Last week, Covered California released its June budget revision, unveiling a $335 million budget, up $2 million from a previously proposed budget. This budget is approximately $58 million less than the previous fiscal year’s, equal to a 15 percent reduction in expenditures. The reduction, according to the exchange, is consistent with their vision to “spend more in the early years to lay the foundation.”

Despite an approximately $100 million extension in federal funding, spending has been reined in, since fiscal year 2015-16 “marks the last year [Covered California] will use federal establishment funds.” The executive summary reads that Covered California is “transition[ing] to relying solely on the fees it collects from health plans” along with money saved from federal fund reserves.

The revised FY 2015-16 budget allocates $118.5 million just for outreach, sales and marketing, the largest share of funds, which is actually about 30 percent less than the previous year. “As of March 2015,” wrote Peter Lee, executive director of Covered California, “Covered California has more than 1.3 million active ‘covered lives’ that are getting care throughout the state.” He also pointed out that, since opening its doors in January 2014, Covered California has covered a total of 1,864,014 lives.

However, Covered California doesn’t look like it will be self-sufficient anytime soon, since enrollment numbers are too low to meet the break-even threshold.

“Even spending all of the money they did on advertising, they still managed to sign up far fewer Californians than they expected,” Lanhee Chen of the Hoover Institution told the Heartland Institute. “In fact, they’ve signed up about 1.27 million people, when they expected to enroll 1.8 million.”

Covered California charges a monthly per member per month flat fee, as listed below:

• $13.95 per enrolled member per month on individual and family plans;
• $18.60 per enrolled member per month on small group plans;
• $0.83 per enrolled member per month in family dental coverage.

Since the exchange receives money based on each enrollee into the program, “falling half a million enrollees short,” said Chen, “will mean financial strain for the exchange.”

The budget attempts to address such a shortfall. “If enrollment is larger than anticipated, we will look to lower the assessment we charge health plans,” the text reads. “If enrollment were to be lower, we would look at reducing costs, reduce our reserves or raise the assessment we charge health plans.”

But, as Chen pointed out, Covered California expects “to bring in $242 million in revenues” and is likely not only to “fall far short of that number,” but also “remain unsustainable in the long run without federal funding.”

Approximately 53 percent of California’s estimated subsidy-eligible population has enrolled with Covered California. The FY 2015-16 budget assumes the health insurance exchange will enroll at least 70 percent “of those eligible for subsidies who do not already have coverage by 2018.” If it doesn’t meet this mark, Covered California has reserves of $194 million, which would fund operations for another six months.

Chen said bureaucracy played a large role in the exchange’s struggle to enroll new patients.

“Covered California required Californians who wanted to buy subsidized coverage to complete their enrollments by telephone, even where a Web-based option was available,” Chen said. “This added layer of bureaucracy is demonstrative of why Obamacare is driving up costs in our health care system and ultimately making it more difficult for people to get access to quality, affordable health coverage.”

California Health Benefit Exchange’s five-member board will meet June 18 to discuss and approve the adoption of the FY 2015-16 budget.

By Katy Grimes

As more regulations are discovered in the 2010 Affordable Care Act, more people are realizing the impact of the legislation. And California looks as if the law could hit it hard.

CA medical claims will jump 62 percent 

According to the Society of Actuaries, financial risk analysts, nationally, medical claims will jump an average of 32 percent for Americans’ individual health care policies under President Barack Obama’s government health care plan.

For Californians, it will be even worse: 62 percent.

But even with clever private sector work-arounds, California lawmakers, led by a Democratic supermajority, are leaving nothing to chance, nor any flexibility for employers. This is a do-it-or-die deal.

California, the first state in the nation to establish an ObamaCare Health Exchange, is working apparently to set a new low in government-driven healthcare ideology with what some are referring to as “CaliCare.”

AB 880, by Assemblyman Richard Pan, D-Sacramento, is a bill which essentially would force large businesses to offer health insurance by fining them more than the average cost of providing coverage. Money raised by AB 880 is meant to increase Medi-Cal provider rates, and to subsidize state costs for it.

“AB 880’s monetary penalty is written purposely vague but sure to be painful to business,” health care expert and lawyer Craig Gottwals with BB&T-Liberty Benefit Insurance Services told me.

“The proposed penalty on employers is based on 110 percent of the average cost of health care coverage, including both the employer’s and employee’s share of the premium.”

Gottwals found:

“According to the Kaiser Family Foundation, the national average cost for individual health care coverage in 2012 was $5,615 and family coverage was $15,745. It is unclear whether AB 880 sets the penalty level at the individual or family level of health care coverage but even if it were set at the lower individual level it would be 110% of $5,615 or a cool $6,176.50 per employee in 2013. That is over three times the federal penalty for not providing healthcare to an employee under PPACA.”

According to the bill:

“The amount of the employer responsibility penalty shall be adjusted annually to reflect changes 
in the average cost of coverage provided by large employers to their employees.” 

The law would apply to private employers with 500 or more employees in California and for employees working as few as 8 hours per week.

AB 880 also exempts governments:

“‘large employer’ shall not include a state, 
city, county, city and county, district or any other governmental employer. … An employer responsibility penalty shall not be incurred by a state, county, city, city and county, district, or any other governmental entity.”

So the government, as it often does, exempted itself from the onerous burdens it’s placing on the private sector.

The many exemptions and exempted groups have been ignored by most of the media. The law reads:

 “HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.”

“The shared responsibility payment (IRS penalty) should not apply to any taxpayer for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time.”

IRS exemptions

The IRS’s allowable exemptions include nine categories of individuals who are exempt from the shared responsibility payment:

* Individuals who cannot afford coverage;

* Taxpayers with income below the federal filing threshold;

* Members of Indian tribes;

* Hardship;

* Individuals who experience short coverage gaps;

* Religious conscience;

* Members of a health-care sharing ministry;

* Incarcerated individuals; and

* Individuals who are not lawfully present.

These exemptions leave mainly the working middle class paying income tax to pick up the tab for most of the system.

We also are finding that

* Most of the middle class will not be able to afford the insurance, and their children will not be covered.

* The half of Americans who do not pay federal income taxes will not be required to pay the “mandatory” IRS fine if they do not buy government health insurance.

* Illegal immigrants will not be fined for not having insurance.

And just in case anyone else was missed the exemption list, the last paragraph was added to cover any other vulnerable group:

“The HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.”

“Healthcare costs have increased 170 percent over the past decade,” said Gottwals. “AB 880 will make for one steroid-induced penalty for state rulers to plunder in upcoming years. Perhaps we can take the Bullet Train to new state-funded clinics?”

By Katy Grimes

SACRAMENTO — Health care in California is about to get a makeover. But this makeover will not be improving the look of healthcare in the state, despite California’s state-of-the-art medical facilities and teaching hospitals.

The Assembly Committee on Health has been hard at work under the tutelage of Committee Chairman, Assemblyman Dr. Richard Pan, D-Sacramento, to prepare the state to implement health reforms enacted by the federal government’s Affordable Care Act, more commonly known as Obamacare.

The ACA requires states to launch online insurance marketplaces by 2014. California’s health exchange, “Covered California,” is “guided by six primary values,” and claims that health insurance costs will be lowered for all Californians.

But even at the hearing Tuesday, Marian Mulkey, Director of the California Healthcare Foundation, said costs will go up for young people — and down for older people. No one at the hearing made the case that, as the number of people covered under one California health insurance exchange dramatically increases, costs will go down — especially since 1.8 million Californians are eligible for subsidies, according to a recent U.C. Berkeley study.

Changes to California

“Risk Pools” and “Adverse Selection” were on the agenda Tuesday at the health committee hearing. This is where the free market and individual choice are completely removed from health care.

“Adverse selection is the tendency for individuals to select different health insurance products based on what is most cost effective to meet their anticipated short term health needs and expected use of health services,” the health committee overview said.

Adverse selection occurs when people who anticipate they will need more health care purchase commensurate insurance coverage, and those who “consider themselves healthy” stay out of the market or purchase the minimal coverage.

None of this sounds unusual; that’s how the free market works when consumers have choices. But the health committee doesn’t approve of this and said that this free market approach “leads to an uneven distribution of risks and healthcare costs.”

This concept of “uneven distribution” is the crux of the entire Obamacare plan. “Many of those risk avoidance strategies will no longer be available because of the ACA,” the overview said.

Affordable Care Act

The largest piece of health policy legislation in more than 45 years, the ACA was passed in 2010 amid much national opposition. The ACA mandated health coverage for almost everyone in the country, and subsidized the costs for low-income or unemployed people. The ACA also will dramatically expand Medicaid, the nation’s largest health coverage program, serving both low-income individuals and families, and providing long-term care services for people with disabilities, as well as the low-income elderly.

Medi-Cal, the California Medicaid welfare program, serves low-income families, seniors, persons with disabilities, children in foster care, pregnant women and low-income adults.

According to the California Department of Health Care Services, 8.8 million residents were enrolled in Medi-Cal for at least 1 month in 2009-10, or about 23 percent of California’s entire population.

In 1996, Medicaid was separated from the welfare system, and increased dramatically in size to include people with disabilities, foster children, pregnant womenand low-income seniors.

California Health Insurance

In California, approximately 50 percent of the people have health coverage through an employer, 18 percent have health coverage through government programs such as Medi-Cal or Healthy Families, 12 percent purchase insurance directly from an insurance carrier or have federal veterans’ benefits and 20 percent are uninsured, according to the Legislative Analyst’s Office CalFacts 2013.

“One last consequence of adverse selection is that it leads to an inefficient, often inappropriate distribution of health insurance across the population,” according to David M. Cutler, Richard J. Zeckhauser in a 1997 report. The report was quoted by the Assembly Health Committee in its Jan. 15, 2013 overview paper, “Health Insurance Informational Hearing: What Policy Makers Need to Know About Risk Pools and Adverse Selection.”

The committee is using 2013 statistics on California’s population, but referencing a report from 1997 on uneven distribution of health coverage. Since 1997, not only has Obamacare been enacted, but in 2003, President Bush signed into law a major expansion of Medicare drug provision to the elderly.

“One of the main reasons that adverse selection occurs is that there are so many insurance products available with varying levels of coverage and costs from which to choose,” the Assembly overview paper said. The health committee proposed to take care of this by standardizing insurance plans. “Thus, insurance companies will not be competing for enrollees primarily based on significant differences in the comprehensiveness of coverage,” the Affordable Care Act and California’s implementation “contemplates coverage among insurers based on price, quality and service instead of benefits or enrollee risk.” This is a model borrowed from the Kaiser health system, but implemented with the full powers of the state.

The federal government and the state of California are attempting to level the playing field and equalize health coverage. In doing so, they have to pass mandates on all insurance companies, preventing them from offering anything unique to Californians.

“As long as coverage is available outside the exchange, healthy individuals and groups may find cheaper policies, or employer-sponsored groups may self-insure, leaving only unhealthy groups in the exchange,” the overview paper said.

Critics pointed out that this is just what Obamacare would bring, leading to a degradation of the whole medical system in California, and eventually America.