Enter, stage left, the Health Benefit Exchange

The clock is ticking on a crucial aspect of health care reform in California.

As the Jan. 1, 2014 deadline approaches, preparations continue at the Health Benefits Exchange, the organization that will oversee the state’s implementation of President Obama’s national healthcare reform. In 2010, California became the first state in the country to enact legislation establishing an exchange, which will allow Californians to shop online for coverage at competitive prices.

Here’s how it will work.

Private insurers that meet a set of minimum coverage requirements are collected into a single online hub. The plans are sorted into pre-defined tiers, dubbed Bronze, Silver, Gold and Platinum, that correspond to different levels of payment and coverage. Bronze plans would have the lowest monthly premiums, but would require the highest copayment for medical expenses, and vice versa for Platinum. By going to the exchange website, prospective buyers can choose from a variety of companies at a variety of prices.

Comparing rival plans often pose a challenge to consumers, but the Exchange believes that buying coverage ultimately may prove as straightforward as purchasing books off Amazon or a new hard drive from Frys.

The hope is that by demystifying the process of shopping for health insurance, more uninsured Californians will look into purchasing coverage and reap the benefits of federal subsidies.

“We’re trying to work out ways to streamline it.” says David Panush, the Exchange’s Director of Government Relations. “The process should be simple.”

Following federal rules, the degree of coverage will be uniform across the tiers. Pre-existing conditions, meaning any personal medical history beyond age, location, and tobacco use, will not be factored into rate calculations.

In order to qualify for the exchange, an insurance plan must offer the 10 “essential” benefits outlined by the ACA: hospitalization, maternity, and mental health care, as well as ambulatory, emergency, prescription, rehabilitative, laboratory, preventive, and pediatric services.

Knowing each plan conforms to the same coverage template, new ratepayers can base their decision on easily comparable bottom-line prices. “It’s apples to apples.” says Gerald Kominski, Director of the UCLA Center for Health Policy Research. “If a you see two identical plans and one costs $100 more per month, that company is going to have to justify the extra cost somehow.”

As an additional incentive to use the Exchange, families and individuals earning less than 400% of the poverty level (in 2012, four times the poverty level would be $44,680 per year for individuals and $92,200 for a family of four) will also have access to federal subsidies in the form of tax breaks to help pay for coverage under an HBEx plan.

Those earning less than 138% will qualify for free Medicaid coverage under the auspices of Medi-Cal. Meanwhile, tax penalties will be phased in for families and individuals who remain without coverage longer than three months and who would not have to pay more than 8% of their annual income in premiums.

Ideally, ease of use and access to tax breaks will attract a large pool of potential ratepayers to the HBEx, giving it the power to bargain collectively on their behalf with the insurance companies who come looking for new customers. But a lot depends on the enthusiasm of the private sector. Although the board is currently awaiting a second federal grant to continue setting up shop before enrollments begin, after 2015 the HBEx is expected to fund itself entirely using fees collected from participating companies.

A “Basic Health Plan” option for those with incomes above the 138% cut-off but below 200% of the poverty level, proposed by Ed Hernandez (D-West Corvina) in Senate Bill 703, will be debated in the legislature in the coming weeks. This program would re-allocate tax subsidies for ratepayers within this income bracket to create a separate single-payer plan for them, similar to Medi-Cal.

A study released on Aug. 10 by the UCLA Center for Health Policy Research and the UC Berkeley Center for Labor Research and Education suggests that a Basic Health Plan for this income bracket would increase overall coverage in California, but reduce the number of Exchange enrollees available to private companies and thereby hurt the HBEx’s bargaining power.

Either way, the Exchange anticipates a substantially broader base of health insurance coverage starting in 2014. Californians increasingly seem to share this optimism, with some reservations. A Ffield Poll released in August (See Page xx) showed support for Affordable Care Act at 54%, with the number claiming to “strongly support” the law is up from 31% in 2011 to 38% in 2012. However, a plurality of 46% believed the reforms would have “not much impact” on themselves and their families.

Of course, how these results will translate into participation when the Exchange opens its doors for pre-enrollment in October 2013 remains to be seen. Next year, the Exchange also will be conducting preliminary tests of the system.

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