Republicans in Washington appear poised to repeal the ACA, better known as Obamacare, some time after Donald Trump is sworn in as president. With premiums on the rise and consistently poor polling, repeal is music to the ears of many, as evidenced by every federal election since the measure was passed in 2010.

However, a partial repeal would cause Californians to lose hundreds of thousands of jobs, billions of dollars in annual federal funding and kick millions of people out of coverage. Some of the losses would be offset by gains elsewhere, but it’s impossible to give a complete analysis of the offsetting effects without Republicans’ replacement plan.

What we know

Even with Republican majorities in Congress and a Republican president, a full repeal of the ACA is unlikely, due to a 60-vote threshold in the Senate that would require at least a handful of Democratic votes.

UC Berkeley Labor Center analysts used a 2015 partial-repeal bill that was ultimately vetoed by President Barack Obama to estimate the effects. Under that bill, California would lose $20.5 billion annually in federal funding for low-income subsidies and expanded Medi-Cal coverage.

As a result of that lost funding, 3.7 million Californians would lose Medi-Cal coverage, while another 1.2 million would lose subsidies, which may or may not make coverage unaffordable. 

Offsets

The billions in lost federal funds would be offset by smaller gains elsewhere, like $6.3 billion in tax cuts to California insurers and high-income earners. A repeal could also remove the requirement to have coverage, saving $1.3 billion in penalties for the uninsured. 

The study estimates approximately 250,000 jobs would be lost from repeal. However, approximately 41,000 jobs would be created through tax cuts, as well as through eliminating fees on insurers, penalties to companies for not providing coverage and penalties for the uninsured.

Popularity

Polling and electoral results have repeatedly shown the law to be unpopular with the public nationally, and Californians are facing an expected average increase in premiums by 13.2 percent next year. 

Nationally, the public is divided on the law. In November, 45 percent of adults had an unfavorable impression of the law, compared to the 43 percent who had a favorable impression, according to a Kaiser Family Foundation tracking poll.

Republicans have incrementally seized power in Washington on a repeal platform ever since Democrats passed the ACA in 2010 with their own congressional majorities and president, Barack Obama. In 2010, Democrats lost the House. In 2014, they lost the Senate. And in 2016, they failed to regain the Senate and lost the White House.

On several fronts, California Democrats have used the tail end of this political season to push for advances on their health care agenda — with mixed results. 

In Sacramento, they succeeded in passing legislation targeting health care cost sticker-shock after several recent misfires. “The unexpected charges come when patients are treated by an out-of-network provider at an in-network facility,” NPR explained. “After several failed attempts in recent years, the California legislature last week passed Assembly Bill 72, which aims to protect patients’ pocketbooks when they’re hit by these surprise bills. Gov. Jerry Brown has until the end of September to sign or veto the legislation. He is expected to sign it into law.”

“A 2015 Consumers Union survey suggests the surprise bill phenomenon is fairly common,” the station added. “It found nearly 1 in 4 Californians who’d had hospital visits or surgery in the prior two years reported receiving an unexpected bill from an out-of-network provider.”

Waiver wanted

In Washington, D.C., meanwhile, a who’s who of members of Congress hailing from California tried to flex their muscle around California’s unlikely request that the federal government allow unlawful and undocumented immigrants in state to access health benefits under Obamacare. “In a letter announced Wednesday, 37 members of California’s congressional delegation asked Treasury Secretary Jack Lew and Health and Human Services Secretary Sylvia Burwell to accept California’s request for a waiver that would allow the state to offer health care to an estimated 50,000 undocumented immigrants,” TPM reported. 

“The letter is just the latest in the fight to expand health care coverage to California’s undocumented population. In June, California Gov. Jerry Brown signed a bill passed by the state’s Legislature that allowed California’s undocumented population to buy their own health insurance on the state’s exchange, Covered California. However, a special federal waiver — a 1332 waiver — is needed before the state is allowed to enact its law.”

It hasn’t been clear whether President Obama could be moved to take action before the end of his term in office. He has already wound up under immense personal pressure to convince insurers to remain committed to the Affordable Care Act’s health care exchanges, despite a growing sense in industry that doing so will be harmful.

Unaffordable care

“With no lifeline coming from the divided Congress, Obama and his administration are redoubling their pleas for insurers to shore up the federal health care law and pushing uninsured Americans — especially younger ones — to sign up for coverage,” Politico observed. “The administration is nervously preparing for its final Obamacare open-enrollment season just a week before Election Day, amid a cascade of headlines about rising premiums, fleeing insurers and narrowing insurance options.”

“But six years after passage of Obama’s signature domestic achievement, the litany of woes afflicting the Obamacare marketplaces is formidable. Enrollment has plateaued at half of what was projected. Three major insurers have largely quit, citing big losses. Double-digit rate hikes are the norm for plans across the country. And roughly one in five Americans may find just one insurer selling plans in their area when they shop for 2017 coverage.”

At the same time, although California’s exchange program has been one of the biggest relative success stories for the ACA, the state’s health cost burden has continued to rise over time. A new study released by the University of California Los Angeles Center for Health Policy Research revealed that “spending is projected to total more than $367.5 billion in 2016, with about 71 percent covered by public funds when additional resources such as the Affordable Care Act subsidies and county spending are included,” according to U-T San Diego.

Indeed, California Democrats pushing the White House used the problem as ammunition for their own waiver goal, arguing before the press “that denying undocumented immigrants health care was only driving up the long-term costs of health care,” as TPM recalled. “Without insurance coverage, many immigrants have been forced to depend on emergency services to be treated.”

Struggling to prove that it has stabilized its business model, Covered California rebuffed criticism from industry leaders burned by their Obamacare experience, while a new state report called the exchange’s own practices and plans into question.

Most recently, Covered California fired back at charges that it shared responsibility for hundreds of millions in losses incurred last year nationwide. “In a blistering critique, Covered California’s executive director, Peter Lee, said UnitedHealth Group Inc. made a series of blunders on rates and networks that led to a $475 million loss in 2015 on individual policies across the country,” NPR reported. “The company estimates a similar exchange-related loss of $500 million in 2016.”

“Lee, a staunch defender of the health law and a former official in the Obama administration, has tangled with UnitedHealth in the past. He knocked the company for sitting out the launch of Obamacare in 2014, then welcomed UnitedHealth into Covered California for 2016.”

Leveling off

The company’s tortured relationship with California’s health exchange culminated in an analyst conference call where CEO Stephen Hemsley warned UnitedHealth “can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.” Observers interpreted the call as a signal that other insurers were getting nervous about the health exchanges’ prospects for self sustaining.

Analysts have tangled over the likelihood that Covered California’s numbers have already begun to plateau — that is, add participants at around the same rate as the previous year. “Despite Covered California’s $29 million marketing campaign to publicize the exchange, many uninsured Californians continue to say they can’t justify paying for health insurance, even if they have to pay a large fine for remaining unprotected,” according to the San Jose Mercury News, which suggested numbers could come in just 100,000 above the previous enrollment period. “The exchange set a goal of enrolling 295,000 to 450,000 Californians who had never bought insurance through the exchange before.”

Audited

Even the state’s own auditor, Elaine Howle, has joined the fray with a sobering judgment on the stability of Covered California. In a report that calls the exchange “high-risk,” the auditor noted that its business model must now shift away from Washington subsidies, increasing the pressure to make up the difference by taking a cut of sales. “Federal funding will expire this year,” Capital Public Radio noted. “That will leave Covered California to rely solely on revenue from health insurers. The amount they pay is dependent on how many people enroll in insurance plans through Covered California.” The exchange has applied a charge of $13.95 each month on each plan it sells. “The audit says, with limited data from the program’s short history, it’s hard to know if Covered California’s enrollment projections will be correct,” according to CPR.

The auditor also focused attention on the issue of competition. It “criticized the exchange for not sufficiently justifying its decision to award a number of large contracts without subjecting the contractors to competitive bidding,” as CNBC reported. “The audit found that 9 of the 40 justifications for sole-source contracts the exchange issued ‘were insufficient’ according to the policy adopted by the exchange’s own board.” According to the Sacramento Bee, Howle questioned the exchange’s spending habits:

“Without competition between prospective firms, the health insurance exchange couldn’t be assured its contractors were the most qualified — or cost-effective — auditors said. They cited the example of the agency’s third-largest overall contract, a marketing and outreach pact with Weber Shandwick for nearly $134 million.”

Penalty warning

The current enrollment period, the exchange’s third since the Affordable Care Act began to be implemented, offered its officials — and allied Democrats — an opportunity to breathe a sigh of relief. After a very rocky start, especially through the federal enrollment process, Obamacare found traction as its parallel expansion of Medicaid coverage gained adherents even among some Republican governors. But even though critics have contended that the evidence suggests Obamacare still faces a cloudy future, Covered California has so far managed to rack up the kind of enrollments capable of keeping it going.

At a recent press conference, top California Democrats touted the state exchange’s numbers to date. “Nearly 1.3 million people have received access to vital treatment at top hospitals through the health insurance program known as Covered California since it launched in January 2014, Democratic Leader Nancy Pelosi announced this week at a press conference held at UC San Francisco,” the university reported.

On the other hand, Peter Lee, the exchange’s executive director, also used the conference to warn residents that penalties for flouting the individual mandate would go into effect, warning Californians to sign up “rather than send a check to the IRS.”

A full court press

The so-called “tax penalty” referenced by Lee, which the Supreme Court authorized to enforce the implementation of Obamacare, has now been expected to “run into thousands of dollars,” according to the Sacramento Bee. To avoid the lower enrollment numbers, riskier pool of insureds, and bad business and political publicity associated with them, Covered California officials went into overdrive this year to keep signup numbers looking respectable enough to keep off critics’ heat. “They’ve spent $29 million on advertising, opened 500 storefronts, beefed up call centers and trained hundreds of health insurance enrollment counselors who speak 12 languages, from Arabic to Vietnamese,” as the Bee reported. “They’ve also rolled through 21 cities in a statewide bus tour to highlight this year’s open enrollment season, projecting the words ‘Enroll Now’ on iconic buildings such as Sacramento’s Tower Bridge and San Francisco’s Coit Tower.”

Covered California was rewarded with an uptick in signups, which, in an apparent irony, created administrative burdens great enough to force the extension. “Friday’s announcement came after a surge of enrollment, which saw tens of thousands sign up for health care plans this week leaving certified enrollers with more applications to file before the deadline Sunday,” the Orange County Register noted. “The extension will help prevent consumers from getting turned away just because they got ‘caught up in a wave of last-minute shoppers,'” as Lee described the situation.

Technical difficulties

Although the federal government did not offer a similar extension through its own web portal for signups, analysts surmised that California faced some problems similar to those that have plagued Obamacare’s online registration process in the past. “In previous years, the federal government was forced to extend the open enrollment deadline because of glitches with its website, long wait times for customers and other technical issues with the enrollment process,” the International Business Times noted.

“This year, California likely faced similar issues, as the California Health Care Foundation found in an analysis that customers frequently struggled to complete online applications, even if they spent hours trying to figure them out.”

Whereas Maryland, another state to extend its deadline, had to contend with customers impacted by the massive blizzard that recently hit the eastern seaboard, California didn’t put forward weather as an excuse, the IBTimes added.

Expanding the exchange

Officials have set their sights on increasing enrollment by upping the public profile of the state exchange, which has struggled in years past to fully connect with potential customers. “There are 750,000 California residents without insurance that are eligible for Covered California,” according to CBS San Diego, with an estimated 2.2 million uninsured Californians eligible for subsidized coverage through either Covered California or Medi-Cal. According to the Los Angeles Times, the total population of uninsured Californians sat at around 4 million. “Of those, officials estimate that 1.4 million would qualify for Medi-Cal, the state’s Medicaid program for low-income residents.”

This time around, added the Times, an informal goal has been set to sign up 295,000 to 450,000 more residents over the three month enrollment period. “We want to make sure all uninsured Californians know that financial help is available to help people buy health insurance and that they can join thousands of Covered California consumers who are getting the care they need when they need it,” said exchange chief Peter Lee, as CBS San Diego noted.

Hoping to avoid service problems that plagued the exchange in previous enrollment periods, Covered California has also moved to staff up its telephone operators. “The scramble is on for up to 500 temporary call-center workers to answer questions and help enroll consumers,” the Sacramento Business Journal reported. “Virginia-based Faneuil Inc., in partnership with InSync Consulting Services in Roseville, won a $12 million contract for the business early this month.” Last year, however, the size of that contract hit $14 million.

Keeping subsidies central

Subsidized care has emerged as a centerpiece of Covered California’s effort to get and keep new enrollees. Officials believe that widespread public ignorance around subsidies has limited signups. “One of the biggest hurdles,” Lee told the Sacramento Bee, “is that more than a third – 36 percent – of uninsured Californians don’t realize they’re eligible for financial subsidies, according to a recent survey. That compared with 84 percent of uninsured who were aware of the existing federal tax penalty for going without health care coverage.”

But the vast majority of plans have already benefitted from subsidies. “Covered California has 1.3 million consumers, about 90 percent of whom receive subsidies to help cover their premiums,” the Times noted.

Bigger seen as better

The move was widely interpreted as reflecting an industry incentive under the Affordable Care Act to consolidate in order to leverage economies of scale. “The Affordable Care Act imposes limits on health insurers’ profits, so these companies view consolidation as the best way to lower costs and take advantage of rising revenues,” the Los Angeles Times noted.

But Anthem CEO Joseph Swedish insisting that the new mega-company was a win for consumers. “Going forward our new company will deliver an acceleration of innovative and affordable health and protection benefits solutions that help address our health system’s challenges and provide supplemental insurance protection, and health care security to consumers, their families and the communities we share with them,” he said.

With health costs continuing to climb upward, however, consumer groups questioned whether fewer choices and less attractive rates were around the corner. And California insurance commissioner Dave Jones told the Times “he doubts there will be any significant benefits from this round of mergers,” emphasizing that “increased consolidation has resulted in less competition and higher pricing.”

In a statement responding explicitly to the Anthem-Cigna merger, Jones expressed even greater skepticism. “California’s health insurance market already suffers from consolidation, with the four largest health insurers in the individual market controlling more than 85 percent of the market,” he said, the Daily News reported. “Further consolidation will result in even less competition among health insurers and will leave consumers and employers with fewer choices and the potential for greater premium increases. Studies of prior mergers of health insurers found that health insurance prices increased as a result of mergers.”

Mixed evidence

Defenders of the post-Obamacare regime in California argued that the projected rise in rates — a bit less than last year’s — ought to be read, along with the addition of new Covered California participants, as good news. “The average premium will rise 4 percent in 2016, a slight decrease from the 4.2 percent jump in 2015,” according to the Associated Press, citing Peter Lee, the state exchange’s executive director. “Larry Levitt of the nonpartisan Kaiser Family Foundation said Covered California appears to be gaining momentum with several major insurers jockeying for market share and substantial enrollment. It’s unclear how the rest of the private market will look yet, he said.”

On the other hand, the 4 percent average has yet to be confirmed by regulators, and in large areas of the state, increases will be as much as twice as high. “On average, Northern Californians will see a 7 percent increase in 2016 premiums, compared with a 1.8 percent increase in the state’s southern half,” the Sacramento Bee reported, with some consumers poised for double-digit hikes. “An average 40-year-old individual in a midrange Silver plan will pay $384 in the state’s north versus $296 in the south, according to Covered California. In the four-county Sacramento region, where 78,000 individuals were signed up for coverage in 2015, the increase will be 8.2 percent.” Those figures reflected the limit of increased competition afforded by the entry of United Healthcare into the Northern California market, where its coverage area includes Amador, Butte, Calaveras, Sutter, Yolo and other counties, according to the Bee.

Meanwhile, the Bee observed, California families whose beneficiaries are spread across Medi-Cal and Covered California plans have encountered a daunting mix of bureaucracies that have yet to interface efficiently: “Health insurance agents, who have been responsible for a large percentage of Covered California enrollments and help consumers navigate the process, are nearly powerless to help their mixed-coverage clients.”

“After surpassing its first year goal by 400,000 — signing up 1.1 million people in private plans — Covered California’s enrollment climbed to only 1.3 million this year, wildly off its 1.7 million target for 2015,” the San Jose Mercury News reported, calling the situation a “crossroads.”

“Experts are watching carefully because the financial health of the exchange depends on growing its number of enrollees. If that doesn’t continue — or even backslides — shrinking dollars could threaten the way the exchange now operates. Finally, provisions of the law designed to offset possible losses for health insurers will expire in 2017. That could also impact premiums — and enrollments — even further.”

The rocky road recalled to mind warnings from early Obamacare critics who raised the specter of a so-called “death spiral” brought on by insufficient enrollment to even out insurance risk across pools of beneficiaries. But according to the Mercury News, “Peter Lee, Covered California’s relentlessly upbeat executive director, remains unfazed.”

Lee has invested much of his time and reputation in the exchange’s success, at least relative to other, ailing setups in states around the country. Steeling his nerve, Covered California recently “awarded its executive director a $65,000 bonus,” just “four months after giving him a 24 percent raise,” as the Los Angeles Times observed. That brought Lee’s annual salary to $333,120, according to California Healthline. (Meanwhile, Deputy Director Yolanda Richardson saw her yearly pay rise over 11 percent to $265,668; all told, the exchange’s top 14 most highly-paid executives all cleared five figures in income per month.)

Rising rates, unknown figures

One explanation for the handsome compensation packages would be familiar to advocates of high pay for CEOs in the private sector: retaining talent. Some consumer advocates, according to the Times, “have credited Lee with securing lower-than-expected rates from health insurers the last two years and reaching substantial enrollment of nearly 1.4 million people.”

But California Insurance Commissioner Dave Jones dismissed that claim. In an interview with State of Reform, Jones characterized California’s health insurance providers as a virtual monopoly, “attributable in part to decisions made by Covered California and unchecked rate increases as top issues.”

Inside and outside the exchange, he said, “you have an extraordinary concentration of the market going to a handful of carriers. As a result, they function in a classical economic sense as monopolists or oligopolists who are able to dictate prices for what is an essential good that people desperately need and are willing to pay just about anything to get.”

Jones has raised hackles among Democrats for challenging Covered California’s effectiveness and propriety. But activists further to his left have created bigger headaches. Not all consumer groups have been kind to Covered California executives. In a letter to Lee, Santa Monica-based Consumer Watchdog demanded that Covered California release its planned rate increases for next year. California “has successfully lobbied the federal government to delay public disclosure of qualified health plan rate change proposals for 2016,” the organization noted, becoming the only state in the nation to do so.

“Citizens of every other state now have access to proposed rate hikes, except the people of California, who are already disadvantaged by the absence of rate regulation in this state,” the letter warned.

Privacy worries

Complicating the picture of Covered California’s health, the exchange has spread unease among would-be allies by forging ahead with a controversial centralized data plan.

“Exchange officials say they’re planning to create a large database with information on patients’ doctor and hospital visits, and prescription drugs. The information could be used to determine whether patients are getting appropriate care,” KPBS reported, but “privacy rights experts are raising some questions.”

Concerns have extended to the prospect of a further leveling off in enrollment. “We’re very concerned that it’s going to chill people from getting health care,” said World Privacy Forum executive director Pam Dixon.

Two years later, the Kaiser Family Foundation has issued a report that suggests these warnings were more accurate than the upbeat predictions of Covered California Executive Director Peter Lee. A key finding:

“Among adults who say that they pay a monthly premium for their health coverage, nearly half of newly insured adults (47 percent) say it is somewhat or very difficult to afford this cost, compared to just 27 percent of adults who were insured before 2014. When looking specifically by type of coverage, 44 percent of Covered California enrollees (not all of whom are newly insured) report difficulty paying their monthly premium, versus a quarter of adults with other types of private coverage. Medi-Cal enrollees do not pay monthly premiums for their coverage.”

Cost, not glitches, slowing CA sign-ups

The Kaiser report, which was based on interviews with 4,555 Californians, says the cost factor is the biggest barrier to higher enrollments, not online technical snafus:

“Cost continues to prevent many uninsured adults from seeking coverage. While many people focused on website glitches and administrative barriers during 2014, uninsured adults say that the reason they still lack coverage is because it’s too expensive, with most not even trying to get ACA coverage, and many who did still saying they are ineligible or believe the coverage is too costly.”

The cost of premiums is also prompting Californians to quit Covered California, KCRA TV in Sacramento reported, citing documents showing that 150,000 people dropped their state coverage in 2014.

These developments come in a pivotal year for Covered California — the last year in which federal subsidies will help cover the subsidies provided by the state agency. By law, beginning in 2016, the agency cannot seek state subsidies and must rely only on revenue it generates from premiums. Its goal was to have 1.7 million residents enrolled by Feb. 15, but it fell far short, with 1.4 million signups.

More criticism from national media

Meanwhile, Covered California is again provoking comment from outside of California. A May 31 Columbia Journalism Review essay by Trudy Lieberman criticized coverage of the agency as misleading:

It’s not easy to figure out how to monitor the progress of Covered California, the country’s largest state-run health insurance exchange.

 

Is it the total number of people who have signed up for an insurance plan on the exchange during open enrollment? The rate at which people renew? The number of new sign-ups in a given year? The number of Latino sign-ups? The number of “covered lives”? The number of Californians who have had coverage through the exchange at any point? Or, simply, the overall rate of uninsured adults across the state?

 

“In recent months, Covered California has cited each of these measures to tout its success. And though outside analysts have raised some notes of caution, press coverage has largely followed the lead set by the exchange. The result is coverage that has too often been reactive, short on enterprise, and with missed opportunities to ask some necessary questions. Covered California may ultimately have a success story to tell — but it will need to face some sharper skepticism before we can be sure.”

Lieberman wrote that California journalists should spend more time talking to affected state residents about their experiences with the agency and be less inclined to accept Covered California’s characterizations of its record.

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.

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, 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.

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. “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:

“HealthCare.gov 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 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.

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[.]”