Monday, October 11, 2010

California’s Health Insurance Exchange Law: Why Does It Matter?

The Affordable Care Act (ACA) has created a new system of health insurance exchanges. States can design and implement the exchanges to offer new opportunities for access to affordable, accountable health insurance. California’s law is the first in the nation..

Under the federal ACA, exchanges will open in 2014 to offer standardized insurance plans to individuals and small businesses, with subsidies available to people earning up to 400% of the federal poverty level. The California law creates a 5- member governing body with two important features. First, it must “take into consideration the cultural, ethnic, and geographical diversity of the state so that the board’s composition reflects the communities of California.” Secondly, its strong conflict of interest provisions exclude participation by active agents of the insurance and health care industries.

In a key provision for affordability, the state will have the right to engage in “selective contracting” with insurance plans, meaning it will be able to negotiate on premium rates. In addition, it has the right to “require carriers to offer additional products within each of” the five levels of coverage specified by the ACA. These could conceivably refer to supplementary dental plans.

The exchanges for individuals and small employers are initially separate. They could be united in the future, pending a study due by 2018.

The exchange must be self-supporting, after repaying an initial loan for administrative start-up, although there is a prospect for General Fund support. Critics have noted that this funding limitation could hamper the exchange’s viability.

The law includes other important features. It requires coordination with existing health programs. The exchange must provide “oral interpretation services in any language for individuals seeking coverage through the Exchange and makes available a toll-free telephone number for the hearing and speech impaired.” And, “The board shall ensure that written information made available by the Exchange is presented in a plainly worded, easily understandable format and made available in prevalent languages.” Further, the Board must “consult with stakeholders relevant to carrying out” its activities, including “health care consumers who are enrolled in health plans, individuals and entities with experience in facilitating enrollment in health plans, representatives of small businesses and self-employed individuals, the State Medi-Cal Director, and advocates for enrolling hard-to-reach populations.”

Read the bills here:

California Exchange Bill AB 1602

CA Exchange Bill – Senate Bill 900 (Governance)

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