Tag Archive: California Association of Health Plans

Policy tension over restricted exchange open enrollment emerges in California

A primary element of the Patient Protection and Affordable Care Act’s reforms of the individual health insurance market is the elimination of medical underwriting and requiring health insurers to accept all applicants for coverage regardless of their medical history and condition, including pregnancy.

For plans sold on the state health benefit exchange marketplace, Section 1311(c)(6) of the law requires the federal government to determine limited to annual open enrollment periods such as those used in large employer group health plans. In addition, Section 2702(b) of the Public Health Safety Act allows health plan issuers selling plans outside the exchange marketplace to restrict enrollment to open or special enrollment periods. Individuals and families can enroll outside these periods only if, for example, they move to another state, lose employer-sponsored coverage or change their family status. Changes in health status are not excepted.

A request this week by California’s U.S. senators, Dianne Feinstein and Barbara Boxer urging their state’s health benefit exchange, Covered California, to add pregnancy to the list of exceptions to the open enrollment timeframe reflects an emerging policy tension point in the implementation of the Affordable Care Act’s individual market reforms.

Nicole Evans of the California Association of Health Plans cautioned “[i]f we start to provide exceptions for people to wait to get coverage until they have a need, you could be undermining the goals of the Affordable Care Act.”

The rationale for restricting enrollment to specified periods of the year is to deter opportunistic enrollment by those who might purchase coverage only when they have a health crisis requiring costly medical treatment and allowing it to lapse once their course of care is completed. Supporters of this policy might argue that allowing enrollment at any time (such as permitted for small group insurance and Medicaid) would convert an insurance product sold in the private market into something more like a government mandated (and subsidized for those who qualify) benefit.

A contrary view is expressed by Anthony Wright, executive director of the consumer nonprofit Health Access California. Wright suggests ending specified open enrollment periods would bring more generally healthy people into coverage offsetting any potential adverse selection, noting those in poor health have the greatest motivation to obtain coverage and are likely already in the risk pool. Wright’s position is reinforced by analysis of 2014 plan year enrollment indicating that those with costly, chronic medical conditions and who might have been denied coverage in the past were among the first to sign up for coverage.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California appears headed toward bifurcated individual health insurance market in 2014

California’s individual health insurance marketplace is shaping as a bifurcated one for 2014 and beyond based on household income and whether coverage is purchased through the state’s health benefit exchange marketplace, Covered California, or outside of it.

California households earning 400 percent or less of federal poverty level will be eligible for advance tax credit subsidies that can be applied toward Covered California plan premiums.  While those with incomes above this level ($45,960 for singles; $92,200 for a family of four) can purchase unsubsidized coverage thorough state exchanges, health plans appear to be preparing to offer plans outside the exchange aimed at households earning above 400 percent of federal poverty.  Without directly referring to the Covered California plans, Charles Bacchi, executive VP of the California Association of Health Plans, said there may be more variation among these plan products than Covered California plans, which are based on standard benefit designs for each of the metal tier plan values (bronze, silver, gold and platinum).  Bacchi, who spoke on a panel of speakers at the annual State of Health Care Conference held earlier this week in Sacramento, added there may be “certain advantages” to plans purchased outside of Covered California but didn’t elaborate.

Bacchi’s comments came the same day Covered California Executive Director Peter V. Lee reported at the organization’s board meeting that plan issuers were invited to submit alternative benefit designs and those alternative plans differed significantly from the standard plan designs Covered California adopted in February, 2013.  Plan issuers and Covered California continue to negotiate to the terms of the contract that will govern qualified health plans sold in the Covered California marketplace for coverage effective in 2014.  The Covered California board has scheduled a special meeting in Sacramento for May 7 to discuss the contract.

A 2011 paper by The Commonwealth Fund warned of the possibility of higher cost individuals concentrating in the exchange market, noting that exchanges could face adverse selection if predominantly high-risk individuals and groups enroll in the exchange while younger, healthier people and groups purchase coverage in the individual or small-group markets outside of it:

This type of market-level adverse selection would primarily stem from the existence of different rules for health plans inside and outside of the exchange. If non-exchange plans are permitted greater flexibility around benefit design and rate setting, those plans could offer lower prices to attract lower-risk individuals.

While the Affordable Care Act consolidates individuals and small employers into a single state risk pool, thus barring plan issuers from segmenting their exchange population risk, adverse selection against the exchange marketplace could reduce plan issuers’ interest in exchange participation despite tax subsidies for individuals and potentially jeopardize the market’s long term viability.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California advances legislation requiring community-based rating in 2014 — sans individual mandate — over objections of health plans

California legislative health committees have approved legislation authored by their chairs that would require health plans and insurers to transition from medical underwriting to community-based rating in 2014.  The authors of the bills, AB 1461 and SB 961, said they would conform California law to a similar provision of the federal Patient Protection and Affordable Care Act (PPACA) that becomes effective that year.

The California Association of Health Plans (CAHP) opposes the bills unless they are amended to also mirror the PPACA’s requirement that all individuals be enrolled in a health plan or have health insurance.  If the PPACA’s so-called “individual mandate” is set aside as unconstitutional by the U.S. Supreme Court this year, CAHP fears without a similar requirement in California law, health plans will fall into the adverse selection death spiral and become actuarially unsustainable.

But putting teeth into any California requirement that all residents have some form of medical coverage could prove problematic since those teeth like the PPACA version would likely take the form of a penalty or excise tax.  As a new tax, it would require approval by two thirds of the California Legislature, which would be a near political impossibility as long as Republicans hold at least one third of the seats in either house.

CAHP also dislikes provisions in the bills that would bar health plans from considering smoking when setting an applicant’s rates, arguing it would lead to non-smokers subsidizing smokers.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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