The head of California’s state-based Affordable Care Act public exchange program says poorly designed efforts to stabilize the individual health insurance market could backfire, by chasing healthy people out of the market.
Peter Lee, the executive director of Covered California, talked about the possible side effects of health system change Tuesday, during a Covered California board meeting in Sacramento, California, that was streamed live on the web.
Lee gave the board a presentation on the American Health Care Act draft that the House Ways & Means Committee and the House Energy & Commerce Committee approved March 9.
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Lee said anyone looking at that the AHCA proposal, or others, needs to recognize that big increases in out-of-pocket coverage costs for low-income or moderate-income consumers will cause many to do without health coverage.
“We want to foster the right mix of risk,” Lee said.
If would-be ACA changers try to reduce out-of-pocket coverage costs for people in their 20s by increasing out-of-pocket costs for people in their 50s and 60s, insurers might attract more healthy young enrollees, Lee said.
But insurers might lose especially large numbers of older enrollees who happen to be healthy, and already pay higher premiums, and that could hurt their benefits-to-revenue ratios, Lee said.
The AHCA draft would replace the current income-based ACA premium tax credit subsidy with an age-based tax credit. The tax credit would phase out for individuals earning more than $75,000 per year and families earning more than $150,000. For consumers under the phase-out level, the tax credits would not vary with income.
Covered California analysts looked at how the age-based tax credit would affect typical exchange plan users in Los Angeles or San Francisco.
In Los Angeles, the tax credit amount could be better for typical Covered California users earning more than $30,000 per year, but it could cut subsidies by more than one-third for 62-year-olds earning less than $20,000 per year, according to the analysis.
For Covered California users in San Francisco, the AHCA tax credit would be roughly comparable to the current ACA tax credit for people in their 20s and 40s who earn $30,000 per year, but it would lead to a big subsidy cut for 62-year-olds who earn less than $20,000
A 62-year-old in San Francisco who earns $20,000 per year and now gets an $11,016 annual ACA premium tax credit subsidy might get a subsidy of just $4,000 under AHCA tax credit rules, according to the exchange analysis.
Lee also gave the Covered California board an enrollment update.
The exchange ended the open enrollment period for 2017, which started Nov. 1 and ended Jan. 31, with about 1.7 million enrolled in coverage or on track to make their first payments for coverage.
Total enrollment was up from 1.6 million at the end of the open enrollment period for 2016.
The number of enrollees, or likely enrollees, who were new to Covered California fell 6.1 percent, to 412,000, down from 439,000 for the 2016 open enrollment period.
The number of returning enrollees increased about 18 percent year-over-year, to 1.3 million.
The number of exchange-certified insurance agents increased 2.6 percent, to 15,075.
- The number of employers with Covered California group coverage increased 18 percent, to 4,315, and the number of people with Covered California group coverage increased 19 percent, to 32,684, or about 1.5 percent of the California residents in small-group plans.
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