Covered California tightens belt

A free health and dental clinic. (Photo: Joseph Sohm)

Covered California, the first and largest state-sanctioned health insurance exchange created through the Affordable Care Act, is going to start the new fiscal year with less money.

A combination of lackluster enrollment and the loss of some federal funds that helped sustain it through its startup period are partly the reason, said Peter Lee, Covered California’s executive director.

“We are now in the process of standing on our own two feet,” Covered California Executive Director Peter Lee said on a conference call with reporters. “With the budget for fiscal year 15-16 we will be ending our reliance of federal startup funds, just as the law and our planning intended. That doesn’t mean our work will slow down.” The 2015-16 fiscal year begins July 1.

The budget tightening will not result in any layoffs among Covered California’s 1,394 state employees, although there may be cuts in private contract workers, he said.

Lee’s comments came the day before Gov. Jerry Brown unveils his revised budget for the new fiscal year. The document reflects the latest tax receipts following the April 15 filing deadline. There are reports that the state will have some $8 billion to $10 billion in new revenues reflecting an improved economy.

Despite that boost, however, Brown’s proposed budget likely will start Covered California off in the new fiscal year with nearly $200 million in unrestricted reserves, which is about $58 million, or 15 percent, less than projected expenditures in the current, 2014-15 fiscal year.

Covered California will also be able to use $100 million in funds from the federal government intended to cover startup expenses.

Lee said reducing Covered California’s budget is its plan to ultimately rely solely on the fees it collects from health insurance companies in addition to the reserves it’s saved up by using federal funds.

Lee said the agency is also able to make budget cuts because it’s already established and launched its technical systems and has built a brand through consumer outreach.

Projections currently estimate about 1.4 million consumers enrolled in the exchange in early 2014, about 300,000 less than had been projected. “We’re going to continue to work just as hard as we have to get the word out (on enrollment),” Lee said.

After being reviewed and revised, Covered California’s governing board will finalize this proposed budget next month.

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