The Potential Impact of Health Care Reform on California: Consumer Affordability

1. Dylan H. Roby, Ph.D. Assistant Professor of Health Services, UCLA School of Public Health Research Scientist, UCLA Center for Health Policy Research This project is supported by The Potential Impact of Health Care Reform on California:Consumer Affordability

2. Patient Protection and Affordable Care Act (HR 3590)“The Senate Bill” Subsidies in the Health Insurance Exchange (100%-400% of FPL) Premium Credits Available if you are: 1) not offered Employer-Based coverage; 2) offered Employer-Based coverage with a low actuarial value (less than 60%) or would spend 9.8% of income on the employer-based premiums. Cost Sharing Credits Based on increasing actuarial value of purchased policies Out-of-Pocket Spending Maximums (based on income) For example, 100-200% of FPL ($1,983 single / $3,967 family)

3. Affordable Health Care for America Act (HR 3962)“The House Bill” Subsidies in the Health Insurance Exchange (133%-400% of FPL) Premium Credits Available if you are: 1) not offered Employer-Based coverage; 2) previously a CHIP enrollee (>150% of FPL) Cost Sharing Credits Based on increasing actuarial value of purchased policies Out-of-Pocket Spending Maximums (based on income) For example, 100-200% of FPL ($500 single / $1,000 family) Maximum amount of $5,000/$10,000 over 350% of FPL

4. Comparison of Individual Market Premium Spending: National vs. Western U.S. Source: Analysis of Medical Expenditure Panel Survey

5. Premium Subsidy Thresholds versus Current Spending in the Individual Market Source: Analysis of Medical Expenditure Panel Survey

6. Who Would Benefit from the Premium Subsidies? • Based on the median, it does not look like higher-income families would benefit from the subsidies. • However, the distribution of spending throughout the population tells us otherwise: • In the Senate bill, an individual or family can opt-out due to financial constraints if premiums are greater than 8% of their income. • In the House bill, the opt-out threshold is 12% of income • Potential Financial Opt-Out Rate for incomes over 400% of FPL: Senate (14%) and House (5%)

7. Concerns with the Affordability Provisions • There are currently 706,000 uninsured individuals in California with incomes over 400% of FPL • If 5% opted out due to the House provisions – 35,000 uninsured • If 14% opted out due to the Senate provisions – 99,000 uninsured • About 7% of employer-based households (300-400% of FPL) pay over 9.8% in their share of premiums • These estimates are based on 2007 data in 2009 dollars, given the increases we are seeing in the uninsured and insurance premiums, we could be underestimating the necessity for affordability protections for higher income groups • In combination, premium subsidies, cost sharing, and out-of-pocket limits may protect many from high health care costs. • However, many families will still face significant costs that they cannot afford: • UC Berkeley Labor Center Spending Calculator: • http://laborcenter.berkeley.edu/healthpolicy/index.shtml#calculator

8. The Future State of California (under health care reform) • Expansion of Medi-Cal Coverage • Close to 2 million Californians could be added to Medi-Cal • Under the House bill, CHIP kids would be added as well unless they opt into the Exchange • Although affordability is protected for this group, the ability for Medi-Cal beneficiaries to access primary care providers is not yet clear • The House bill calls for Medi-Cal fees to equal Medicare rates • Under the Senate bill, additional FMAP may not be enough to increase fee schedule and guarantee access • Existing Medi-Cal HMOs may be able to fill needs using their existing networks of private physicians • Community Health Center investment in both bills • Children in third grade will find the words “Actuarial Value” and “Silver Plan” on their vocabulary quizzes

9. The Future State of California, Continued • Potential for Basic Health Plan development (Senate Bill) • California will be especially skilled at delivering this type of care due to Health Care Coverage Initiatives and existing local plans • If state chooses this model for 133-200% of FPL group, those individuals would not be eligible for subsidies in the Exchange • State flexibility • In 2007 reform effort, there was exploration of using subsidies up to 600% of FPL – is that necessary in CA? • Will California be able to use CMS waivers and waivers to the national plan to expand coverage and fill in the gaps? • What will happen to Share of Cost beneficiaries? • Could states opt for more generous protections that might need less monitoring (SCHIP approach)?

10. Closing Thoughts • If the Senate bill is passed by the House, the affordability protections are solid, but could improve • Californians will be more likely to hit the financial opt-out thresholds than people in other states • Three times as many Californians would qualify in the Senate bill when compared to the House bill – Opportunity for Reconciliation • Although this reform was not designed specifically for California, it would certainly help many low-income Californians (<133% of FPL) • It would provide better transparency and regulation in the health insurance market, that could enable consumers • Risk of starting from scratch on these complex issues • These premium and cost-sharing subsidies and OOP maximums were designed fairly well, and starting from scratch and keeping it simple is a risk