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Covered California board proposes to cut budget because of slower enrollment



May 14, 2015
Area(s) of Interest: Advocacy Health Care Reform 

Due to tepid enrollment numbers, Covered California’s board of directors has proposed to spend $58 million less in 2016, slashing its marketing and outreach program by 33 percent. Open enrollment in Covered California fell short of its goal of 1.7 million this year, ending with the number of enrollees at 1.4 million.


Additionally, the exchange must pay its own way in the future after receiving $1 billion in federal money. And while it still has some $290 million in reserve for 2016, the exchange projects that fewer than 1.5 million people will sign up for next year.


Several factors contributed to the falling numbers of enrollees, but pundits say some uninsured still find the cost of health insurance unaffordable despite premium subsidies. Because state law prohibits Covered California from drawing on state general funds, its primary source of revenue is the $13.95 tacked onto every individual enrollee policy. The state will retain this fee, but it will be unchanged from the previous year in an effort to hold down premiums for enrollees. Maintaining the monthly fee will raise $233.2 million in revenue.


Next month, the exchange’s board is expected to take a final vote on the proposed $332.9 million budget for the fiscal year starting July 1, 2015. Negotiations are also underway with health plans on their 2016 exchange products, for which initial rates have already been submitted.


Despite the fact that California was one of the worst performing states in terms of the change in enrollment this year, with less than a 1 percent increase, Covered California projects that it will enroll 1.48 million next year and it hopes to reach nearly 2 million by 2019. This slight increase allowed Florida to overtake California as having the most exchange enrollees, though this is no doubt due to Florida having a larger potential subsidized enrollee population on account of its lack of an expanded Medicaid program.  Some states reported significant enrollment increases – Connecticut reported a 39 percent increase, while New York saw a 10 percent increase.


The exchange signed up nearly 500,000 new enrollees during its second open enrollment period, but it also lost a significant number of customers. It retained 65 percent of the reported 1.4 million people it originally signed up. People whose incomes fell were shifted to Medi-Cal (160,000), with fewer than expected enrollees migrating to Covered California from Medi-Cal.


Health insurers also have predicted higher churn in the health exchange as the economy recovers and more people gain health care coverage through work.

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