How the State of California is Implementing Health Reform

In just one year, hundreds of thousands of Californians have benefited from the Affordable Care Act (ACA), according to a report by Linda Leu and Anthony Wright of Health Access. Their detailed report explains how access to healthcare in California is changing as a result of health reform. The following is a summary of the report including descriptions of actions that the state has already taken to implement healthcare reform as well as pending legislation.

By this time next year in 2012, even more Californians will see additional benefits from the Affordable Care Act, most notably low-income adults getting county based coverage. In addition, California’s Exchange will be putting the pieces together to begin enrollment in late 2013.

California, which has been trying for years to reform healthcare on the state level, was quick to take advantage of the new benefits and opportunities. This includes applying for new federal grants, passing legislation to implement and expand upon federal law, negotiating a Medicaid waiver with the federal government, and issuing new regulations and oversight of insurers.

On September 30, 2010, then-Governor Arnold Schwarzenegger signed about a half-dozen bills passed by the California State Legislature, bringing state law into compliance with the ACA. In some cases, the laws go beyond federal requirements. The legislature has introduced more than a dozen bills to continue to implement the federal health law.

Health Access says that California will need to adapt its individual market laws to the Affordable Care Act by January 1, 2014, so insurers cannot deny people with pre-existing conditions or charge different rates to cover them. The Pre-existing California Insurance Plan (PCIP) is ramping up its outreach and enrollment efforts, so the state can draw down as much of the $761 million (and potentially more) of federal funds available for California. The following is a description of how specific programs have changed.

Small Business Tax Credits
(Editor’s note: Small businesses will get incentives to purchase coverage through state-run health exchanges.) Starting in March of 2010, small business owners became eligible for tax credits of up to 35% of the their contribution to a health plan. Beginning in 2014, if they purchase coverage through an exchange, they will get tax credits of up to 50% of their contribution.

The tax credit applies to employers with fewer than 25 full-time employees that contribute at least 50% of the total premium. The full credit is available to businesses with fewer than 10 employees averaging less than $25,000 annual wages and phases out at $50,000. Non-profits qualify for up to 25% in tax credits.

The Healthcare Exchange
A lot of work is needed to get California’s Healthcare Exchange program ready for implementation by 2014 including hiring staff, building IT systems, providing for easy enrollment in coverage and eligibility in getting federal subsidies, organizing the marketplace so consumers can make good decisions, and setting up processes to negotiate for the best value for individuals and small businesses. Four of the five appointments to the Exchange board have been made and a first meeting is expected in the next month.

Rate Reviews
California received $1 million in federal funding to ramp up rate reviews. The Department of Insurance and Department of Managed Healthcare will be implementing new rate review procedures and looking closer at insurance company rate filings. AB 52 (Feuer), which would give the state the authority to approve or deny rates, is pending in the Legislature. Another bill, AB 51 (Alquist), would conform state law to the new rules on medical loss ratios; so at least 80% to 85% of premium dollars go to patient care, rather than administration and profit.

Small Group Rating
A bill in the California Legislature this year, AB 1083 (Monning), would establish reforms in 2014, so that small businesses don’t face price hikes when a few of their workers get sick.

Preventive Care Requirements
Up to 31 million Americans are expected to benefit from the requirements for private health plans to offer preventive services with no cost share for consumers. Many screenings, immunizations, and other preventive services are now available to consumers with no co-payments, co-insurance, or deductibles. Last year, Governor Schwarzenegger signed, AB 2345 (De La Torre), which puts the federal protections into California law.

Rescission Restrictions
Health plan rescissions had already decreased in California due to increased media and regulatory oversight, but legislative action was still pending. In 2010, Governor Schwarzenegger signed AB 2470 (De La Torre) to implement the new federal standards for rescission. California improves upon federal law with requirements that insurers continue coverage pending determination of rescission.

Lifetime Caps on Coverage
On September 23, 2010, the ACA required plans to begin phasing out annual limits. ACA bans all lifetime limits.

Coverage For Young Adults
An estimated 196,000 young adults are now eligible to stay on their parents’ coverage. Starting September 23, 2010, the ACA allowed parents to keep their children on their health insurance plans up to age 26. This could assist up to 4 million young adults nationwide and 196,000 in California. In 2010, California passed SB 1088 (Price), which conforms state law to federal law with regard to this new option for children up to age 26. CALPERS reports that 27,000 young adults are getting such coverage among its membership.
Starting in 2011, young adults who meet certain income requirements will also be eligible for the Low-Income Health Programs, which are county-based Medicaid expansion programs. In 2014, young adults will be among the nearly four million Californians who can get income-based subsidies for purchasing coverage through the Health Benefits Exchange.

Medicare Expansion
As many as 269,623 seniors and people with disabilities in California fell into the Medicare Donut Hole last year — a gap in coverage that required them to pay thousands of dollars out of pocket for prescriptions. Last year, 269,623 beneficiaries in California got $250 rebate checks. Starting in 2011, a 50% discount on prescriptions will close the coverage gap further. Additional measures will phase out the gap over the next several years. Preventive services, such as colorectal cancer screenings, mammograms, and annual wellness visits are now available to seniors enrolled in Medicare with no copayments, co-insurance, or deductibles. This will mean savings to 4.5 million seniors in California.

Over the next 20 years, the Affordable Care Act will slow Medicare spending by reducing waste, fraud, and abuse. These fraud prevention measures and other savings are expected to extend the financial solvency of the Medicare program by 12 years. These measures are also expected to lower out-of-pocket costs to beneficiaries. In 2018, beneficiaries can expect to save almost $200 a year in premiums and more than $200 a year in coinsurance. At the state level, one bill in consideration, AB 151 (Monning), would ensure guaranteed issue for seniors who switch from Medicare Advantage plans to Medi-gap coverage, regardless of health status.

Coverage For Pre-Medicare Retirees
Under ACA, $5 billion is available for a new reinsurance program to provide financial assistance to employers and union based plans covering early retirees ages 55 to 65. This includes 430,000 Californians who retired before they were eligible for Medicare. More than 100 California employers, union trusts, and others have received funding. A number of states have used reinsurance to lower premiums for small businesses. Savings for the plans will have to be used to lower costs for the enrollees.

Enrollment in Public Health Programs
Health Access said that California needs to streamline its eligibility and enrollment systems to make it easy to enroll in Medi-Cal, Healthy Families, subsidies in the new Exchange, or private coverage.

Medicaid Funding
A new Medicaid waiver, approved last year, takes advantages of opportunities under the ACA to provide $500 million in state budget fiscal relief to help prevent further Medi-Cal cuts. The ACA also establishes funding for innovations like healthcare homes and community health teams. It also increases funding to community clinics that provide Medicaid services and increases provider reimbursement in 2013.
California must conform to Medi-Cal rules in order to expand the program, in 2014, to those who are up to 133% of the poverty level — including adults without children at home. The federal government will fund 100% of the coverage of newly eligible enrollees for the first three years. The state must reform eligibility and enrollment procedures to streamline how Californians get coverage, so that it will be ready to enroll as many Californians as possible. Several bills advance these goals, including AB 43 (Monning), SB 677 (Hernandez), AB 1296 (Bonilla), AB 714 (Atkins), and AB 792 (Bonilla).
All California counties are working on plans to implement Low Income Health Programs. These programs use existing county health dollars and new federal matching funds to provide coverage to low income adults earlier than 2014. Under the state’s Medicaid waiver, counties can begin providing Medicaid-like coverage, this year, to medically indigent adults up to 200% of the Federal Poverty Level through the Low Income Health Programs (LIHP).
Implementation of the Medicaid waiver will continue including efforts to monitor how public hospitals are meeting their goals to improve quality and capacity. Starting this year, $9.5 billion in new funding will allow health centers to expand their services. They will be able to treat an additional 20 million patients and expand their medical, oral, and behavioral health services. Health Access says that Congress needs to protect funding for community clinics.
For more information, visit www.health-access.org.