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Minimum wage hike might boost California exchange plans

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Some job market news that’s good for California workers could be bad for the state’s public health insurance exchange.

Budget analysts at the state-based Affordable Care Act (ACA) exchange, Covered California, talk about the possible effects of good job market news on coverage sales in a 2016-2017 budget proposal.

California Gov. Jerry Brown recently signed a bill that will increase the state’s minimum wage to $10.50 per hour Jan. 1, 2017, from $10 per hour today. The minimum wage is supposed to rise to $15 by 2023.

Covered California budget analysts are also expecting employers in California to continue to grow, and to continue to reduce the state’s unemployment rate.

An increase in what low-wage workers earn should help exchange plan sales, but a stronger job market may hurt sales, the analysts write.

Today, the analysts say, California has 1.4 million people who get health coverage from Covered California; 700,000 who have off-exchange individual coverage; 18 million who have employer-sponsored group coverage; 12 million who have Medicaid; 1.6 million uninsured people who are eligible for ACA exchange plan subsidies; and 1.4 million uninsured people who are not eligible for ACA exchange plan subsidies.

If low-wage workers earn more, because of an increase in the minimum wage or market forces, that should push some workers out of Medicaid, the analysts say.

In the past, the analysts say, workers who have lost Medicaid coverage due to rising earnings have been less likely to sign up for exchange plan coverage than the exchange had expected. But a consulting firm told Covered California, which is based in Sacramento, California, that the impact of a rising minimum wage could be the biggest driver of additional enrollment through 2020.

The analysts see employment growth as a major risk factor: About 44 percent of Covered California users who giving up exchange coverage do so because they are moving into employer-sponsored group health plans.

About 27 percent leave Covered California because they become eligible for Medicaid, Medicare or military health programs, and 13 percent buy individual coverage outside of the exchange system.

Because of the enrollee churn, Covered California needs to acquire about 700,000 to 900,000 new enrollees every year just to achieve moderate net growth, the analysts say. 

See also:

Covered California reboots its small-group division

California agents back Web firms

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