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Intro to the California Health Insurance Exchange

A key building block of health care reform, the California Health Benefit Exchange,  was signed into law by Governor  Schwarzenegger last week in response to federal law.  States are mandated by the Patient Protection and Affordable Care Act to form insurance exchanges, have them certified by Health and Human Services by January, 2013 and operational by January, 2014.   California is the first state to respond.

Described as the lynchpin of health care reform, these exchanges will provide a website-based marketplace for purchasing health insurance.  5 basic insurance plans ranging from a basic catastrophic plan for people under 30 to a premium benefit-rich plan will be offered by various insurance companies.  Detailed information regarding the plans and the insurance companies providing them will be available on the site allowing shoppers to understand their options and make choices.  A toll free number manned by ‘navigators’ will offer ‘live’ help in using the system and answering questions.  The exchange will also provide those who qualify information about government health insurance subsidies.  People with incomes 133% of the Federal Poverty Level who qualify for an expanded Medicaid program will use the exchange as a ‘doorway’ to a special Medicaid program.

The objective of the exchange is to make health insurance accessible and affordable particularly to people who otherwise would be uninsured or could not afford insurance.  To that end the people who could use the new system to purchase health insurance are limited to:

  • - people who qualify for subsidies.  (beginning with anyone with incomes at or below 4 X the Federal Poverty Level ($64,000 for individuals or $88,000  for a family of 4) - people who do not receive health insurance benefits from their employer

    - people who are self-employed

    - people who are un-employed and not eligible for Medicare

    - employers of small businesses, purchasing insurance for their employees

These people ordinarily would be assigned high insurance rates because they’re not part of a large risk-sharing group.  Large pools of people usually have a good mix of healthy and sickly, young and old resulting in a lower group rate.  With projected 2-4 million people joining the exchange, relatively cheaper rates are possible.  Also, offering just 5 standard plans should bring administration costs down further.

Much about the exchange is still unknown.  The Department of Health and Human Services has yet to issue all the guidelines and the individual states must figure how this new government entity fits in with existing entitlement structures and how, exactly, it will function.  To do this, a health exchange governing board of 5 people appointed by the governor and the state legislature will be named to make this happen.

“Accessible and Affordable Health Care for All” is what a health insurance exchange is designed to bring about.  But did you know that it’s been tried before?  California established one in 1993; but it was discontinued in 2006.  Massachusetts set one up 4 years ago; and today, their insurance rates are the highest in the country.    What are chances this one will succeed?  We’ll be looking at that next.

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