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Introduction to the Affordable Care Act and Covered California

Participant Guide

Version 3.0

Covered California Participant Guide Course Name: Introduction the Affordable Care Act and Covered California Version 3.0

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Table of Contents

1. Course Objectives ................................................................................................... 1

2. Affordable Care Act Overview ................................................................................ 1

OVERVIEW OF THE LAW ............................................................................................................... 1

THE SUPREME COURT’S DECISION ON THE ACA ........................................................................... 2

AFFORDABLE CARE ACT CHANGES IMPLEMENTED PRIOR TO 2014 ................................................ 2

“GRANDFATHERED” HEALTH PLANS ............................................................................................ 3

AFFORDABLE CARE ACT CHANGES IMPLEMENTED IN 2014 ........................................................... 4

3. Major Changes to Healthcare with the Affordable Care Act ................................ 6

MINIMUM ESSENTIAL COVERAGE .................................................................................................. 6

PEOPLE NOT REQUIRED TO HAVE HEALTH INSURANCE .................................................................. 7

CALCULATING THE PENALTY FOR NOT HAVING HEALTH COVERAGE .............................................. 8

IMPROVEMENTS TO MEDICAID .....................................................................................................10

HEALTH INSURANCE EXCHANGES ................................................................................................11

HOW MARKETPLACES ARE STRUCTURED .....................................................................................12

FUNCTIONS MARKETPLACES PERFORM .......................................................................................12

ESSENTIAL HEALTH BENEFITS ....................................................................................................12

NO WRONG DOOR ENROLLMENT OPPORTUNITIES ........................................................................13

4. What is Covered California? ................................................................................. 13

COVERED CALIFORNIA OVERVIEW ...............................................................................................13

HOW DID COVERED CALIFORNIA START? ....................................................................................14

HOW IS COVERED CALIFORNIA FUNDED? ....................................................................................14

MISSION, VISION AND VALUES .....................................................................................................14

WHAT INSURANCE IS OFFERED BY COVERED CALIFORNIA? ..........................................................15

5. What is Covered California’s Individual Market? ................................................ 16

WHAT SERVICES ARE OFFERED THROUGH COVERED CALIFORNIA’S INDIVIDUAL MARKET? ............16

WHEN CAN INDIVIDUALS AND FAMILIES ENROLL? ........................................................................16

HOW DOES COVERED CALIFORNIA’S INDIVIDUAL MARKET WORK? ...............................................16

WHO CAN APPLY IN COVERED CALIFORNIA’S INDIVIDUAL MARKET? .............................................17

WHO IS COVERED CALIFORNIA’S PRIMARY POPULATION? ............................................................17

HOW DOES COVERED CALIFORNIA ADDRESS CONSUMER NEEDS? ...............................................18

HOW MANY CALIFORNIANS ENROLLED IN THE FIRST OPEN ENROLLMENT? ...................................19

6. Introduction to Covered California’s SHOP Market ............................................ 19

OVERVIEW OF COVERED CALIFORNIA’S SHOP MARKET ...............................................................19

ELIGIBILITY FOR THE SHOP MARKET ...........................................................................................20

PRODUCTS AND SERVICES ARE OFFERED THROUGH COVERED CALIFORNIA’S SHOP MARKET ......20


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SMALL BUSINESS TAX CREDITS, AMOUNTS AND DURATION ..........................................................21

ELIGIBILITY ................................................................................................................................21

STEP BY STEP PROCESS OF APPLYING FOR SHOP COVERAGE ....................................................21

SHOP’S PRIMARY POPULATION ..................................................................................................22

7. Endnotes ................................................................................................................ 24


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1. COURSE OBJECTIVES

Understand the fundamentals of the Affordable Care Act

Understand the new health insurance options available through the Affordable Care Act

Describe the time frame for implementing the new health insurance options in the Affordable Care Act

Understand the new requirements for individuals to have health insurance

Understand the Affordable Care Act’s insurance reforms

Understand “Essential Health Benefits”

Describe the expansion of Medi-Cal

Describe the new health insurance “Exchanges” or “Marketplaces”

Define the origin, background and values of Covered California

Describe the individual market and its primary target audience

Describe the Small Business Health Options Program (SHOP) market and its primary target audience

2. AFFORDABLE CARE ACT OVERVIEW

OVERVIEW OF THE LAW

The Patient Protection and Affordable Care Act (ACA) was signed into law on March 23, 2010. It is designed to increase the number of Americans with health insurance and cut the cost of health care. The ACA made significant changes to the way health insurance is provided, and paid for, in the United States with the goal of reaching near-universal coverage, improving both quality and affordability for millions of Californians. Some of the major changes include:

Insurance market reforms, such as a ban on denying coverage to people because they have a pre-existing condition

A new requirement that nearly everyone must have coverage

The creation of “Marketplaces” that will give people a new way to shop for and enroll in a health plan that best meets their needs

Increases the affordability of coverage through an expansion of Medicaid (Medi-Cal in California) and creation of new premium assistance and cost sharing reduction programs for those who buy Marketplace coverage

New initiatives aimed at making it easier and more affordable for small businesses to offer coverage

Improvements to Medicare such as free preventive services, cancer screenings and annual wellness visits; better coverage for prescription drugs for seniors; and a bolstering of the program’s financial stability

Although not covered in detail in this training material, the ACA also included sweeping changes to the health care delivery system in the United States (US), major new public health initiatives, and a range of provisions aimed at financing the ACA.


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A number of the ACA improvements went into effect in the months immediately after passage, but many of the most important coverage changes went into full effect in 2014.

THE SUPREME COURT’S DECISION ON THE ACA

In the aftermath of its passage, the ACA was subject to a number of court challenges, primarily on the theory that its requirement that most Americans have health insurance (i.e., the individual mandate) was unconstitutional. On June 28, 2012, the Supreme Court confirmed the constitutionality of the individual mandate, and with it related insurance reforms for achieving the ACA’s goal of near universal coverage. However, the Court also held that states may opt out of the Medicaid expansion for adults. California has opted to expand Medi-Cal, California’s Medicaid program.

AFFORDABLE CARE ACT CHANGES IMPLEMENTED PRIOR TO 2014

Most of the changes to healthcare went into effect on September 23, 2010, six months after passage of the ACA. The following table describes the changes implemented prior to 2014:

Change Description

Young Adult Coverage Young adults can receive dependent coverage under their parents’ health plan up until their 26th birthday.

Preventive Care

All new health plans must cover specific preventive services and medical screenings. These services include mammograms and colonoscopies, recommended immunizations, and additional preventive care and screenings.

No Lifetime or Annual Limits

Health plans are prohibited from imposing a lifetime dollar limit on the essential health benefits, such as hospital stays, a consumer receives. In 2014, the law also prohibited plans to set dollar amount limits for key health benefits during a person’s lifetime.

Scrutiny of Rate Increases

Federal funding is provided to states to support them in tracking, scrutinizing and reviewing proposed health insurance rate increases. Effective September 1, 2011, most individual and small group plans had to participate in the rate review process. Health insurance companies must provide a reason for any increase in premiums.

Ensuring Premium Dollars are used for Health Coverage (Medical Loss Ratio)

Beginning August 2012, health plans had to provide rebates to consumers if they spent too much of their premium dollars on administrative expenses, such as marketing, profits and salaries, rather than on medical care and improving health care quality. Specifically, individual and small group insurers must pay rebates if their medical loss ratio (the percentage of premiums spent on reimbursement for clinical services and activities that improve health care quality) is not at least 80%. Large group insurers must pay rebates if their medical loss ratio falls below 85%.


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Change Description

Ban on Pre-Existing Condition Exclusion for Children and Adults

Health plans are banned from imposing pre-existing condition exclusions on children under the age of 19. The ban on excluding coverage of pre-existing conditions was extended to adults as part of the broader set of 2014 insurance reforms.

Other Improvements to Health Insurance

Health plans must comply with new requirements to sharply limit the circumstances under which they can cancel coverage (known as rescissions), provide people with better appeal opportunities, allow people to choose their primary care doctor, and provide better access to emergency rooms.

Consumer Assistance Programs

New federal grants helped states improve their consumer assistance programs. These programs provide consumers with assistance in understanding their health coverage options, enrolling in health coverage, and filing complaints and appeals.

Small Business Tax Credits

Small businesses purchasing health insurance may qualify for tax credits that help offset the cost of providing employees with health insurance. In 2014, the tax credits increased and are linked to buying coverage through the new Marketplaces.

Medicare Improvements

As of January 1, 2011, most preventive services were offered for Medicare beneficiaries, including cancer screenings, screenings for diabetes and high cholesterol, and vaccinations. To help ensure Medicare beneficiaries can take advantage of these improvements, the ACA added a new free “annual wellness visit.” Starting in 2011, Medicare beneficiaries began receiving a 50% discount on brand name drugs in the coverage gap and a 7% discount on generics. Other changes in the ACA improve care coordination for Medicare beneficiaries, strengthen the low-income subsidy program for Medicare Part D, and improve the financial sustainability of the program. Note, however, that none of these changes disrupts the coverage of Medicare beneficiaries, they continue to have the same coverage options as before and are not in any way expected to enroll in the new Marketplace.

“GRANDFATHERED” HEALTH PLANS

To avoid too much disruption in people’s existing health insurance coverage, grandfathered health plans are exempt from some of the ACA insurance reforms. Grandfathered plans are those that were in existence on March 23, 2010, and have not changed in ways that substantially cut benefits or increase costs for consumers. Insurers must notify consumers with these policies that they have a grandfathered plan.


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Health plans must disclose if they are grandfathered in all materials describing plan benefits. They must also offer contact information for questions about the grandfathered health plan.

There are consumer protections that do and do not apply to grandfathered plans. All grandfathered health plans MUST:

End lifetime limits on coverage

End arbitrary cancellations of health coverage

Cover adult children up until their twenty-sixth birthday

Provide a Summary of Benefits and Coverage (SBC) a short, easy-to-understand summary of what a plan covers and associated costs

Hold insurance companies accountable to spend your premiums on health care, rather than administrative costs and bonuses

Grandfathered plans DO NOT have to:

Cover preventive care for free

Guarantee your right to appeal

Protect your choice of doctors and access to emergency care

Be held accountable through rate review for excessive premium increases

In addition, grandfathered individual health insurance plans (the kind you buy yourself, not the kind you get from an employer) do not have to:

End yearly limits on coverage

Cover you if you have a pre-existing health condition

AFFORDABLE CARE ACT CHANGES IMPLEMENTED IN 2014

Insurance Market Reforms

Health insurance plans in the individual and group markets (except grandfathered plans) will have to cover consumers even if they have a pre-existing health condition; even if the pre-existing condition was a basis for denial of coverage (guaranteed issue) previously. They also must renew coverage without regard to health status, use of medical services, or other factors (guaranteed renewal). Health insurance cannot be dropped if an insured person gets sick. Nor can a consumer’s initial application be re-examined to cancel their coverage due to the consumer making an unintentional or honest mistake while completing the required information during the application process.

Accompanying these reforms are major changes in how insurers set premium levels for health plans. Insurers in the individual and small group markets may not vary the premium rate charged for a particular product based on the health status or past claims experience of an enrollee. Insurers are allowed to vary premiums only to reflect the geographic area in which a consumer lives, the number of people covered in a family, the age of family members (older adults can be charged up to 3 times as much as younger adults), and smoking status (smokers can be charged up to 1.5 times as much as non-smokers). States can further limit rate variation, and California has opted to do so, by not allowing smokers to be charged more for their coverage.

The table below describes additional changes to healthcare that went into effect in 2014.


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Change Description

Health Insurance Requirement

Starting in 2014, most people were required to have public or private health insurance or pay a financial tax penalty. Parents with children who are tax dependents are responsible for ensuring those children have coverage.

Affordable Coverage and Financial Support

To make coverage more affordable, the ACA provided new federal financial assistance for those who qualify and allowed the expansion of Medicaid to support the use of marketplace plans. It also required that people be able to apply for financial assistance using a single, streamlined application. The new process is designed to get people into the right program regardless of where they initially submit their application.

Health Insurance Marketplaces

The ACA requires states to either establish their own Marketplaces where individuals and small businesses can shop for health insurance or have one set up by the federal government. The marketplaces will allow individuals and families to shop for health insurance online, in person, by mail or by phone. Small businesses can enroll in Small Business Health Options Program in person, by mail or by phone.

New Coverage Options for Small Businesses

The new Marketplaces include a SHOP making it easier for small businesses to offer coverage options to their employees. The law also establishes a tax credit to support small businesses in providing health insurance to their employees.

Essential Health Benefits

Most health plans must cover a core set of 10 services, known as essential health benefits. This is to ensure consumers have access to necessary services and to create greater standardization among health plans.

Use of Standard Health Plan Options

Insurers must make most health plans available at four metal tiers (Bronze, Silver, Gold, and Platinum) that vary in the share of medical expenses paid by the insurance company. The use of standardized metal tiers helps consumers to make apples-to-apples comparisons across health plans and see their expected costs more easily.

Minimum Coverage Plan

A minimum coverage plan, sometimes referred to as a “catastrophic plan,” or “basic coverage plan” is offered to people under age 30, as well as to individuals who are exempt from the individual mandate to purchase coverage because they have an affordability or hardship exemption.

Child Only Plans Insurers that offer coverage through the new Marketplaces must make a child-only plan available to families. These plans can be used by parents and


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Change Description

caretakers who do not need coverage for themselves, but need an option for their children under the age of 21.

Large Employer Health Care Requirement

Originally slated to be applied to large employers who failed to offer coverage in 2014, the Obama Administration delayed the large employer health care requirement to 2016. The fines apply only if a company has employees who receive premium assistance from Covered California. Businesses with greater than 100 eligible employees are not subject to tax penalties for 2015 tax year. Beginning January 1, 2016, the definition of small business will change to include employers with at least one but no more than 100 full-time equivalent employees.

3. MAJOR CHANGES TO HEALTHCARE WITH THE AFFORDABLE CARE ACT

MINIMUM ESSENTIAL COVERAGE

Health insurance coverage is an important way to make sure people have access to medical care when they need it. It also offers people financial security by protecting them against high or unexpected medical bills. Effective January 2014, the ACA required that most United States (US) citizens and legal residents enroll in health coverage that meets minimum essential coverage (MEC) standards. In order for health coverage to be considered MEC, the plan must adhere to the following standards:

Fair health insurance premiums

Prohibition on pre-existing conditions exclusions

Prohibition against discrimination based on health status

Provide essential health benefits

Prohibition against rescissions

Coverage of preventive health services

Extension of dependent coverage

Provide a summary of benefits and coverage (SBC)

Allow an Appeals Process

Patient Protections

Adhere to: the Newborns’ and Mothers’ Health Protection Act, the Mental Health Parity and Addiction Equity Act and the Women’s Health and Cancer Rights Act

Actuarial value can be no less than 60 percent

Those who do not have coverage may be required to pay a tax penalty. This ensures that people can take advantage of the health and financial benefits of insurance and makes it possible to implement many of the insurance market reforms included in the ACA. Health insurance that qualifies as MEC is coverage that meets the law’s requirement and allows people


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to avoid the tax penalty. MEC does not include coverage providing only limited benefits, such as the following:

Coverage consisting solely of excepted benefits, such as:

Stand-alone vision care or dental care

Workers' compensation

Accident or disability policies

Coverage That Meets MEC Standards:

Most employer-sponsored coverage. This includes coverage offered to former employees (such as Consolidated Omnibus Reconciliation Act of 1985 COBRA) and retiree medical coverage

Most coverage purchased in the individual market, including via a Marketplace

Medicaid

Medi-Cal

Certain types of veterans’ coverage (e.g. TRICARE)

Self-funded student health insurance plansi

Refugee Medical Assistance (RMA)

AmeriCorps coverage offered to AmeriCorps volunteers, which is a domestic counterpart to the Peace Corps

PEOPLE NOT REQUIRED TO HAVE HEALTH INSURANCE

As of 2014, most people are expected to have public or private health coverage. There are exemptions from the tax penalty for people who:

Are uninsured for less than three months of the year

The lowest-priced coverage available would cost more than 8 percent of the consumer’s household income

Do not have to file a tax return because income is too low (below the federal tax filing threshold)

Are a member of a federally recognized tribe or eligible for services through an Indian Health Services provider

Are a member of a recognized health care sharing ministry (e.g. Medi-Share or Christian Healthcare Ministries)

Are a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare

Are incarcerated (either detained or jailed), and not being held pending disposition of charges

Are not lawfully present in the US

To secure an exemption from the individual mandate penalty under one of these categories, individuals need to apply for an exemption from the Department of Health and Human Services (HHS), or the IRS when they file their taxes depending on the reason for their exemption. For


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example, individuals can receive financial assistance for hardship and religious exemption through the marketplace, but can be found eligible for an affordability exemption only by the IRS. Federal regulations governing the details of what constitutes an exemption are quite detailed, and applicants will need to meet those standards.

Unaffordable coverage and the tax penalty

Private individual health coverage is considered unaffordable for those whose contribution toward MEC is greater than 8 percent of their income. Consumers who lack access to affordable MEC would not be subject to the tax penalty.

Consumers who do not have health coverage are subject to the tax penalty if they can purchase the lowest-cost health plan available through Covered California for 8 percent or less of their household income (with applicable premium assistance factored into the cost of coverage).

In other words, if the cheapest health plan available to a consumer is greater than 8 percent of their annual household income and they opt not to purchase coverage they will not be penalized. However, they will still be required to apply for the exemption.

Additional information on who may or may not be required to have health insurance coverage can be found at: www.healthcare.gov.

CALCULATING THE PENALTY FOR NOT HAVING HEALTH COVERAGE

Non-exempt consumers who do not enroll in health coverage in 2014 will have to pay a penalty. The penalty is referred to as the individual mandate and represents the shared responsibility payment. The penalty for those who do not have a health plan that qualifies as MEC is either a flat dollar amount, or a percentage of household income, whichever amount is greater. The penalty will increase over the next two years, and then remain the same from 2016 and beyond. The penalty is based on the number of months the consumer is not covered.

This means that each month a consumer does not have coverage; they may owe 1/12th of the annual penalty. However, if a consumer does not have coverage for less than three consecutive months during the year, they will not be subject to the penalty.

For benefit year 2014, the annual penalty is the greater of:

$95 for each adult and $47.50 for each child, up to $285 per family, or

1 percent of the tax filer’s annual household income minus the federal tax filing threshold

For benefit year 2015, the annual penalty is the greater of:

$325 for each adult and $162.50 for each child, up to $975 per family, or

2 percent of the tax filer’s annual household income minus the federal tax filing threshold

In 2016, and beyond, the annual penalty is the greater of (for later years, the penalty will be indexed based on the cost of living):

$695 for each adult and $347.50 for each child, up to $2,085 per family, or

2.5 percent of the tax filer’s annual household income minus the federal tax filing threshold

Please note that if the greater of the two penalty costs (percentage or flat amount) is more than the national average of the Bronze level plan premium, the consumer will pay the lesser of the two.

http://www.healthcare.gov/


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Understanding how to calculate the percentage of income penalty

The federal tax filing threshold is the amount of income that is required to file a tax return. People with incomes below the filing threshold do not have to file a tax return while those with incomes above the threshold must file a tax return. The requirement to file a tax return is determined by the household’s gross income, age of the filer and filing status. The gross income amounts are updated annually. The table below shows the 2014 federal tax filing thresholds:

2014 Federal Tax Filing Threshold

Filing Status Age Gross Income

Single Under 65 $10,000

Single 65 or older $11,500

Married Filing Jointly Under 65 (both spouses) $20,000

Married Filing Jointly 65 or older (one spouse) $21,000

Married Filing Jointly 65 or older (both spouses) $22,400

Married Filing Separately Any $3,900

Head of Household Under 65 $12,850

Head of Household 65 or older $14,350

Qualifying Widow(er) with Dependent Child

Under 65 $16,100

Qualifying Widow(er) with Dependent Child

65 or older $17,300

There are four steps in calculating the tax penalty:

Step 1: Determine the gross household income.

Step 2: Subtract the federal tax filing threshold.

Step 3: Apply percentage for the penalty year.

Step 4: Compare percentage of income penalty amount against the flat dollar amount.

Whichever amount is higher is what the consumer will owe.

Example 1:

Stan is a single, 24 year old tax filer who made $45,000 in 2014 and was uninsured all year. How much will Stan’s tax penalty be for 2014?

Displayed below are the percentage of income calculations using the 2014 filing threshold amount of $10,000:

$45,000 - $10,000 = $35,000

Stan’s income minus filing threshold for single filers equals the portion of Stan’s income used to calculate the penalty.

$35,000 x 0.01 = $350


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The portion of Stan’s income used to calculate the penalty multiplied by the penalty percentage for 2014 which is 1 percent (or 0.01) equals Stan’s percentage-of-income penalty.

Compare the flat minimum penalty for 2014 with the percentage-of-income penalty. Stan will have to pay the larger amount. Since $350 is larger than $95, Stan will likely owe $350 depending on the national average premium costs for Bronze plans.

Example 2:

Cindy is a 25 year-old college student. She is claimed as a dependent on her parents’ taxes. Cindy is a member of her parents’ health plan up until her 26th birthday which is May 31st of 2014. She does not enroll in health coverage after May of 2015 and is not covered for 7 months (June through December). She is not exempt from the penalty and the household income is $96,000 per year. Both parents are under the age of 65. How much will the tax penalty for Cindy’s parents be for 2014?

Displayed below are the percentage of income calculations using the 2014 filing threshold amount of $20,000:

$96,000 – $20,000 = $76,000

The household income minus the filing threshold for married filing jointly (under the age of 65) equals the portion of Cindy’s parent’s income use to calculate the penalty.

$76,000 x 0.01 = $760

The portion of the household’s income used to calculate the penalty is multiplied by the percentage for 2014 which is 1 percent (or 0.01) which equals the percentage-of-income penalty. However, since Cindy was only without coverage for 7 months, we divide this amount by twelve for the monthly penalty (~63.3) and multiply by the 7 months she was without coverage to get $443.3.

This amount is compared with the flat minimum penalty for 2014. Since $443.3 is larger than the $95 flat rate, the household will likely owe $443.3, depending on the national average premium cost for Bronze plans.

IMPROVEMENTS TO MEDICAID

Under the ACA, states were able to decide whether to expand Medicaid to all adults, including parents and adults without children, up to 133 percent of the FPL. To ease the fiscal impact of this decision on states, the federal government is covering 100 percent of the cost of newly eligible adults in the first years of implementation. Over time, the federal government’s share of the cost of will taper down to 90 percent.

Medicaid is a federal- and state-funded public program that offers health insurance and long-term care to low-income individuals, including children, parents, pregnant women, people with disabilities and seniors. States take primary responsibility for administering the program, but must do so within federal requirements.

To qualify for Medicaid, individuals must meet both financial and non-financial criteria, such as citizenship and immigration requirements. Originally, Medicaid primarily offered health insurance only to individuals who also qualified for financial assistance, such as families on welfare and people with disabilities on Supplemental Security Income (SSI). However, in recent decades Medicaid has increasingly become a source of insurance for children and some parents from low to moderate-income working families. Until passage of the ACA, it offered little or no coverage to adults without children.


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California has opted to implement the Medicaid expansion (known as Medi-Cal) which has significantly expanded eligibility for all adults ages 19-64, but especially for adults without biological children (childless adult). The Medi-Cal program is governed by the Department of Health Care Service (DHCS), and each county in California is responsible for operation of the program at the local level. Prior to the federal law, adults in this group were not eligible themselves for Medi-Cal benefits, but had to have a linkage, such as an eligible child, to access benefits. Also, part of Medi-Cal is the Targeted Low-Income Children’s Program (TLICP), formerly known as Healthy Families. TLICP is a low-cost insurance program for children and teens that provides health, dental and vision coverage to children who do not have other health insurance.

The expansion of Medi-Cal for adults is one way the ACA is increasing access to health insurance. The comparison looks like this:

Prior to 2014 2014 and beyond

Medi-Cal coverage for adults was

limited to those who met income

and eligibility standards and who:

Had a child living at home

Had a disability

Were over the age of 65

Were pregnant

Adults who are at or below 138% of the FPL qualify

for Medi-Cal, including those who:

Do not have biological children (childless adult)

Have children living at home (parent and

caretaker relatives)

Have a disability

Are over the age of 65

Are pregnant

Please refer to the Eligibility for Individuals and Families course for additional information on Medi-Cal.

HEALTH INSURANCE EXCHANGES

One of the largest components of the ACA was creating a new way to purchase coverage through health insurance exchanges or marketplaces. The marketplaces are entities that were set up in each state to create a competitive market for health insurance. They offer a choice of health plans (sometimes known as qualified health plans or QHPs), establish common rules regarding the offering and pricing of insurance, help low- and moderate-income people to apply for financial help to purchase and use coverage, and provide information to consumers so that they can better understand their options.

Each state decided to operate its own marketplace as a state-based exchange or allow the federal government to do it for them. If a state elected to have the federal government do it for them, it opted to have the federal government provide the marketplace altogether or still play a significant role in its marketplace by entering into a partnership model with the federal government. Under a “partnership” model, states take on some responsibilities for managing the marketplace operated by the federal government. For example, they can help decide which plans should be offered (i.e., take on plan management as a responsibility) or help in designing consumer assistance, or both. However, the federal government ultimately remains responsible for running the marketplace in partnership model states.

California elected to run its own marketplace, known as Covered California. As required under federal law, Covered California launched its initial open enrollment period on October 1, 2013


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ending March 31, 2014. People who enrolled in health insurance plans through Covered California had coverage that went into effect as early as January 1, 2014.

HOW MARKETPLACES ARE STRUCTURED

A state-based marketplace must be a government agency or nonprofit entity established by a state. While the ACA refers to exchanges, the federal government refers to them as marketplaces.

States chose to establish marketplaces for individuals and small businesses. They were operational and began accepting applications on October 1, 2013, with health insurance coverage starting January 1, 2014.

If a state did not elect to set up a marketplace, the HHS established and operated a Marketplace in that state, either directly or through an agreement with a nonprofit entity.

Funding to establish marketplaces is available to states until January 1, 2015. After this date, states must find alternative ways to finance the cost of operating their marketplaces.

FUNCTIONS MARKETPLACES PERFORM

The primary function of a marketplace is to provide consumers a place to compare health coverage plans and purchase one that works best for them, as well as to connect eligible consumers with financial assistance to make health coverage more affordable.

Under the ACA, there are many specific functions that a marketplace is required to perform, including:

Screen and certify health plans as qualified to be offered on the exchange

Provide standardized information about health plans to consumers via a website, including the premiums, cost-sharing charges, benefits, provider networks and the quality rating of health plans in order to help inform consumer choice

Operate a toll-free telephone assistance hotline, an internet website, and offer in-person consumer assistance designed to help consumers understand their options, enroll in plans and secure financial assistance

Allow individuals to apply for coverage using a single, streamlined application that may be used to apply for Medicaid as well as coverage offered by the marketplace. The application may be submitted online, in person, by mail, or by telephone

Make available an electronic calculator to estimate the cost of coverage

ESSENTIAL HEALTH BENEFITS

The health plans offered through the marketplace are standardized, meaning they offer the same basic benefits so that consumers can make apples-to-apples comparisons across health plans.

The health insurance plans offered through Covered California, as well as those outside of it, are required to offer a uniform set of core benefits, known as essential health benefits. In the past, there was a wide range of health insurance policies offering different benefits. Essential health benefits must include the following 10 services:


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10 Essential Health Benefits

1. Ambulatory (walk-in) patient care, such as visits to a doctor for an illness and services provided by an outpatient clinic

2. Emergency (ER) services

3. Hospitalization

4. Maternity and newborn care

5. Mental health and substance abuse disorder services, including behavioral health treatment

6. Prescription drugs

7. Rehabilitative and habilitative services and devices. These include physical, occupational, and other therapies and treatments to help people regain function after an accident or illness, (rehabilitative services) or to help them maintain (rather than regain) their ability to function on a daily basis (habilitative services)

8. Laboratory services

9. Preventive and wellness services, and chronic disease management

10. Children’s services, including dental and vision care

Pediatric Dental Plans

Under the essential health benefit requirements, plans must provide pediatric services, including oral and vision care. Under the ACA, marketplace plans are not obligated to include pediatric dental benefits if stand-alone dental plans are also being sold on the marketplace.

The rules governing stand-alone dental plans are different from those of other marketplace plans. Stand-alone dental plans are not subject to the 4 “metal” tier system as other Covered California health plans, instead they must meet requirements to offer either a “low” value plan or “high” value plan.

NO WRONG DOOR ENROLLMENT OPPORTUNITIES

Since there is a range of health coverage programs, the ACA includes a number of provisions aimed at making it easier for individuals to apply for and enroll in the right program. Most importantly, county and state agencies along with the new marketplaces must offer the opportunity to complete a single, streamlined application that allows people to be evaluated for Medicaid and health insurance plans in the marketplace. People do not need to know in advance which program they qualify for. Consumers can simply submit the application through a marketplace or their county social services office to be evaluated for all health coverage programs.

People are able to submit the single, streamlined application online, by phone, in-person or by mail.

4. WHAT IS COVERED CALIFORNIA?

COVERED CALIFORNIA OVERVIEW

Soon after the passage of the ACA on March 23, 2010, California became the first state in the nation to enact legislation to establish a health insurance marketplace. Although originally known as the California Health Benefit Exchange, the state adopted Covered California as the


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business name for California’s easy-to-use health insurance marketplace through which individuals and small businesses can access affordable health insurance plans.

Consumers can use Covered California to learn about and buy health insurance, and to determine if they qualify for financial assistance that can lower the cost a consumer will pay for insurance. Covered California is a leader in active purchasing, which means it negotiated prices with health plans, ensuring that consumers get the best prices possible for quality health insurance. This is a tremendous benefit to consumers because it enables consumers to do apples-to-apples comparisons across different health plans based on price, not services offered.

In 2013, Covered California began helping individuals compare health insurance plans and choose the plan that works best for their needs and budget. Covered California also allows individuals to understand whether they qualify for financial assistance, such as advanced premium tax credits and cost-sharing reductions. Small businesses will also be able to select from competitively priced health insurance plans and offer their employees the ability to choose from an array of plans. Some small businesses may qualify for federal tax credits.

HOW DID COVERED CALIFORNIA START?

To help ensure that the new health insurance marketplace met the needs of Californians, the State appointed a five-member board of directors to oversee the activities of the new Marketplace. Two of the members were appointed by the Governor, one by the Senate Rules Committee and one by the Speaker of the Assembly. The Secretary of the Health and Human Services Agency, or the Secretary’s designee, serves as an ex-officio voting member of the Board. All board members serve four year staggered terms to ensure continuity of program knowledge and operations.

After much research, the board selected the name Covered California as the name for the new health insurance marketplace to reflect the vision, mission and values of the new health insurance marketplace.

To help facilitate the management of Covered California, the Board selected an Executive Management team. The Executive Management team in turn recruited staff members from across the state to support and manage the daily activities of Covered California.

HOW IS COVERED CALIFORNIA FUNDED?

As with all state exchanges, the federal government granted money to the State of California to help Covered California get up and running. The federal grant money is intended to fund Covered California’s operations through December 2014. Beginning in January 2015, Covered California will be self-sustainable (not taxpayer-funded) and will no longer rely on federal funding for operations. Covered California is part of state government, but private companies provide the health insurance plans. Covered California does not receive direct financial support from the State of California and, by law, cannot rely in any way on state general funds for its operations.

Covered California provides a marketplace for private insurance companies (such as Blue Shield, Anthem Blue Cross, Kaiser Permanente and others) to sell insurance policies, and generates revenue by charging insurance companies fees for each successful enrollment.

MISSION, VISION AND VALUES

The vision of Covered California is to improve the health of all Californians by assuring access to affordable, high quality health care.


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The mission of Covered California is to improve health care in the state by increase the number Californians with health insurance, improve health care quality, reducing health care costs, ensuring that California’s diverse population has fair and equal access to quality health care and reduce health disparities through an innovative, competitive marketplace that empowers consumers to choose a health plan and providers that give them the best value.

The values that shape Covered California are:

Value What It Means

Consumer-focused

At the center of Covered California’s efforts are the people it serves, including individuals and their families, and small-business owners and their employees. Covered California will offer a consumer-friendly experience that is accessible to all Californians, recognizing the diverse cultural, language, economic, educational and health needs of those we serve.

Affordability Covered California will provide affordable health insurance while assuring quality and access to coverage.

Catalyst

Covered California is a catalyst for change in California’s healthcare system, having created a marketplace that offers new strategies for providing high-quality, affordable health care, promotes prevention and wellness, and reduces health disparities.

Integrity Covered California will earn the public’s trust through its commitment to accountability, responsiveness, transparency, speed, agility, reliability and cooperation.

Partnership

Covered California welcomes partnerships and its efforts will be guided by working with consumers, doctors, hospitals, health insurance companies, employers and other purchasers, government partners and other stakeholders.

Results

The impact of Covered California will be measured by its effort in expanding coverage and access to care, improving healthcare quality, promoting better health and health equity, and lowering costs for all Californians.

WHAT INSURANCE IS OFFERED BY COVERED CALIFORNIA?

To ensure that the vision, mission, and values are met, Covered California contracts with private health insurance companies. These companies will compete to ensure they are offering the best possible prices for health coverage to Californians. Covered California insurance plans will be grouped by cost and value, using consistent information so that Californians can make direct comparisons among plans, see expected costs more easily and get the coverage they need.

Covered California offers health insurance plans with four levels of coverage (also known as metal tiers): Platinum, Gold, Silver and Bronze each tier offers coverage at different levels of cost to the consumer.

Within each metal tier, the benefits are always the same, even if the plans are offered by different health insurance companies. For example, a Silver plan offered by health insurance Company “A” provides the same coverage as a Silver plan offered by health insurance company


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“B.” This makes it easy for consumers to compare plans. Consumers can look at cost and then pick the plan that is right for them.

These health insurance plans are offered within Covered California’s two marketplaces:

1. Individual market – Serves California’s individuals and families

2. SHOP market – Serves California’s small businesses with 1 – 50 eligible employees

5. WHAT IS COVERED CALIFORNIA’S INDIVIDUAL MARKET?

WHAT SERVICES ARE OFFERED THROUGH COVERED CALIFORNIA’S INDIVIDUAL

MARKET?

In 2013, Californians were able to buy health insurance directly from Covered California for coverage starting as early as 2014. Those eligible to buy health insurance through Covered California are called qualified individuals.

Listed below are the services offered through Covered California’s individual market:

Variety: Consumers can select from a variety of companies and plan options depending on the geographic area in which they reside and the level of insurance coverage desired.

Premium Assistance: This will help consumers pay for their health insurance premiums.

Cost-Sharing Reductions: This will help consumers with their share of cost for deductibles, co-insurance and copayments (excluding premiums).

These services will be discussed in greater detail in the Covered California Plan Options course.

WHEN CAN INDIVIDUALS AND FAMILIES ENROLL?

Open enrollment is the period of time when consumers may select a Covered California health plan and enroll. Open enrollment happens once a year and allows all eligible consumers to enroll in or make changes to their current insurance plan. Enrollment for Medi-Cal is year round.

The first individual market open enrollment period began on October 1, 2013 and ended on March 31, 2014. Beginning in year two, open enrollment begins on November 15, 2014 and ends on February 15, 2015. The plan for every year thereafter is for open enrollment to begin on October 15 and end on December 7. Outside of open enrollment, consumers may be eligible for a special enrollment depending on certain qualifying life events. This topic will be discussed in greater detail in the Eligibility for Individuals and Families course.

HOW DOES COVERED CALIFORNIA’S INDIVIDUAL MARKET WORK?

The following steps outline the process to enroll for Covered California health coverage in the

individual market:

Step 1: Individuals and/or families apply through Covered California.

Step 2: Covered California determines eligibility.

Step 3: If the individual or family seeks financial assistance, Covered California determines eligibility for premium assistance and cost-sharing reductions.

Step 4: If the individual or family proceeds, they can shop for Covered California products and services and select those products and services that meet their needs.


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Step 5: The individual or family can enroll into a Covered California health plan.

Step 6: The individual or family pays a monthly premium to the health insurance company to maintain coverage and reports changes in circumstances to Covered California.

WHO CAN APPLY IN COVERED CALIFORNIA’S INDIVIDUAL MARKET?

Any eligible Californian can shop through Covered California for coverage. Consumers do not have to be eligible for premium assistance or cost-sharing reductions to take advantage of the new marketplace. The consumer eligibility criteria are:

Be a citizen or national of the United States, or a non-citizen who is lawfully present in the United States

Be a resident (or intend to be a resident) of California. If someone has health insurance through an employer or uses Medi-Cal, the individual would most likely continue to use that coverage

Not be incarcerated (other than incarceration pending the disposition of charges)

WHO IS COVERED CALIFORNIA’S PRIMARY POPULATION?

Covered California’s primary population is the state’s uninsured people, especially those who are eligible for financial assistance. It is estimated that over 4 million Californians will be without health coverage in 2015. The chart below shows the health insurance marketplace in California projected for 2015:

The implementation of the Affordable Care Act is expected to significantly reduce the number of uninsured Californians.


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Linguistic Mix

California is a multilingual state. The 13 most commonly spoken languages are:

English

Spanish

Vietnamese

Chinese

Korean

Tagalog

Russian

Farsi

Armenian

Khmer (Cambodian)

Laotian

Arabic

Hmong

Covered California will provide in-person consumer assistance and materials in most of these languages. Many people seeking coverage through Covered California will have limited English proficiency. Therefore, Covered California will provide in-person consumer assistance in a variety of formats.

According to CalSIM 1.9 2015 data, it is anticipated that 35 percent of the population over the age of 18, eligible for financial assistance and seeking coverage through Covered California will have limited English proficiency.

HOW DOES COVERED CALIFORNIA ADDRESS CONSUMER NEEDS?

In addition to those who are uninsured, many Californians are underinsured. People who are described as underinsured have health benefits that do not adequately cover their medical expenses. The expenses may take the form of:


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High out-of-pocket costs

Coverage for catastrophic costs only

High deductibles and copayments

Exemptions for specific conditions or high-cost treatments

Annual and lifetime benefit limits

Being underinsured causes some people to delay seeking needed care or avoid getting care altogether. People may avoid going to the doctor or filling prescriptions because they cannot afford it. Others end up with medical debt and other severe financial problems.

Covered California addresses the needs of this population in a number of ways:

HOW MANY CALIFORNIANS ENROLLED IN THE FIRST OPEN ENROLLMENT?

During Covered California’s first open-enrollment period, from October 1, 2013 to March 31, 2014, nearly 1.4 million Californian’s enrolled in health coverage through Covered California. More than 1.2 million of these people were eligible for financial assistance to help pay for health care coverage. An additional 1.9 million Californians were eligible for no- or low-cost Medi-Cal.

6. INTRODUCTION TO COVERED CALIFORNIA’S SHOP MARKET

OVERVIEW OF COVERED CALIFORNIA’S SHOP MARKET

Covered California’s Small Business Health Options Program (SHOP) is a marketplace specifically designed for small businesses with 1 to 50 eligible employees. This marketplace allows employers to compare a number of qualified, competing health insurance plans from private insurance companies. Through Covered California’s SHOP, small businesses employers offer a reference plan to their employees, allowing them to choose the health plan they want; something that few small employers have been able to do easily until now. In 2015 Covered California will begin offering health insurance plans to employers with 100 or fewer eligible employees, for coverage beginning in 2016.

Employers can enroll in Covered California’s SHOP throughout the year. Unlike the Covered California marketplace for individuals, there is no designated open-enrollment period for


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businesses, giving employers the option to enroll either according to their current policy’s renewal date or by another effective date of their choosing.

The new health care law, the Affordable Care Act, does not require small employers to offer health care coverage. Employers with 1-50 eligible employees will not be subject to penalties for not providing health coverage.

ELIGIBILITY FOR THE SHOP MARKET

Covered California’s SHOP Marketplace primarily serves small businesses that meet the following criteria:

Have 1 to 50 eligible employees, with at least one employee, other than the owner, who receives a W-2 tax form at the end of the year

Elect to offer, at a minimum, all eligible employees’ coverage in a Covered California Health Plan through SHOP

Have the majority of their employees employed in California

Seasonal workers, 1099 contract workers, part-timers working less than 20 hours per week, and temporary workers are NOT eligible under any circumstance to participate in the SHOP marketplace.

To qualify as an eligible* employee in Covered California individuals must meet the following criteria:

Must receive an offer of coverage from a qualified employer

Work at least an average of 30 hours per week, measured on a monthly basis*

Be a part-time employee who works between 20 and 29 hours a week for whom the employer offers health care coverage. Part-time employees count in the total employee count, which cannot exceed 50

*California defines an eligible employee as one who works an average of 30 hours per week,

measured on a monthly basis. Additionally, eligible employees must be permanent and actively engaged in the business of the employer or become an eligible employee once the offer of coverage is made by the employer.

PRODUCTS AND SERVICES ARE OFFERED THROUGH COVERED CALIFORNIA’S SHOP

MARKET

Listed below are the types of products and services that are offered through Covered California’s SHOP market:

Access to Competing Health Insurance Plans

Access to Multiple Coverage Options

Access to Tax Credits

Benefits Administration

Enrollment Support

Customer Service


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SMALL BUSINESS TAX CREDITS, AMOUNTS AND DURATION

The ACA includes federal tax credits to qualified small businesses. These tax credits are designed to help make it more affordable for small businesses to offer health insurance to their employees. Beginning in 2014, eligible small businesses can secure the tax credit only if they purchase coverage for their employees through SHOP.

Taxable employers with fewer than 10 full-time equivalent employees with wages averaging less than $25,000 per year that contribute a minimum of 50% toward their employee’s premium may qualify for the maximum tax credit.

Tax credits are also available for qualifying nonprofit or tax-exempt employers. These employers must meet the same criteria as other small businesses.

The amount of tax credits depends on a number of factors including the number of full-time equivalent employees and the amount the employer spends on insurance premiums.

Tax credits will become more generous in 2014, and the table below illustrates the two phases of tax credits to help employers, with 25 or fewer full-time equivalent employees, cover premium costs.

Phase Tax Year(s)

Maximum Tax Credits for Businesses as a Percentage of Insurance Premium Expenses

Maximum Tax Credits for Tax-Exempt Organizations as a Percentage of Insurance Premium Expenses

Phase One 2010 – 2013 35% 25%

Phase Two 2014 50% 35%

The maximum amount of tax credits increases to 50% of premium expenses and coverage, as long as coverage is purchased from Covered California compares to 35% for 2010 -2013 (Phase 1). For tax-exempt employers, the maximum amount of tax credits increases to 35% in 2014 compared to 25% in Phase 1.

ELIGIBILITY

Small businesses may qualify for tax credits if they:

Have fewer than 25 full-time equivalent employees for the tax year (example: two part-time workers count as one full-time-equivalent employee)

Pay employees a combined average wage that does not exceed $50,000 per year

Contribute at least 50% toward their employees’ premium costs―this contribution requirement also applies to add-on coverage such as vision, dental, and other limited-scope coverage

STEP BY STEP PROCESS OF APPLYING FOR SHOP COVERAGE

Covered California’s SHOP Market lets small business owners easily compare and contrast a variety of Covered California health plans, which are offered by private health insurance companies. These plans include consumer-friendly provisions that make it easier for both


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employers and employees to understand their health insurance options. The following steps outline the process to enroll in the SHOP market:

Step 1: Small businesses apply through the SHOP market by phone, mail, or in-person through a certified partner.

Step 2: The SHOP provides defined levels of coverage (Platinum, Gold, Silver and Bronze); small business owners select the level of coverage to offer their employees. Beginning October 1st, 2014 employers can offer base metal tier with the option to buy down or buy up to a contiguous metal tier. Employers will be able to offer two metal tiers to their employees rather than just one. Contiguous metal tiers mean that the tiers must be next to each other (e.g. employers could offer a Bronze/Silver but not a Bronze/Gold).

Step 3: The employer decides how much they want to contribute to their employee coverage (employer contribution of 50% is required), who they will cover, and if the employer wants to include dependents of employees (employer contribution of 0% is required).

Step 4: Employees elect the specific health plan that meets their needs and budget within the defined level of coverage. The entire family must select the same plan. Step 2 contiguous tier still applies.

Step 5: If the small business seeks financial assistance, Covered California will help determine eligibility for the federal tax credit to help pay for premiums.

Step 6: Small businesses complete the short form employer application and employees complete their applications and submit to SHOP.

Step 7: Covered California verifies eligibility and issues one consolidated, monthly invoice to the employer for all health plan premiums

SHOP’S PRIMARY POPULATION

Employment Mix

The illustration below represents the top six employment sectors with the largest number of uninsured:

Employer-Sponsored Coverage


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Roughly half of all Californians get their health insurance through their job. This is called employer-sponsored coverage, and it is the main source of coverage for working adults. However, not all working adults have employer-sponsored coverage for a variety of reasons, including:

The recent economic downturn has resulted in a decline in employers offering coverage

Employees need to meet eligibility requirements, which are often determined by length of employment and number of hours worked

Some employees choose not to participate because the cost is too high

The chart shows the breakdown of the uninsured working population by employer size. The highest uninsured percentages are seen in employers with less than 50 employees.


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7. ENDNOTES

i Self-funded student coverage with a plan year that begins on or before December 31, 2014, is treated as minimum essential coverage under final rules issued by the Department of Health and Human Services (HHS). Colleges and universities must apply to HHS if they want to have their self-funded student health insurance plans treated as minimum essential coverage after this date.

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