USC News

Health policy experts at USC sound off on ‘Covered California’

By Emily Bazar

February 26, 2013

Jan. 1, 2014.

“That is the date that is equivalent to when Medicare took effect 50 years ago,” said Peter Lee, executive director of the California Health Benefit Exchange.

On that day, the exchange will debut as a new health insurance marketplace for millions of Californians.

The exchange is a major piece of President Barack Obama’s signature health care law and will provide federally subsidized health coverage to individuals and families making between 138 and 400 percent of the federal poverty level, which was up to $92,200 for a family of four in 2012.

Lee and other health policy experts convened on Feb. 6 in Sacramento to discuss the exchange — recently named “Covered California” — and how it will fundamentally alter the state’s health insurance market.

The panel was sponsored by the USC Price School of Public Policy and the Leonard D. Schaeffer Center on Health Policy and Economics.

According to Lee, 2.6 million Californians will qualify for subsidies on the exchange. About 2.7 million Californians won’t qualify, but they will be able to buy unsubsidized insurance on the exchange or outside of it.

All of them, he said, will benefit from monumental changes to the insurance market that are part of Obamacare.

For example, insurance companies will no longer be allowed to reject people who have pre-existing medical conditions. Nor will they be allowed to charge older people more than three times what younger people pay for coverage.

And plans must offer certain benefits in categories ranging from maternity and newborn care to prescription drugs.

Unsubsidized plans sold outside of the exchange must meet the same requirements.

“The vision we have is all Californians getting access to care,” said Lee, who also addressed some of the challenges that face the exchange, which will offer plans through an online website.

He pointed out that nearly half of Californians who will be eligible for subsidies on the exchange are Latino, and about 14 percent is Asian, so the exchange must tailor its marketing and materials to a diverse audience that speaks many languages.

And though Lee has said in the past that he wants the experience of buying health insurance on the exchange website to be as easy as shopping on Amazon.com, he admitted that this wasn’t the best analogy.

“It won’t be that simple, I’ve got to confess,” he said. “We think it will be as easy as can be. And we will have a service center of people answering calls. We will have trained assisters … helping people that need help in person.”

The exchange plans to open in October with an open-enrollment period, with coverage to commence in January.

The state will be divided into eight regions, and plans will be tailored to residents in each region, Lee said.

But for this market to work, consumers must make good choices, said Dana Goldman, a health economist and director of the Schaeffer Center.

Goldman has studied decision-making among Medicare users purchasing prescription drug coverage, also known as Medicare Part D.

He found that many consumers don’t understand basic differences between the available plans and costs. And over time, the number of plans and their benefits has decreased, he said.

That’s why the exchange must be studied closely to determine how cost and coverage change over time.

“We have to be careful about monitoring what’s going on,” he said. “California has the advantage that we have eight laboratories of regions that are going to have different things going on,” Goldman said, “and the key will be to draw lessons from what’s going on in each of those regions.”

Bob Kocher, a former member of the Obama administration who helped craft Obamacare, sounded an optimistic note.

He believes health plans will change their offerings to fit consumer tastes and needs, giving buyers more power on the exchange.

“Every year on the health insurance exchange, you could go buy a different health plan,” he said. “That’s making health plans actually stop thinking like insurance companies and at least begin thinking like a cellphone company and hopefully better, like a retailer.”

Kocher went so far as to suggest that consumers may actually begin to enjoy purchasing health insurance, a comment that drew chuckles from the crowd.

“The health insurance product you buy is the most expensive thing you buy every year. It ought to be as fun as buying an iPhone,” he said. “And we’re going to be on that path.”