Expanding access and subsidies in California

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.

Conference Compromise
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.






24 replies
  1. 1
    CindyH says:

    Wish I could move to California.

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  2. 2
    sherparick says:

    When the Democrats in California reach a consensus, the result is very positive. So why can’t they solve housing. Well, their voters who own homes are very sensitive to anything that keeps the value of those homes from going “up.” All the root of all conservatism is selfishness about keeping what one has and greed about getting more. So progressive Californians become instant Conservatives when it comes to maintaining the value of their homes and promoting policies against high density housing and mixed zoning, which just happen to to also cause the price of their asset, e.g.the house. I expect that eventually something will get cobbled together.

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  3. 3
    Raoul says:

    I’m wondering about the folks between 138% and 200%. Is there really a gap there that isn’t covered in the new plan? Or are they already in a good place with Fed subsidies? It just struck me as odd that the CA bill covers 100-138% fpl, 200-400, and 400-600. Where to the 139-199% people get help?

    Thanks.

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  4. 4
    Raoul says:

    eta: It’s also sort of mind boggling to think that a single parent with one kid, where the parent makes CA minimum wage of $12/hr, that household is above 138% FPL ($23,336).

    Unless one is maybe out in the California hinterlands, even qualifying for various benefits, making ends meet in that state on $24,960 (assuming the job is a true 2080 hr work year, with PTO etc) hardly seems possible. People do it. Obviously. But, wow.

    Now imagine were Californians were dealing with the absurd federal minimum wage.

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  5. 5
    Barbara says:

    @sherparick: Maybe when their kids have no choice but to move to a different state? I think the place to start might be to look at other jurisdictions that have, however imperfectly, developed plans to promote more housing options. Minneapolis recently did just that, after undertaking an exhaustive public listening and education campaign. The DC metro area has become more intentional about allowing density in transit corridors and there have been close to 40,000 new apartments either in construction or approved over the last two years that have actually begun to stabilize rental pricing. Since I live in a county where the transit corridor has long been zoned to permit higher density, I can tell you first hand that density promotes a lot of good things, like night life and healthier retail business, and it does NOT reduce housing prices for those who do own single family homes or townhouses. What everyone should realize is that the value of a home in a place like SF is almost entirely attributable to the value of the underlying property, and that is almost never going to go down.

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  6. 6
    OzarkHillbilly says:

    @sherparick:

    So progressive Californians become instant Conservatives when it comes to maintaining the value of their homes

    To cut them some slack, if you have a $550,000 mortgage on a $580,000 house, the value doesn’t have to drop much before one is under water. And if a person has lived in the same house for 27 years and is closing in on paying off the biggest investment they will ever make, it’s hard to fault them for not wanting money removed from the only retirement nest egg they have.

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  7. 7
    daveNYC says:

    Yeah, key thing is that the FPL isn’t just ‘poor’, it’s living in a van down by the river levels of poor. With the bonus that the federal minimum wage is $7.25, so it doesn’t even get you up to the poverty level.

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  8. 8
    guachi says:

    Subsidies for 400-600% of poverty level?

    It’s like California reads this blog.

    ReplyReply
  9. 9
    Barbara says:

    @OzarkHillbilly: But living close to greater density housing doesn’t reduce the value of your house in a place like San Francisco. These are irrational fears stoked mostly by people who don’t want to live near density for other reasons.

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  10. 10
    laura says:

    @sherparick: the dense infill around me would beg to differ. I live in a post-war neighborhood – 1946 tract housing and we’re on a third phase of dense, affordable housing smack dab in the middle of transit hubs light rail, main bus line, transit hub, state college, teaching hospital/trauma center, main drag of the city, freeway access, food and other shopping plus schools and parks in walking distance, bike friendly and Zillow keeps telling me our lil casita de amor keeps inching up in value. Seeing an increase of the yoots, and their babies and dogs has been all upside.
    YMMV

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  11. 11
    Barbara says:

    @laura: My husband was integrally involved with an affordable housing project that neighbors sued repeatedly to stop. He reviewed all kinds of studies on the property values in comparable communities and the consensus seemed to be that a minimum level of density and affordability is all but essential for maintaining the kind of experience most people living in those places value. SF risks becoming like Venice, a place that has become basically dead to normal life.

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  12. 12
    Henry says:

    My wife and I are both on SS and together we get just over 138% of poverty income. We are on Medicare but we now pay $135 a month each for that.
    We lost our Ca cost coverage when we got remaried. Is any of this going to help us? We are looking at a Medicare Advantage plan but we just don’t have any income to spare.
    w3ski

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  13. 13
    OzarkHillbilly says:

    @Barbara: I have never been to SF much less lived there so I can’t speak to those particulars, but I want to say this: A fear being irrational doesn’t make it any less real, not to the person feeling it. So I’m just speaking to the human condition which is pretty universal, not the economics of CA housing which is specific to CA.

    ETA: and please don’t take this as my disagreeing with you, I am speaking to a different aspect of the same problem.

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  14. 14
    Barbara says:

    @Henry: Are you currently enrolled in or eligible for Medicare?

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  15. 15
    Barbara says:

    @OzarkHillbilly: Yes, of course, which is why policy makers have to do more than propose random approaches to addressing issues and lay the groundwork to show how people will benefit even when their intuition might make them think otherwise.

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  16. 16
    Barbara says:

    @Henry: Oops, I am sorry. You said right there that you are ON Medicare. There is no way to avoid the Part B premium that is assessed for Medicare unless you are willing to risk paying an even higher Part B premium for the rest of your life if you enroll late. (Same is true for Part D). MA plans won’t let you enroll if you are not enrolled in Part B. Whether an MA plan versus a Medicare Supplemental policy would be a good idea depends, in part, on how much medical care you are currently consuming. If it’s more per month than the cost of the supplemental plan, those can be a good bargain. If it’s less, then a low premium MAPD plan can be a good idea. Medicare supplemental plans are allowed to underwrite except in some very specific windows, but MA plans cannot underwrite.

    There is also unlikely to be a better health care bargain in any private context than Medicare. The beneficiary protections for Medicare are exponentially better than any private program, and even if it doesn’t feel like it when you are on a fixed income, Medicare is heavily subsidized by current workers.

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  17. 17

    @Raoul: The group between 138% and 200% FPL are not getting any new state funds (which is going to be an awesome identification opportunity to a follow-on paper that I’m waiting to hear if it got accepted at the target journal any day now). The logic is that this group already has good federal subsidies combined with highly likely Silver Spread strategies can/will reduce net of subsidy premiums to single digits/per month or low double digits.

    Over 200% FPL is a notch point in the subsidy design so things get expensive fast.

    ReplyReply
  18. 18
    Fair Economist says:

    @sherparick: California is ready to pass SB50, a bill that will allow meaningful amounts of new housing to be constructed and bring our rents back from stratospheric to merely high. It was blocked this year by Anthony Portantino, chair of the relevant state senate committee. We’re getting there.

    I anticipate making generous donations to his opponents.

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  19. 19
    Mnemosyne says:

    @Henry:

    As Barbara said, I think you’re stuck with the $135 per month no matter what, but I would either call the Covered California number or find a healthcare navigator and see if there are any options to extend your current coverage at a low cost. You should be able to find a certified healthcare navigator either through the Covered CA website or by asking your local hospital for their list.

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  20. 20
    Fair Economist says:

    @Barbara: I have the somewhat weird experience of seeing a commercial zone near me get built into the kind of neighborhood California needs. The area around the Main Place Mall in Santa Ana, right next to Orange, has long been a low rise commercial/office zone. There’s been one apartment complex there for a long while. During the housing bubble they built a mixed use plus townhome development. Over the past two years they built two large apartment complexes next to that, and they just tore down a low-rise office complex for a 727 unit apartment and townhome development. A couple of smaller office buildings are already being rebuilt into mixed use complexes. Across the street the Main Place mall is now planning to build 1900 units (really) in its parking lots. All told they’re going to add about 4,000 housing units over about 6 years – enough to actually mean something for the local markets.

    You wouldn’t really expect conservative Orange County to be leading on this, but it is. Of course a lot of the drive is from Santa Ana, which isn’t conservative anymore. Orange still is, but its chronic budget deficit from being an older town with mostly suburban layout is forcing it to accede to some of these developments (the area is mostly in Santa Ana, but not entirely). So far Orange has only yielded on developments “over the freeway” into areas you’d not naturally think of as part of Orange. Those are running out, though, and Orange still has that budget deficit every year. I’m hoping the dying Village Mall gets the mixed use treatment soon. Absolutely the right thing to do but the political resistance will be insane, in multiple meanings of the word.

    ReplyReply
  21. 21
    Barbara says:

    @Henry: @Mnemosyne:

    To add something that might not be obvious, even if you were to enroll in a commercial plan that duplicates coverage of Medicare covered services (even I am confused about whether this is something plans are allowed to do anymore, because it used to be a big no no). However, if you do, and you are retired, Medicare is supposed to be the primary insurer, although in some states not all insurance plans are allowed to “coordinate,” so this issue can vary considerably. There are plans that will pay only the “secondary” amount even if you are not enrolled in Part B. They will assume that you are enrolled in Medicare Part B. You really, really need to read the fine print.

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  22. 22
    Henry says:

    @Barbara: We are in Medicare and we have to copay $135.00 each per month even with no health costs. Then there are out of pocket costs like on my wife’s recent MRI.

    ReplyReply
  23. 23
    Henry says:

    @Mnemosyne: Covered Ca is out of the question for us. They want over $900 a month to continue coverage as when we were single.
    Henry

    ReplyReply
  24. 24
    Barbara says:

    @Henry: But is the $135 for a Supplemental plan or is it for basic Part B coverage? If it’s for Part B coverage, that is what everyone has to pay to be enrolled in Part B. There is no way to avoid that if you want Part B coverage, even if you enroll in a Medicare Advantage plan. If it’s for a Supplemental plan, there might be ways to replace it or move to MA. Just trying to understand your situation.

    Medicare Part B (basically, outpatient services) has 20% co-insurance for nearly every service, and there is no maximum out of pocket limit. Medicare Advantage has a maximum out of pocket spending cap. At any rate, that’s why most people buy supplemental pans if they don’t enroll in a Medicare Advantage plan.

    ReplyReply

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