Covered CA hits familiar rough patch

by James Poulos | May 26, 2015 8:11 am

covered+california[1]As a number of state exchanges across the country struggle and fold, Covered California — by far one of the most successful — has begun to experience similar challenges.

Dramatic cuts

Covered California officials portrayed a slate of new budget cuts as evidence that the exchange was prepared to thrive in the absence of federal funding. But as the Los Angeles Times reported[2], Covered California has fallen some 300,000 enrollments short of its second-year goal. With the exchange charging $13.95 per individual enrolled, the lower figure translates into over $4 million in lost revenue.

According to the Times, officials have settled on a plan that cuts 15 percent from last fiscal year’s budget. Although the budget for marketing, outreach and sales will drop by a full third, it will remain the largest single expenditure, at over $121 million. “The state also would draw on $100 million in federal money in reserves,” noted the Times — “the last of the start-up grant. No further federal funding is expected.”

The exchange also announced an additional enticement for would-be enrollees: a first-of-its-kind cap on payments for so-called specialty drugs. According to the new regime, taking effect in 2016, the typical customer “will pay a maximum of $250 per month for high-end specialty drugs that cost as much as $1,000 a pill on the retail market,” the Sacramento Business Journal reported[3].

Critics quickly took note of a counterintuitive detail, however. “A group with silver-level plans will pay $150, but those with bronze plans will pay as much as $500 per month until they hit their maximum annual out-of-pocket of $6,500,” according to the Business Journal.

But as Medicare and Medi-Cal participation has expanded separately under Obamacare, the cost of new prescription drugs has become a systemwide burden. “Programs such as Medi-Care and Medi-Cal have struggled with burgeoning health costs in recent years from drugs such as Harvoni, a potential cure for many patients with hepatitis C,” as the Sacramento Bee observed[4]. “The drug has a shelf price of $1,125 a pill, with a typical treatment cost that approaches $95,000.”

Enrollment rates fall

In anticipation of a heavy budgetary lift during the first year of Obamacare, the Affordable Care Act provided generous subsidies to states setting up their own exchanges. Even though an end to the cash was foreseen since the beginning, California and other states have had to scramble to make up the difference.

One bellwether came in the form of decreasing signups during the latest round of availability. The federal exchange set up under Obamacare has seen the same kind of dropoff as the state exchanges, CNBC reported[5]:

“ signed up 147,000 people in 36 states during a special tax season enrollment period, officials revealed Tuesday. That relatively light level of sign-ups was similar to what was seen in 11 other states and the District of Columbia during their own grace periods. […] The federal exchange’s special enrollment period was open to people who learned they were subject to a tax penalty for failing to have health insurance coverage last year when they were preparing their tax returns.”

Hard choices

Covered California has wound up in perhaps the best position to weather the tough transition to self-sufficiency. Other states haven’t been so lucky. In Hawaii, the state Health Connector exchange has collapsed, unable to attract enough signups by the January 1 deadline this year. A proposed[6] infusion of cash from the state’s general fund couldn’t measure up to projected costs. Yet staying out of compliance risked “about $1 billion in Medicaid funds to serve 330,000 Hawaii residents,” KTIV Channel 4 reported[7].

As Health Connector Executive Director Jeff Kissel explained, the choices states face in Hawaii’s position can be daunting. “If we use the federal technology, the federal government requires everyone to sign up again,” he told KTIV. “We are scheduled to meet as a board again next Wednesday to consider how we’re going to move forward and face the challenges and overcome[.]”

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