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Federal Healthcare Reform Hits Home

news1California health insurance exchange could benefit up to 25,000 locally

Of an estimated 40 million Americans without health insurance, about 55,000 live in Santa Cruz County, according to the 2010 Community Assessment Project for the county. In other words, one in every five county residents is currently uninsured, and that number has been increasing since 2008.

This will change dramatically when the Affordable Care Act [ACA], President Barack Obama’s flagship policy that aims to create near universal health coverage for Americans, goes into effect in 2014.

A cornerstone of The Patient Protection and Affordable Care Act, which was signed into law in 2010 and upheld by the Supreme Court last month, is the creation of Health Benefit Exchanges in every state—one-stop healthcare shopping malls where consumers and small business owners can browse, compare and purchase health insurance plans best suited to their needs.

California's Health Benefit Exchange, which has been in development for two years, is scheduled to begin operating as soon as the law goes into effect.

Larry DeGhetaldi, president of the Palo Alto Medical Foundation, says that the Exchange is a way of making the free market work for people who are not eligible for single payer coverage under MediCal or MediCare and not covered by their employer.

“The aim,” he says, “is to maximize market efficiency and create affordable insurance.”

As a one-stop shopping center, the California Exchange is designed to promote competition between healthcare insurance providers.

California Assemblymember Bill Monning, of the 27th District, says “companies are competing with each other to provide their product at a less expensive rate.” Monning has worked hard to pass legislation that supports the Exchange. “Part of the theory is that the free market keeps those costs down,” he says.

news1-2Jaimi Ellison is the owner of Santa Cruz Core Fitness and Rehab, where she says she cannot currently afford to provide her small staff with health insurance. She hopes the Affordable Care Act will change this. The ACA also establishes certain requirements that health insurance companies must meet. This helps to ensure that people shopping in the Exchange are comparing similar products, says Alan McKay, the executive director at Central California Alliance for Health, which serves Santa Cruz and Monterey counties.

“Benefits will be standardized across different models, so you're comparing apples to apples when looking at two different insurance products,” he says.

Among those requirements, Monning says, are that insurance companies will no longer be able to turn customers down based on pre-existing conditions. They will no longer be able to set lifetime limits on customers' care or annual spending caps, and they can no longer drop their customers after they get sick. Insurance companies will also be required to provide preventative care with no deductible fees.

The difference in plans will be the pricing for the consumer and how high of a deductible they choose, Monning says.

The Exchange will employ a community rating, which assures that insurance companies offer plans to all customers at the same price, regardless of their medical history, adds McKay.

Of course, requiring insurance companies to insure people with preexisting conditions is a costly proposition for those companies, and to compensate for those increased costs, they would have to raise their premiums. That, says McKay, is where the mandate comes in.

Monning explains that with everyone mandated to purchase health insurance—old and young, healthy and sick—insurance companies can afford to lower their premiums because they will be insuring a larger risk pool.

He says the mandate will bring many more people into insurance companies' risk pool.

The more healthy people, and especially young people, who purchase insurance, the more economically viable the risk pool.

“And because of the individual mandate, many young people who previously might have opted out of buying coverage will now be required to participate,” says McKay. “So their premium dollar goes into the pool that can be extended to even out the premium costs of the entire group that's using the Exchange.”

DeGhetaldi describes the Exchange as a “great experiment and good policy,” but is concerned that even with the mandate, not enough young and healthy people will enroll. If people have the income to purchase health insurance but choose not to, they will be fined on their tax return.

“All [the government] can do is withhold a tax rebate,” DeGhetaldi says. “So there aren't a lot of teeth to the mandate.”

Competition will likely drive prices down and make participation in the Exchange more attractive, but for some people, health insurance plans will still be too costly. Because the ACA law mandates that everyone purchase insurance, the federal government will provide means-tested subsidies that consumers can apply to the cost of the insurance they buy through the Exchange.

DeGhetaldi says 20,000 to 25,000 of the uninsured people in Santa Cruz County will qualify for subsidy-assisted insurance through the Exchange. People qualifying for these subsidies can have an income of up to four times the poverty level.

For example, a family of four with an income of $92,200 would still qualify for premium subsidies, according to Kaiser Health.

The remaining uninsured population will be covered by other ACA provisions, such as MediCal, which will be expanded to include people with incomes up to 133 percent of the poverty level.

The ACA also makes subsidies and tax credits available for businesses to purchase health insurance for their employees through the Exchange.

Since 2010, business owners with fewer than 100 employees have been eligible for tax credits that cover up to 35 percent of the premiums they pay to insure their workers, and in 2014 the tax credit will increase to 50 percent.

Employers with 50 to 100 employees will have to pay some form of tax on their tax returns if they do not provide coverage for their employees, Monning says. “For small employers, they will be able to make an informed decision on what's best for the economy of their business,” he says.

Jaimi Ellison, owner of Santa Cruz Core Fitness and Rehab, says that as things are today, she cannot afford to provide her small staff with health insurance, but she is very interested to learn how she could purchase her employees an affordable plan through the Exchange.

If the cost of buying the insurance with subsidies and the savings in tax credits were close enough, she says she would go for the plan that covers her employees.

“It's a no brainer,” Ellison says. “Any way I can create benefits for my employees, I'm going to do it.”

Ellison herself is currently uninsured, she says, and she knows from experience that it is smart to have a plan. Twelve years ago, when she was 18, Ellison was hit by a car while riding her bike. She had healthcare coverage through her family's plan back then. Without it, she says, she would have gone bankrupt after the hospital bills.

“I know I should have it,” she says. “Everyone should have it.”

Monning says the only way the ACA goes down now is if the law's opponents take control of both houses of Congress and The White House come November. If that were to happen, which he thinks unlikely, the California Health Benefit Exchange would still go forward.

He says that when it comes to increasing accessible healthcare for Californians, “there is no turning back.” 

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