(March 16 -- Special to The Bee)
Even as other states struggle to implement federal health reform - or decide whether to ignore parts of it - California is putting into place the final pieces of a plan to have the new system up and running by the end of the year. But tensions between the administration of Gov. Jerry Brown and Democrats in the Legislature could still scuttle that progress.
Lawmakers in the Assembly and Senate this month adopted separate versions of legislation that would enact a historic expansion of the Medi-Cal program for the poor and fold into state law federal reforms that will transform the private insurance industry into the near-equivalent of a public utility.
A new state agency, meanwhile, is building an Internet platform that is supposed to enable millions of Californians and small businesses to shop for coverage online beginning Oct. 1, using federal tax credits to pay a portion of their premiums. From all appearances, that system is on track to open on schedule.
One of the final hurdles for that online marketplace, to be known as Covered California, was cleared this month when lawmakers agreed on rules governing how insurance companies will be able to charge customers different prices based on where they live.
The Affordable Care Act, the federal law pushed by President Barack Obama and adopted by Congress three years ago, was designed to reduce as much as possible the variations in the cost of insurance by creating more cost-sharing in the system.
All plans, for example, will be required to cover everyone who applies, regardless of their medical history, and people who have been sick will be charged the same as people who are healthy. There will be no caps on the amount of care a person can get in a year or over their lifetime.
Insurance firms will be able to charge older customers up to three times as much as younger ones - a significant difference but still less of a gap than often exists in today's largely unregulated market. In fact, the insurance industry is warning that the change is going to drive up prices dramatically for young, healthy people who will now be asked to pay more to help bring prices down for older, sicker customers.
The other exception to flat pricing - geography - would divide the state into 19 regions, each with an average of about 2 million people. Sacramento, for instance, would be in a region with Yolo, Placer and El Dorado counties.
The number of regions is important because it determines the extent to which people who live in places where the cost of care is relatively low, like Los Angeles, will subsidize care for people who live in high-cost regions, like Sacramento. Sacramento tends to have higher health costs because it has only a few, large hospital companies that can drive a hard bargain on prices with insurers.
Having 19 regions should be enough to allow the insurance companies to price their coverage to reflect those cost differences. But the number of regions is low enough that it shouldn't allow the industry to cherry-pick and decide not to offer coverage, or price people out of coverage, in neighborhoods that tend to have more sick people. In today's market, the number of "regions" is essentially unlimited. Companies can charge two people living next door to each other vastly different prices based on their health history and other factors.
The other major piece of the reform - the expansion of Medi-Cal - is still the subject of negotiations between the Legislature and the governor.
What is nearly certain is that California will take full advantage of the federal offer to expand eligibility to more than a million state residents, mostly childless adults who have been excluded from public coverage until now. The federal government is promising to pay the entire cost of that coverage for the first three years, and then lower its contribution to 90 percent by 2020. Even then, California would be getting about $6 billion a year in health care while paying $600 million more from its general fund.
The coverage will be available to people earning up to 138 percent of the federal poverty level, or about $15,000 for an individual and about $32,000 for a family of four. The application process will also be streamlined, with recipients no longer required to document their income. Instead, eligibility workers will use an electronic database to verify the figures in a person's application.
People with incomes up to 200 percent of the poverty level, or $46,000 for a family of four, might also be eligible for Medi-Cal at little or no cost as an alternative to the private coverage available to them in the health exchange. The Legislature wants to provide this option because even with the federal subsidies, many low-income families will still find the cost of private coverage too steep for their budgets.
But exactly how those 1 million-plus low-income people will be served is still in question. Brown proposed two alternatives: simply expanding the state Medi-Cal program or having each of the 58 counties expand their current programs that cover low-income people who don't qualify for Medi-Cal.
The counties, and most experts who have weighed in on the issue, favor a statewide approach, which would be simpler and probably easier to administer. The bills in the Legislature implementing the expansion reflect that approach. But Brown has yet to agree to it.
The issue has become intertwined in a related debate about how much of the money the counties currently get to care for the poor should be shifted to the state. Brown, arguing that more people will be insured and so fewer will be using county programs, wants to take as much of that money as possible for the state. But the counties want to keep it, arguing that they will still be the safety net for 3 million to 4 million people who will not get coverage even after the Affordable Care Act is fully implemented. More than $1 billion annually is at stake.
The dispute threatens to delay final passage of the legislation, which would make it more difficult for the state, or the counties, to be ready to serve all the new people who will be eligible for Medi-Cal on Jan. 1, and required to obtain coverage.
But whether that coverage is available Jan. 1 or a few months later, California, with its new online market for private coverage and a vast expansion of its public program, still seems poised to lead the nation with the state's embrace, and implementation, of the new federal law.
Daniel Weintraub has covered California public policy for more than 25 years. He is the editor of the California Health Report at www.healthycal.org.