health insurance coverage to full-time employees or face financial penalties, employers must understand how the law defines full-time workers, as well as the penalties that businesses can face for failing to comply or choosing not to provide coverage.

Under provisions called the employer shared responsibility rules, the PPACA requires large employers (generally those with 50 or more full-time employees) to provide affordable group health coverage with sufficient value to full-time employees and their dependents. Full-time employees are generally defined as those who work on average at least 30 hours per week. Employers that fail to comply with these rules can face penalties.

What are the potential penalties?

The failure to offer coverage penalty applies if at least one full-time employee obtains subsidized coverage on an exchange where the employer does not offer coverage to at least 95% of its full-time employees and their dependents. This penalty – which can be up to $2,000 per year for each full-time employee (in excess of 30) – will be based on the total number of full-time employees an employer has, regardless of how many employees have government-subsidized exchange coverage.

The insufficient coverage penalty applies if the employer offers full-time employees coverage, but the coverage is either unaffordable (individual premium cost exceeds 9.5% of the employee’s household income) or does not provide minimum value (plan pays less

than 60% of the covered costs). Proposed regulations released by the IRS provide guidance and alternative safe harbors for calculating whether health coverage is unaffordable, including use of an employee’s W-2 earnings. The potential penalty for insufficient coverage is $3,000 per year for each employee who obtains government-subsidized coverage on an exchange.

Employers also should note that in determining whether an employer is subject to these provisions (i.e., is a “large employer”), the IRS controlled group rules are applied – meaning that all affiliated employers for which there is 80% or greater common ownership will be treated as a single employer. However, compliance with the employer shared responsibility rules – and any associated penalties – will generally be assessed on an employer-by-employer basis.

Who is considered a full-time employee?

As an employer, the determination of who is a full-time employee will be crucial in evaluating your options for complying with the employer shared responsibility rules,

and equally important, designing your group health plan’s eligibility and participation requirements.

Because there can be various ways of assessing what constitutes a full-time employee eligible for coverage under the PPACA, the IRS has issued guidance in the form of several notices, as well as temporary regulations. These guidelines set out criteria and standards that can help employers make accurate determinations when hiring new employees, including:

•Initial measurement period – A designated period of not less than three months or more than 12 months used in determining whether a newly hired variable or seasonal employee is full-time.
•Standard measurement period – An annual

designated period of not less than three months or more than 12 months used to determine whether an ongoing variable or seasonal employee is full-time.
•Administrative period – A period of up to 90 days for making full-time determinations and offering/implementing full-time employee coverage.
•Stability period – An annual designated period of not less than six months (and not less than the corresponding measurement period) during which the employer must offer affordable minimum essential health coverage to all full-time employees, or face financial penalties for not doing so.
•Full-time employees – If a new employee is reasonably expected to average at least 30 hours per week at the time of hire, the employee must automatically be treated as full-time and offered group health coverage within three months of hire.
•Variable hour and seasonal employees – A variable hour employee is someone whom the employer cannot reasonably determine will average at least 30 hours per week at the time of hire. No definition is provided for a seasonal employee, but presumably it would include anyone who works on a seasonal basis. Employers may use the initial measurement period to determine whether a newly hired variable or seasonal employee actually averages at least 30 hours per week, and the standard measurement period to determine whether an ongoing variable or seasonable employee actually averages at least 30 hours per week. If the employee does average at least 30 hours per week during the initial measurement period or standard measurement period, the employer must offer affordable minimum essential health coverage during the stability period, or face financial penalties for not doing so.
•Transition from new to ongoing employee status – Once a new employee has completed an initial measurement period and has been employed for a full standard measurement period, the employee must be tested for full-time status under the

ongoing employee rules for that standard measurement

period, regardless of whether the employee was full-time during the initial measurement period.

The implementation of the ACA – The Affordable Care Act will impact employers of all sizes. The small group health insurance market, currently serving firms 2 to 50 employees, will change significantly.

California is home to 610,000 small businesses that employ over 5.3 million people, and another 2.8 million small businesses with no employees, according to the UC Berkeley Center for Labor Research and Education. Because they do not have the bargaining power to negotiate low prices on health insurance, many small business owners have trouble attaining affordable insurance for their workers and themselves.

Under existing California law that dates back to the early 1990s, insurers are required to sell coverage or “guarantee issue” of coverage to small businesses with 2-50 employees. Rates may vary by plus/minus 10% depending on the health status of the employees as well by age, geographic region and family size.

Federal health reform modifies these rules in several key ways:
•Eliminating pricing of premiums based on health status
•Limiting the range of premiums based on age to no more than 3:1: that is, tho

se ages

60-64 can only be charged three times as much as those aged 20-29.
•Adding the self-employed to those eligible for guaranteed issue of coverage
•Expanding the rules to employers with

up to online casinos 100 employees

Federal law also permits non-smoker discounts and “wellness incentives”.

Passage of California AB 1083 modifies (for California) federal health reform. by changing the rules for small “group” or small business coverage by:

Eliminating pricing of premiums based on health

status

Limiting the range of premiums based on age to no more than 3:1:

that is, those ages 60-64 can only be charged three times as much as those aged 20-29.

Adding the self-employed to those eligible for guaranteed issue of coverage

Expanding the rules to employers with up to 100 employees

Consistent with existing California law, AB 1083 does not permit different charges based on health status, including smoking, wellness, etc.

These changes aim to make health insurance more available to million of businesses. The proof, wil be in the forthcoming release of rates and plans by insurers, and public/private exchanges.

By Chad Terhune
10:00 AM PDT, March 28, 2013

The federal healthcare law will help cause insurance premiums to rise 30% on average for many middle-income Californians next year, but lower-income consumers could save up to 84%, a new government report says.

Covered California, the state agency that commissioned the report issued Thursday, said federal subsidies and decreases in out-of-pocket medical expenses should offset most of the higher premiums for people buying their own health coverage.

Officials said about 570,000 Californians who have annual incomes between 250% and 400% of the federal poverty line and have individual policies now will pay 47% less, on average, due to federal subsidies.

These state estimates offer the first detailed look at how healthcare costs may change for millions of Californians next year and the various factors that will affect families' overall medical expenses.

The affordability of coverage will play a pivotal role in whether California can successfully implement President Obama's Affordable Care Act and reach the goal of extending coverage to many of the state's 5.6 million uninsured residents.

Even supporters of the federal overhaul have expressed concern that the government requirement for richer benefits and new consumer protections will drive up premiums too high.

“It is critical for us to understand the true financial impact on Californians as we move toward 2014, and this is an important step in determining strategies to help protect consumers from cost increases,” said Peter Lee, executive director of Covered California. “There may be increases in premiums depending on what product people buy.”

These changes would most immediately affect the 2 million Californians who purchase their own coverage and the state’s uninsured residents.

This analysis by the Milliman consulting firm did not look at premiums for the 19 million Californians who receive health benefits from larger employers. The federal law has a smaller effect on those plans.

Next month, health insurers must submit their proposed rates to the state for coverage starting Jan. 1. Covered California plans to select certain companies for its state-run exchange and negotiate rates by mid-

May.

Insurance industry officials said they support the state's efforts to expand and improve health coverage, but those changes carry a price.

“These richer benefits, more predictable coverage and subsidies come at a cost,” said Patrick Johnston, president of the California Assn. of Health Plans. “All these expansions add to the already increasing cost of care.”

In California, individuals earning up to about $16,000 will qualify for an expansion of Medi-Cal, the state's Medicaid program for the poor and disabled.

Beyond that, people and households earning up to 400% of the federal poverty level are eligible for federal subsidies. That income threshold goes up to about $46,000 for an individual and $94,000 for a family of four.

Without subsidies above those income levels, the report said, consumers face 30% higher premiums and a 20% increase in their total cost of medical care when lower deductibles and cost sharing are factored in. Families earning less than $60,000 a year fare much better, in line to save 84% on premiums and 76% on the total cost of their care.

Age is another dividing line. The report estimates that young people under 25 could incur premium increases that are 25% higher than average, while older consumers could face a smaller increase, of 12%, under new limits on how much rates can vary based on age. Milliman said younger consumers stand to earn less and many will qualify for subsidies that help mitigate higher rates.

Absent any changes from the federal law, Milliman said individual premiums in California would increase 9%, on average, in 2014 due to rising medical costs and other factors.

In January, most Americans must purchase health insurance or pay a penalty under the federal law.

The Milliman report attributed much of the cost increase overall to the new guaranteed coverage for all applicants, including sicker patients who were previously denied insurance. Adding those higher-cost policyholders is expected to increase medical costs.

New federal requirements that individual policies cover a higher percentage of overall medical costs and include 10 “essential health benefits,” such as prescription drugs and mental health services, also contribute to higher costs.