Covered California, the new statewide Marketplace for private health insurance, recently announced proposed rates it negotiated on behalf of Californians. The fact the rates were significantly lower than most had projected is great news for the implementation of the Affordable Care Act (ACA) and for Californians.
Nevertheless, political opponents are on the attack and, bafflingly, they are using the current, dysfunctional individual insurance marketplace as some kind of gold standard for comparison. They are muddying the waters, comparing comprehensive coverage and rates in Covered California to individual plans currently offered in the individual marketplace, many of which are junk or close to it. It’s like comparing the quality of a Lincoln to that of a Yugo.
The state’s current individual insurance marketplace is a wreck, as over 7 million uninsured Californians can attest. A market that works so well millions of Californians can’t afford coverage? What a well functioning marketplace, or so the naysayers say. The current marketplace leads to coverage denials based on pre-existing conditions, bankruptcies and foreclosures for families when someone gets sick, is underinsured, denied a claim or lacks coverage.
Unfortunately, illness is unavoidable. Fortunately, getting ill and losing you’re life savings isn’t what’ll happen when Covered California opens its doors in January 2014.
Covered California’s policies are standardized, making apples-to-apples comparisons possible. Soon consumers will even be able to compare the quality rating between plans. In fact, being able to compare plans for cost and quality, which is next to impossible today, is a major driver for reform. Covered California will work to give Californians clear, concise information about their choices in the new Marketplace.
Covered California’s rates include “essential health benefits”—a broad array of services including office visits, hospital stays, prescription drugs, mental services etc.–, covering pre-existing conditions, chronic conditions and acute care. Additionally, the ACA ensures low- and middle-income families pay no more than eight percent of their income on health insurance. At Covered California, paying premiums and crossing your fingers in hopes your insurer will cover your illness will be going the way of those lawless Wild West days as well
Covered California will pool purchasing power, negotiating rates for millions of Californians who currently lack the clout to effectively negotiate for themselves. A fairer comparison than the one naysayers offer would be between Covered California’s rates and those offered by California’s small employer market. Keep in mind; this is still apples to eggs. While both markets don’t allow pre-existing condition exclusions, small employer coverage isn’t standardized, employee out-of-pocket costs aren’t capped, and they vary greatly and are rising rapidly.
That being said, let’s assume the average small employer-sponsored plan is approximately equivalent to a silver plan offered by Covered California, since both represent a middle ground in terms of premiums. The average premium in California’s most expensive market, San Francisco, is $403 in the small group market compared to $351 at Covered California—that’s a 13% lower average premium. In fact, the average can be as low as 29% in Los Angeles.
It is nearly impossible to compare today’s plans to the new Marketplace being delivered by Covered California. Nevertheless, it is clear Covered California will significantly improve the offerings for consumers, making it easier for Californians to make apples-to-apples comparisons about their choices. More importantly, it will be easier for California individuals and families to budget for healthcare, to know they have coverage they can rely on and are more economically secure.