California Forges Ahead With Its Health-Insurance Exchange While Others Dither

State-Run Health Insurance Exchanges …which States are making progress?

When did dithering equate to leadership? Never. California is not dithering and is leading the way on State-Created Healthcare Exchanges. As you all know, I am on the board of San Diego’s largest Hospital system and we have been working to understand the full impact of Obamacare and the implementation of State-Run Health Insurance Exchanges.

Everyone in the California healthcare profession understands this simple fact : “Uninsured people cost billions to the State of California and our Healthcare providers”. The Exchanges will offer some new options that will reduce the number of uninsured Californians and we are all watching closely.

While we are all watching the Exchange’s become a reality in California, I have been listening to 17 “Denyasaurus” Governors (not in California) explain why they are choosing to abandon the concept of State-Created Health-Insurance Exchanges and instead allow the Federal Government to set up the Exchanges in their states. What? States that hate federal involvement actually asking for federal involvement? I must be dreaming? Do I see “Bigfoot Riding a Unicorn” again?

More on that later.

California is steaming ahead with their Exchange and the board responsible for creating the Exchange has already arrived at a benefit package. They have chosen a benefit structure that resembles an existing Kaiser plan. This package of benefits is already in the market and appears to be well accepted by workers, individuals and employers in the State already covered by Kaiser. In other words, instead of attempting to create a new benefit structure which no insurer in the state would be offering and might struggle to implement, they instead chose a plan already functioning in the state at a very visible premium. Smart.

Although full details of the Exchanges are under development and States are working with Health and Human Services on the details and the rules, California has now published an RFP to all insurers that want to write insurance in the new Exchange. By arriving at the benefit structure to be included in the Exchange, the insurers are able to develop a cost model for the service and are moving closer to being able to identify the premium cost for providing the service. The benefits package chosen by the California Exchange and the fact all insurers are singing out of the same hymnal should ensure the public is provided the same options regardless of the insurer. Cool.

We are seeing an influx of new insurers and are seeing a new-wave of insurers that are developing plans that are a direct-link between the patient, doctor and the hospital with drastically-reduced operating expenses because the plans no longer need traditional “insurance-brokers” to be sold in the state. These insurers are instead acting more like “Visa and MasterCard” – simply functioning as a source of reimbursement instead of attempting to intercede in the concept of care-management. They choose to leave care-management to the docs. Not bad.

No one knows if these new “insurers” are going to make it however one thing is clear, the interest in insuring a large population of Californians is very appealing to a number of companies.

Californians that qualify for the Exchange will be able to do 2 things they could never do:

1. Purchase a suite of health insurance benefits at the same price as offered to everyone else in the State. No more small-group insurance cost that is too expensive. Now, an insurer that writes in the State Exchange will charge everyone the same price. California residency is the “Group” now.

2. Purchase health insurance that belongs to the individual and not the company. This insurance will be portable and will give the individual a measure of security they have never had before.

I will update you on the progress of the California Exchange model as it develops over the next few months.

One more bit of news. Although the shortage of Primary Care doctors has been declining for years, California is seeing a surge in medical professionals. While it takes time to build a workforce, there appears to be a realization that while the independent doctor with cash patients may be on the decline, the number of doctors and medical groups working for someone else is on the increase. Dr. Welby will always have a place in California’s diverse economy, as will Specialty Doctors; however, the market has turned. The concept of managing the working details of the business operation is being replaced by a new care-giver model – with Docs working for someone else. These new care-givers are the source of a growing workforce in the state which is not expected to abate..

Before I close, I want to get back to Governor Denyasaurus and attempt to understand the logic … or the absence of logic, of their willingness to let the Feds set up exchanges in their States.

Their logic: “…let the Feds be responsible for providing and managing the exchanges in my state because we Governors do not like the Feds telling us what to do, (States-rights), and we think the exchanges will fail. We also think the exchanges will cost our states too much money to administer”.

Keep in mind , many of these States are enthusiastic supporters of States-Rights and also have the highest percentage of uninsured residents. These States also won their argument against the Feds by challenging an Obamacare provision that would force the states to set-up their exchanges by denying them Medicaid reimbursement on non-Obamacare programs. The Supreme’s told the Feds “no blackmail would be allowed”. States won the right to say no. Now what?

What does the dog do when it actually catches the car??

What is very interesting is how these states now seem to understand the needs of their population and are therefore asking the Feds to set up the Exchanges that those at 130-150% of the poverty level may access. In addition, these exchanges allow businesses with under 50 employees – especially lower wage paying businesses – to fell good about not offering healthcare at work because they know their employees will be able to procure health insurance through the Exchanges. The States clearly see the Exchanges have a benefit to the State and their residents. Yet something is holding them back.

One more point, hospitals and providers are going to freak when they find out their State chose to stick them with more unreimbursed care – especially when there was a way to provide them with relief via Obamacare.

As you know, the Feds reimburse 100% of the cost of a State-run Exchange for 4 years and the reimbursement falls to a low of 90% over a 10 year period. The savings related to exchanges is expected to save a state between 8-12% of their uninsured cost over a 10 year period so the 10% not being reimbursed is anticipated to be a wash. Yes, I know you’re skeptical as we should all be, however the reality is this: uninsured healthcare costs related to poor and working class folks are costing States $millions so something must be done to get these folks insured.

Now the concept of savings covering the 10% gap can be pie-in-the-sky wishful thinking or there will be States that get it figured out and make it work. Either way, the fact that the costs are covered for 4 years is enough to get the other 33 States to set up their own exchanges in a creative manner that will reduce the long-term cost of un-reimbursed healthcare expense for uninsured residents.

I am still laughing at these Gov’s because I predict over the next 6 months, with the exception of a few die-hards, the hold-outs will eventually set-up their own exchanges … quietly and out of the view of the cameras. These Dinos will ultimately care about their extinction as all of them surely know the value of getting poor and working-class residents covered under some type of health plan.

Until then, California steams ahead with the creation of their State-Run Heath Insurance Exchanges.

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2 Responses to California Forges Ahead With Its Health-Insurance Exchange While Others Dither

  1. btg5885 says:

    Vincent, this is very well done. With your perspective, you hit many nails on their heads. CA’s approach is very practical – use a plan in the market and build off that. Yet, the doing something part is key and the governors who are failing to act are doing a disservice to their state. I was talking with a benefit consulting professional who spoke of the states who won’t accept the additional Medicaid money or build the exchanges as if that was the end of it. On the former issue, the hospitals will lobby very heavily to reluctant governors to take the money for the very reason you mentioned – money up front beats chasing elusive money on the back end anyday. But, the key to all of this is having more folks insured will take the care out of the ER when it has become catastrophic and expensive and place it in doctors offices and clinics on a preventive basis. That will be a huge savings. Plus, with the “60 Minutes” piece on HMA which showed the pressure on ER doctors to admit patients from the ER regardless of need, it will save that money and risk. By the way an article in today’s paper of a study by VA Commonwealth University and Wake Forest University said that Obamacare saved consumers $1.5 billion in 2012. Most of that came from refunds from insurers who were making too much profit from premium dollars. Well done. BTG

  2. btg5885 says:

    Vincent, no new comment, other than to say happy holidays. I check in periodically for new posts, but your paying and volunteer jobs are likely keeping you busy. Take care and best wishes, BTG

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