A New Era for Health Insurance - Covered California

Many people have strong feelings about Obama’s Patient Protection and Affordable Care Act; but whether you are for or against it is beside the point of this post. We merely want to expose Covered California (an insurance exchange program established as a result of the Affordable Care Act) to show how it may impact you and your family’s health insurance plans.

What is Covered California?

Think of Covered California as a state-run insurance marketplace where most well-known insurance companies (Anthem, Blue Shield, and Kaiser to name a few) offer health plans of various levels of coverage - such as Bronze, Silver, and Gold levels. All plans offered by Covered California, or in the private marketplace, will be required to meet certain basic requirements. Open enrollment for Covered California should start sometime in October this year and the coverage will begin January 1, 2014.

If you live outside of California, go to this link to find up-to-date state health insurance marketplace profiles.

Why should I Care?

If any of the following situations apply to you, you may need to look into Covered California health insurance and/or private plans more closely:

• If you have pre-existing medical condition (in the “high risk” pool) and could only get HIPAA health plans previously, you now can shop for a new plan which may have lower premium rate and wider coverage.
• If you purchased a health plan originated after 3/23/2010, your plan will cease to exist and you will need to shop for a new plan either through Covered California or the private marketplace.
• If you are retiring before age 65 and have to sign up for an expensive COBRA plan due to medical conditions, you now have options to shop for a new plan.
• If you are a business owner with less than 51 full-time employees that are paid an average annual wage of less than $50,000, you may be eligible to receive a small business health care tax credit through a Covered California health plan. In the future, Covered California will be open for larger employers too. Note: this is delayed for another year.
• If you currently don’t have health insurance, you are required to have health insurance starting 2014 or pay a penalty unless you meet certain exemptions.

How Much Does It Cost?

There is good news and bad news on this. The good news is that if you buy a health plan through Covered California, you may be eligible to receive tax credits depending on your Modified Adjusted Gross Income (MAGI) from the previous tax year. Tax credits can be immediately applied to the insurance premium, which reduces the amount you pay each month. The bad news is that most families don’t qualify for the tax credits because their household income is over 400% of the federal poverty level (which is about $94,000 for a household of 4). You can go to this cost calculator to see how much of a tax credit you could get.

Keep in mind that if you already have an individual health insurance plan now, or are about to purchase one, the premium is expected to increase at least 20% if not more in 2014. How much rates will actually increase is still anybody’s guess.

Action Plan

At the moment, California and all the participating health insurance providers are still finalizing details on Covered California health plans. There are many unanswered questions and we don’t expect to see more clarity until after August. The key is to be proactive in planning for your health coverage and make sure the new changes will not take you by surprise. We are not health insurance experts, but with our client’s best interests in mind we are keeping a close eye on developments.