Last night, the California budget deal was announced. It contains several major health policy provisions. The biggest ones in terms of coverage include expanding Medicaid with state funds for young adults whose immigration status would not allow them access to Medicaid. Other elements of Medicaid were also beefened up. The big policy changes of interest to me is on the individual market.
Covered California already has one of the more unique markets in the country. It is a very active purchaser model which severely restricts the space insurers have to play games with premium spreads. Now it will have significantly more power to offer low and no premium plans.
1) Approve Governor’s proposed subsidy levels.
2) Additional $450 million General Fund over three
years, as follows: $133.4 million in 2019-20, $149.4
million in 2020-21, $167.3 million in 2021-22.
3) This funding will be used as follows:
(a) Approximately $10 million per year to provide
state subsidies to individuals below 138 percent of the
federal poverty level (FPL). This augmentation will
fully cover the cost of the standard premium for this
group of individuals.
(b) The remaining funding will be used to provide
additional subsidies to individuals between 400 and
600 percent of the FPL.
4) Adopt placeholder trailer bill language with the
following changes to the Governor’s language:
(a) Sunset exemption from the Administrative
Procedures Act after three years
(b) Require the Franchise Tax Board to report
statistics on the mandate penalty
(c) Clarify exemptions from the mandate penalty
So the short version of this is that California will adopt a state wide individual mandate. Those funds will support enhanced premium subsidies for three distinct groups. The first group will be for the small percentage of Californians earning between 100% to 138% Federal Poverty Level (FPL) who are on the Exchange for a Cost Sharing Reduction (CSR) Silver plan and not on Medicaid. Their premiums will be zero dollars after the new subsidies. This is a fairly low cost proposal as the benchmark premium for a single individual earning 138% FPL is $22 per month. The next group of subsidies are small ($10-$20 per member per month) subsidies to people earning between 200% to 400% FPL. These are “top-off” subsidies to people already getting federal premium support. The final group is the 400% to 600% FPL group. Right now, this cohort pays full premium. These subsidies could be worth several hundred dollars per member per month.
The goal of these actions are to bring in healthier risk and make coverage more affordable to more people. It applies both a carrot (enhanced subsidies) and a stick (a modest mandate) to change the cost calculation for coverage.
These are the steps of a state that is actively trying to get their market to work.