New Analysis Shows the Health of Californians Enrolled Is a Key Indicator of the Individual Market’s Stability and Success

SACRAMENTO, Calif. — A new analysis shows that California continues to benefit from attracting a healthy mix of enrollees to its individual insurance market through significant investments made by Covered California in marketing and outreach. These investments have resulted in more-stable rates and enrollment. The health of California’s consumers is a critical element of the state’s overall stability and will play a significant role in informing Covered California’s rate negotiations for 2019, which determine the prices consumers will pay regardless of their receiving subsidies.

“A healthy pool of consumers is the foundation of the stability of California’s individual insurance market because healthier consumers mean lower premiums for everyone, which helps promote more enrollment,” said Peter V. Lee, executive director of Covered California. “From the start, Covered California has focused on enrolling a healthy mix of consumers, and this analysis provides new evidence that investing in promoting enrollment is essential and pays off in the form of reduced premiums for those who do not receive subsidies.”

The study, titled “National vs. California Comparison: Detailed Data Help Explain the Risk Differences Which Drive Covered California’s Success,” was posted today on Health Affairs, a prominent website devoted to health policy and issues affecting health and health care. The analysis was conducted by Wakely, a nationally recognized health care actuarial consulting firm, along with Covered California’s chief actuary, John Bertko.

The study’s three key findings:

  • California’s individual market risk score is about 20 percent lower than the other states’ average risk score from 2015 through 2017.
  • Covered California’s risk scores are lower than the national average across every metal tier (Bronze, Silver, Gold and Platinum) for each of the three years examined.
  • California’s off-exchange enrollment, where consumers enroll outside of Covered California but generally get the same products at the same prices as they would on-exchange but without the benefit of the federal tax subsidy, remained relatively constant from 2015 to 2017. The rest of the nation’s off-exchange enrollment decreased substantially during that same period. This decrease is important because off-exchange enrollees tend to be healthier than average, and these are individuals who do not have the federal tax credit to make coverage more affordable.

“A healthy and stable individual market is one that works for both subsidized and unsubsidized consumers,” Lee said. “In California, we have seen remarkable stability in the number of unsubsidized consumers in the individual market since 2015, while the rest of the nation has seen a one-year drop of 20 percent in coverage for consumers who do not receive any financial help. This decline in coverage translates to 1.3 million Americans being unnecessarily priced out of coverage.” (See Table 1.)

The study pointed to four key reasons why California has been successful in attracting and retaining a healthier mix of consumers:
  1. California expanded its Medicaid program, known as Medi-Cal, and studies show that states that expanded Medicaid coverage have lower risk scores.
  2. States that established their own marketplace, such as Covered California, have lower risk scores than states that rely on the federal marketplace.
  3. Covered California and other state-based exchanges tend to invest more in marketing and outreach, which are critical to enrolling new consumers.
  4. Covered California’s patient-centered benefit designs, which are standard across plans in each metal tier, help reduce consumer confusion.

Lee noted that for states supported by the federally facilitated marketplace, the higher risk scores and decrease in enrollment are likely to get worse with the federal administration’s decision to underinvest in marketing, which was reinforced with the recent cutback in outreach funding for the federal Navigator program.

“Enrolling and keeping consumers in health care coverage is an ongoing process that takes ongoing investments. Marketing and outreach are critical to informing the public about their options and educating them about the value of coverage,” Lee said. “When you pull back on these elements, you will see fewer healthy consumers enrolling, which will lead to higher premiums for unsubsidized consumers in those markets.”

An estimated 13 million people are enrolled in the individual market across the country. Of those, approximately 5 million do not receive any financial help. A Covered California analysis found that most unsubsidized consumers are not high-income earners and have a median annual income of $75,000 (see Table 2).

The most recent data shows that California’s uninsured rate fell to a record low of 6.8 percent at the end of 2017, down from 17 percent at the end of 2013 before coverage was available through the Affordable Care Act.