The Covered California Board of Directors met on May 12, 2016 in Sacramento. Covered California presented their proposed 2016-17 budget and associated program changes, including a health plan assessment level of 4% for the individual market and 5.2% for the small business market, the closing of the Contra Costa Public Service Center, and a reduction in funds to the Navigator Program. Additionally, PricewaterhouseCoopers reported its findings from a market analysis of the Covered California individual market for 2016-2022. Finally, Covered California announced the completion of a series of special enrollment kickoff meetings that took place in April, and highlighted significant enrollment growth in Covered California for Small Business.
2016 Special Enrollment Outreach Kickoff Meetings
Covered California hosted thirteen special enrollment outreach kickoff meetings in the month of April (Graph 1). Over 600 certified agents and navigators attended the meetings. The meetings included a review of open enrollment numbers, policies, strategies, and best practices to use during the special enrollment period and various enrollment tools and resources available. Covered California reported receiving a lot of positive feedback from meeting participants.
Graph 1: Map of Special Enrollment Outreach Kickoff Meetings
Source: Covered California Executive Director’s Report, May 12, 2016
Covered California for Small Business
Covered California reported that Covered California for Small Business is seeing tremendous sales growth. Sales are up 83% from 2014 to 2015 and the number of selling agents is up 70%. Additionally, Covered California reported first quarter sales added 4,942 new covered lives, reaching 126% of the goal set for the quarter.
Enrollment in Covered California for Small Business through March 31, 2016 is 3,663 small business groups covering 27,467 members with an average group size of 7.5 employees.
2016-2022 Market Analysis and Planning
PricewaterhouseCoopers (PwC) presented the results of a market analysis for 2016-2022 conducted for Covered California. PwC reviewed enrollment and enrollment projections, and modeled ten policy and market change scenarios (such as enactment of the minimum wage in California, changes in unemployment, and potential federal policy changes in the Affordable Care Act [ACA]) that could affect Covered California enrollment in the future. PwC evaluated Covered California fiscal stability based on models related to average tenure and the revenues generated by health plan fees based on enrollment.
Overall, PwC found that Covered California enrollment is likely to remain relatively flat (between 1.1 million and 1.8 million) over the next five years, but could grow if Covered California seizes specific opportunities to manage turn-over, churn and retention. PwC noted that the individual market, characterized by significant numbers of individuals coming in and out of coverage (churn) prior to the ACA, remains a churning market post-ACA. To ensure just minimal growth, Covered California must newly enroll 700-800,00 and re-enroll 800-900,000 annually to account for the level of churn in the market.
Other highlights of the report include:
- Acquisition costs. Individual market acquisition costs (the average costs to acquire and enroll new customers) are lower as a percent of total premiums than before ACA implementation. Overall acquisition costs decreased from 7.6% of premiums to 5.8% in the individual market. Acquisition costs in the post-ACA market are comprised of 6.6% from Covered California channels and 4.9% from other channels. In order to increase its acquisition spend, PwC concluded that Covered California will need to improve its cost structure, become more efficient, or increase revenue.
- Enrollment penetration. For 2016, 69% of the subsidy-eligible and 12% of the non-subsidy-eligible individuals enrolled in Covered California. Covered California has already served 2.5 million Californians and is on track to touch three-quarters of those eligible in 2016. Take-up rates are highest among the lower income levels.
- Areas of opportunity. PwC analyzed areas of opportunity to manage churn, turn-over and retention and found that the greatest areas for potential enrollment in Covered California are individuals leaving Medi-Cal and employment-based coverage, retaining existing members, and targeting those who remain uninsured. PwC estimated a potential increase in enrollment of as much as 331,000 from successfully addressing all of the eight opportunities analyzed.
Review the PwC findings in more detail here.
2016-17 Proposed Budget, Forecast and QHP Assessment Fee
Covered California staff presented the proposed 2016-17 budget for discussion to the board and stakeholders. The budget will be noticed for action, potentially with revisions, at the June board meeting. The 2016-17 fiscal year will be the first year of Exchange operations without a new federal appropriation. The proposed budget totals $308 million (Table 1), which is less than the 2015-16 approved budget of $335 million, but an increase over the projected (actual) 2015-16 budget of $299 million.
Table 1: Comparison of 2015-16 Approved Budget, 2015-16 Projected Budget, and 2016-17 Proposed Budget (in millions)
Source: Covered California 2016-17 Budget. Table created by ITUP.
– Covered California projected expenditures for 2015-16 are $36 million less than the approved budget of $335 million. The projected expenditures are lower in all areas, with the largest changes in Service Center costs (-$11.6 million) and Outreach and Sales, Marketing costs (-$14 million).
The 2016-17 budget proposes an increase of $9 million above the projected expenditures for 2015-17, primarily due to increases in salaries and benefit costs and the addition of seven new staff positions.
– For 2015-16, Covered California revenues are expected to be $22 million below original estimates. Current effectuated enrollment is lower than the medium projection used to develop the 2015-16 budget (i.e. 1.48 million enrollees correlating to $234.4 million from plan assessments). ITUP notes that the current effectuated enrollment for 2015-16 of 1.32 million enrollees is even less than the lowest enrollment projection of 1.37 million enrollees.
– Covered California’s budget includes year-end reserves for 2015-16 of $221.8 million, $24 million higher than originally forecasted. According to Covered California’s multi-year forecast, 2016-17 reserves would cover expenditures for between five and nine months.
Table 2: Minimum Number of Months Covered California Reserves Can Cover Expenditures by Fiscal Year
Source: Covered California 2016-17 Budget.
The 2016-17 budget year is the first year that Covered California will not be receiving federal funds, resulting in expenditures of $58 million from reserves (Graph 2).
Graph 2: Covered California’s Budget and Sources of Funding: FY 2014-15 through 2019-20
Source: Covered California 2016-17 Budget.
– For 2016-17, Covered California health plan assessments will transition from a flat fee of $13.95 per enrollee to a percentage of gross premiums paid beginning in 2017. Based on Covered California’s forecast, revenues will exceed expenditures in FY 2017-18 with assessments set at 4%.
The revised formula of 4% of premiums results in higher health plan payments than the $13.95 flat fee. The 2016-17 health plan contract proposed a 3.5% fee and the federal exchange charges health plans 3.5%. The fee for Covered California for Small Business for 2016-17 is 5.2%.
Forecast Effectuated Enrollment
– Between 2015-16 and 2016-17, the forecasted effectuated enrollment numbers have decreased (Table 3). For example, for 2015-16 the forecasted effectuated enrollment was 1.467 million, under the medium enrollment projection, but is revised to 1.321 million, a reduction of 11%. Additionally, for 2018-19, the forecast is revised from 1.978 million to 1.473 million, a change of -25%. Overall, Covered California notes enrollment projections show more moderate growth compared to previous projections.
Table 3: Comparison of FY Budgets 2015-16 and 2016-17 Medium Enrollment Projections (in millions)
Source: Covered California 2016-17 Budget. Table created by ITUP.
Other Proposed Budget Changes
In presenting the 2016-17 proposed budget, Executive Director Peter Lee highlighted the following:
- Closure of one Public Service Center in Contra Costa.
- Termination of its contract with Health Consumer Alliance to provide assistance in addressing consumer issues with Covered California or its Qualified Health Plans. Consumer assistance will be provided via a new internal Office of Ombudsman. The Office of Ombudsman is budgeted at $2 million. Advocates expressed concern that the Office of Ombudsman will not be an independent, impartial entity and costs more than the Health Consumer Alliance contract.
- Reduction in funding for the Navigator grant program from $13 million to $5 million. The reduction will reduce the number of lead grantees from 69 to 46 and result in a reduction in individuals served from 77,000 to 28,000.
Covered California for Small Business Model Contract
Covered California adopted minor changes to the Covered California for Small Business contract, which can be reviewed on slide 27 of Covered California’s Policy and Action Items for May.
Special Enrollment Period Policies and Individual Eligibility and Enrollment Regulations Emergency Readoption
Adoption and Approval
Covered California adopted emergency regulations related to special enrollment. The new regulations maintain the reliance on consumer attestation of eligibility for special enrollment but allows Covered California to request documentation to verify eligibility for special enrollment.
The proposed special enrollment period policies were updated from last month’s discussion and were discussed again in this meeting. Covered California’s updated special enrollment policy proposes to institute a statistically valid random sampling of enrollees to verify eligibility for special enrollment, requiring appropriate documentation. A written request will be sent to an enrollee asking to provide documentation of the qualifying event making them eligible for special enrollment. The enrollee will have 30 days to provide documentation. After the 30-day period, Covered California will deem an enrollee eligible or ineligible for enrollment. Covered California will accept attestations when documentation cannot be provided on a case-by-case basis.
Covered California expects to discuss the special enrollment policy in future meetings as the federal government released new federal interim rules on May 6, 2016. The new federal interim rules impose new eligibility requirements for special enrollment periods related to permanent move and consumers that are newly eligible for tax credits. These new federal rules will need to be included in Covered California’s special enrollment policy.
Covered California reported that, starting in 2017, electronic verification of eligibility will be phased in, with an alternative to determine eligibility with non-electronic documents or in cases where documentation does not exist.
Certified Application Counselor Program Regulations
The Covered California Board approved the proposed amendment to continue paying for background checks for new applicants for the Certified Application Counselor Program.
The next meeting will be held on June 16, 2016. Documents and a video recording from this board meeting are available on the Covered California website.