Published on Physicians for a National Health Program (http://www.pnhp.org)
Is the California ACA exchange a model for the nation?
Obamacare works in California. Here's why.
By Peter V. Lee, James C. Robinson
Los Angeles Times,
July 27, 2015
Early reports that 2016 health insurance premiums would increase in double
digits brought out the usual cadre of critics to claim — once again — that
Obamacare is not financially sustainable.
We now have the full picture in California, where we are proving that health
insurance exchanges can keep prices in check. Residents who enroll through
Covered California, our statewide exchange, will see only modest 4% increases in
2016. Those selecting the lowest-priced plans actually will save 4.5%.
These low premiums were made possible because California law gave Covered
California the power to actively negotiate on behalf of its 1.3 million
consumers. The board and staff of Covered California have used this authority.
That's helping the Affordable Care Act work as intended — using market forces to
hold down costs.
So how exactly is California getting such good results? First, Covered
California selects which plans can be sold through the exchange. This gives it
leverage with the insurers, which want to reach this source of new customers.
Those insurers then are able to negotiate better deals from hospitals and
doctors. In contrast, the federal health insurance marketplace and other state
exchanges take all comers and do not force insurers to improve plans to get
their products onto the exchanges.
In 2014 and 2015, Covered California turned away several plans because of
serious concerns about high prices, inadequate physician networks or weak
administrative capabilities.
Covered California also negotiates directly with health insurers on prices.
We pressure carriers to keep premiums as low as possible and offer robust
networks of doctors and hospitals. Passive insurance exchanges, including the 37
states that are part of the federal marketplace, allow insurers to charge
whichever rates pass regulatory muster and cover however many doctors they
want.
Equally important, Covered California standardizes the deductibles and other
characteristics of plans offered. That empowers consumers, who can make
apples-to-apples comparisons. Standardization also allays fears that low-premium
plans might be complicated or rife with coverage exclusions. Californians can
rest assured that their coverage means they can get the treatment they need
without first paying a deductible that can be thousands of dollars.
Moreover, the benefit of standard plans and negotiated prices accrue to
anyone who buys individual health insurance. Again, because of how California
law implemented the ACA, the rates Covered California negotiates must also apply
to policies those plans sell outside the exchange.
Covered California is using its heft to improve patient care and outcomes
too. Contracts with insurers require that they participate in quality
improvement programs, reduce ethnic and geographic disparities in access to
care, and provide patients with access to doctors and hospitals that meet their
needs.
Taken together, this process generates a better set of insurance options than
do the federal and state insurance exchanges that adopt a passive market
approach.
Free market forces can be a powerful tool to contain health costs. But for
that tool to work, consumers need the support of an active purchaser that can go
toe-to-toe with the insurers. Other states and the federal exchange would be
wise to look at what's working in California.
Peter V. Lee is the executive director of Covered California. James C.
Robinson is a professor of health economics at UC Berkeley.