State Marketplace Profiles: California
Final update made on November 26, 2013 (no further updates will be made)
Establishing the Marketplace
On September 30, 2010, former Governor Arnold Schwarzenegger (R) signed into law two complementary bills, AB 1602 and SB 900, to establish the California Health Benefit Exchange. California was the first state in the nation to pass legislation creating a health insurance Marketplace after the enactment of federal health reform.1 Current Governor Jerry Brown (D) called a special legislative session in late 2012 to allow the state to draft additional supplementary legislation to implement the Affordable Care Act (ACA) in California. In October 2012, the Marketplace announced that its new name would be ‘Covered California.’
Structure: The legislation defines California’s Marketplace as a quasi-governmental organization, specifically an “independent public entity not affiliated with an agency or department.”
Governance: Covered California is governed by a five-member board, including the Secretary of California Health and Human Services (or designee) as a voting, ex officio member, two members appointed by the Governor, one member appointed by the Senate Committee on Rules, and one member appointed by the Speaker of the Assembly. The legislation specifies that each appointed member of the Board should possess expertise in key subject areas such as, individual or small employer health care coverage, health benefits plan administration, or health care finance. While serving on the Board, members must not be affiliated in any way with a carrier or other insurer, an agent or broker, a health care provider, a health care facility or clinic, or a trade association for these entities. Also, members must not be health care providers, unless receiving no compensation for services provided.
Current Board members are:
- Diana S. Dooley (Chair), Secretary of California Health and Human Services
- Kimberly Belshé, First 5 LA
- Paul Fearer, Union Bank and Pacific Business Group on Health
- Susan Kennedy, former Chief of Staff for Governor Schwarzenegger
- Dr. Robert Ross, The California Endowment
The Board of Covered California has been meeting monthly since April 2011 and hired an Executive Director who began on October 17, 2011. Covered California has a staff of 138 employees.
In September 2012, the Board approved the creation of three key stakeholder advisory groups meant to inform the Board’s policy decisions and shape the implementation of Covered California. Stakeholder advisory groups will include, Plan Management and Delivery System Reform; Marketing, Outreach and Enrollment Assistance; and the Small Employer Health Options Program.2 In November 2012, Covered California adopted a Tribal Consultation Policy and added a Tribal Consultation advisory group to help structure the relationship between the Tribes and Covered California, build a partnership, and maximize the participation of eligible American Indians in the Marketplace.3 In January 2013, the membership of the four stakeholder advisory groups was announced.
Contracting with Plans: The Board will selectively contract for health coverage offered through Covered California, “seek[ing] to contract with carriers so as to provide health care coverage choices that offer the optimal combination of choice, value, quality, and service.” California has experience acting as an active purchaser from other programs, such as the Children’s Health Insurance Program (CHIP), small-business purchasing pool, and the state employee purchasing pool. The legislation directs the Board to define minimum requirements that carriers must meet to be considered for participation in Covered California.
To mitigate the risk of adverse selection, carriers are required to offer at least one choice at each of the four coverage levels, whether or not they participate in Covered California. Catastrophic plans will only be offered by carriers participating in Covered California. Also, products offered through Covered California, either for individuals or small employers, must be offered to that population outside the Marketplace. Covered California permits variations in premiums based on age, family status, and geography for 16 rating areas. Covered California does not allow for premium rating based on tobacco use.
In 2012, Covered California led multiple stakeholder group sessions with consumer advocates, brokers, and business representatives to gather feedback on plan selection and design issues including, the optimal number of plans with which to contract, network criteria, out-of-pocket cost design, dental and vision coverage, and health system reform. Covered California released a draft report in July 2012 on QHP options and recommendations based largely on stakeholder feedback.45 Initial recommendations on plan and network design included requiring all QHPs to offer all metal tiers, limiting each issuer to propose 2-3 products per geographic region, and standardizing family tiers and tier ratios.
In September 2012, the Board approved using the eValue8 tool, which measures and evaluates health plan performance, as part of the QHP solicitation to support a quality rating system.6
On February 13, 2013, Covered California announced that it will require standardized benefits and cost-sharing across all the health plans that participate in the Marketplace. The final benefit plan designs specify the benefits that will be offered by all plans and the deductible, copayment, and co-insurance amounts that will be required of plans at different metal tiers.7 Carriers are required to offer at least one of Covered California’s adopted standardized benefit plan designs in each region for which they submit a bid; however, they may also propose an alternative benefit design and may offer the standardized Health Savings Account-eligible (HSA) design.
On November 16, 2012, the Board released a final Qualified Health Plan (QHP) Solicitation to carriers for bids to offer, market, and sell QHP coverage through the Covered California beginning in 2013.8 Bids were due from carriers by January 20, 2013. The bids were evaluated based on the mix of health plans in each region of the state that meet the Marketplace’s goals to promote affordability, competition, alignment of delivery systems, and long-term partnerships. The Board also developed a model QHP contract. On August 7, 2013, Covered California announced it had signed contracts with 12 health insurers to offer plans on the individual Marketplace. Six of those insurers will also offer products in the SHOP.9 Since that announcement, one insurer did not receive final approval to sell in the Marketplace and currently 11 insurers are offering plans through Covered California’s individual Marketplace. Covered California had previously announced the rates for plans in individual Marketplace in May and the SHOP in August.
Dental and Vision Benefits: In October 2012, the Board adopted a policy supporting stand-alone pediatric vision plans on the same terms as pediatric dental benefits in both the Individual and SHOP Marketplaces. Also, the Board approved offering stand-alone vision plans providing services to adults and children for benefits not offered through the EHB benchmark plan.10 On January 8, 2013, the Board released a solicitation inviting vision and dental issuers to submit bids to offer supplemental dental and vision plans through Covered California.11 Bids were due April 8, 2013.
On June 25, 2013, Covered California announced that six issuers would sell nine pediatric stand-alone dental plans. These products can also be bundled with the QHP for a single premium. There are three different product types available: Dental Preferred Provider Organizations; Dental Exclusive Provider Organizations; and Dental Health Maintenance Organizations. Each plan is offered at a high actuarial value (85%) and low actuarial value (70%).12
For 2014, Covered California will not offer QHPs that embed pediatric dental benefits. However, the Board voted on August 8, 2013 to offer pediatric dental benefits as an embedded benefit beginning in 2015.
Risk adjustment, Reinsurance, and Risk corridors: Covered California decided it will initially rely on the federal government to administer risk adjustment and reinsurance programs for the state.
Consumer Assistance and Outreach: Covered California has developed a multi-pronged outreach, education, and marketing campaign to raise awareness about new coverage options and to provide enrollment assistance. The state procured subcontractors to develop the outreach, marketing, and education strategy and has detailed enrollment goals which have been broken out by potential enrollees’ insurance status and demographic characteristics.13 Based on this strategy, several programs will provide outreach, education, and enrollment assistance, including the Outreach and Education Grant Program, the Enrollment Assistance Program, and the Community Outreach Network.
The Outreach and Education grant program provides grants to community-based organizations to provide targeted outreach to eligible populations. This program complements the state’s broader marketing strategy and helps build capacity for the Assister Program. On January 21, 2013, Covered California released the Request for Applications for the program.14 On May 14, 2013, Covered California announced the award of $37 million in grants to 48 lead organizations throughout the state. The lead organizations will be supported by 226 subcontracting organizations. The bulk of the grant funding, $34 million, went to organizations targeting individuals, while $3 million was allocated to organizations providing outreach to small businesses.15 Covered California set aside another $3.1 million to fund four medical associations to educate providers about the ACA.16
Covered California also established an Assisters Program to provide direct assistance to consumers to help them enroll in coverage. Given California’s complex linguistic and cultural diversity and its size, the state solicited broad stakeholder input for the Assister program. In June 2012, Covered California subcontractors released recommendations and a final work plan for Phase 1 and 2 of the statewide Assisters Program.1718 The Assisters Program consists of In-person Assisters, called Certified Enrollment Entities (CEEs) and Certified Enrollment Counselors (CECs), and Navigators. that will include non-profit organizations, community clinics, faith-based organizations, tribal organizations, community colleges, school districts, and labor unions. Other entities that may participate as enrollment assisters but will not be paid by Covered California include health insurance agents, hospitals, and providers. CECs will be paid $58 per successful enrollment in a QHP through Covered California or in Medi-Cal and $25 for QHP or Medi-Cal renewal. Navigators will be supported by $5 million in annual grant funding. The Navigator funding is divided into two pools: $1 million for the targeted funding pool to support organizations that target hard-to-reach populations; and $4 million for the regional funding pool to support organizations that foster regional collaborations.19 The CEE and CEC application process is ongoing while the Navigator application is expected to be released in February 2014 with grant awards announced in April. CEEs, CECs, and Navigators must complete a 3-day training program, pass a certification exam, and pass a finger-printing and criminal background check.20
Covered California has also developed the Community Outreach Network, which consists of organizations that have partnered with Covered California to assist in the effort to raise awareness about the Marketplace. Participating organizations are not compensated for their work. To date, 90 organizations have signed partnership agreements for the Community Outreach Network. Another 367 organizations and individuals have expressed interest in joining and are currently going through the agreement signing process.
In February 2013, Covered California announced the launch of its new consumer and business website (www.coveredca.com) to provide information on the coverage opportunities that will be available. The website is available in English and Spanish and numerous fact sheets have been translated into 11 other languages.
Covered California established three Service Center sites throughout the state. Service Centers in Contra Costa County and Rancho Cordova opened for a soft launch in September. The Fresno Service Center opened in November. The number of staff across all three Service Centers is expected to reach 500 by the end of the year.
In September 2013, Covered California launched its advertising campaign, with tv, radio and digital media ads in three test markets—San Diego, Sacramento, and Chico/Redding. Ads in both English and Spanish were included in the launch.The campaign expanded to additional markets in October and included print ads and ads in additional languages. The campaign also includes out-of-home advertising and a presence on social media, including Facebook and Twitter. Covered California plans to spend $20 million in marketing through the end of December and $45 million for the entire open enrollment period from October 1, 2013 through March 31, 2014.21
Small Business Health Options Program (SHOP) Marketplace: In October 2012, the state released a solicitation for the Administration of SHOP Operations.22 On April 4, 2013, Covered California announced that it had awarded a contract to Pinnacle Claims Management Inc. to administer the SHOP Marketplace. The contract includes maintenance and enhancements of the SHOP Marketplace through December 2015. California intends to pursue the option for the employer to choose the plan tier, while the employee chooses the issuer and plan. To be eligible to purchase through the SHOP, small employers must meet minimum participation and contribution requirements. At least 70% of qualified employees (does not include those employees enrolled in other coverage) must enroll in a QHP in the SHOP and the employer must contribute at least 50% of the lowest cost coverage in the tier selected by the employer. On August 7, 2013, Covered California announced it had finalized contracts with six insurers to sell products in the SHOP.
Basic Health Program (BHP): California has considered an optional coverage program available through the ACA which allows states to use federal funding to offer subsidized health insurance to adults with incomes between 139 and 200% of the federal poverty level (FPL) who would otherwise be eligible to purchase subsidized coverage through an Marketplace. Following delay in the release of federal guidance on the BHP, California developed an alternative Bridge Plan proposal that would certify certain Medi-Cal managed care plans as bridge plans, allowing individuals transitioning from Medi-Cal to the Marketplace to remain in the same plans. These would also offer lower premiums, thereby increasing the affordability of coverage for low-income enrollees.23 On March 11, 2013, Covered California sent a letter to HHS requesting approval of the proposed Bridge Plan.24 The California legislature passed SBx1 3 authorizing the bridge program and the Governor signed the bill on July 11, 2013.
Essential Health Benefits (EHB): The ACA requires that all non-grandfathered individual and small-group plans sold in a state, including those offered through the Covered California, cover certain defined health benefits. Legislation selecting the Kaiser small group HMO plan as the state’s EHB benchmark plan and the state’s Healthy Families (CHIP) program as the pediatric dental supplemental benefit was signed into law in October 2012 (AB 1453/SB 951).25
The legislation creates the California Health Trust Fund within the State Treasury, which will be continuously appropriated and used to manage the finances of Covered California. The legislation also authorizes a loan of up to $5 million from the California Health Facilities Financing Authority to assist in establishment and operation of the Marketplace. The California HealthCare Foundation and the Blue Shield California Foundation also funded activities in preparation for applying for the federal Establishment grant.26
In September 2010, the California Health and Human Services Agency received a federal Exchange Planning grant of $1 million. The state also received a federal Level One Establishment grant of $39.4 million on August 12, 2011 which will be used for overall business and operational planning, research and analysis, and implementation of an information technology system. The state was awarded a second Level One Establishment grant in June 2012 for $196.4 million for continued Marketplace development.27 In January 2013, the state received a $674 million federal Level Two Establishment grant that will enable the state to finance Covered California’s operations through December 2014.28
On January 3, 2013, California received conditional approval from the U.S. Department of Health and Human Services (HHS) for its State-based Marketplace.29 Covered California launched on October 1 and began enrolling qualified individuals, families, and small businesses into coverage.
California Health Benefit Exchange Stakeholder Engagement Plan. Approved September 18, 2012.
California Exchange Tribal Consultation Policy. November 11, 2012.
California Health Benefit Exchange. The California Path to Achieving Effective Health Plan Design and Selection and Catalyzing Delivery System Reform: Stakeholder Input on Key Strategies. May 18, 2012.
Qualified Health Plan Policies and Strategies to Improve Care, Prevention and Affordability. Discussion Draft- Options and Recommendations. July 16, 2012.
CA Health Benefit Exchange Board Meeting Minutes. September 18, 2012.
Final benefit plan designs released March 15, 2013
California Health Benefit Exchange. 2012-2013 Initial Qualified Health Plan Solicitation to Health Issuers. November 16, 2012.
Covered California press release, “Covered California Health Plan Contracts Signed,” August 7, 2013.
Letter to CCIIO from Peter Lee. November 9, 2012.
Covered California, “Children’s Dental Insurance Plan Rates 2014,” June 25, 2013 (updated September 6, 2013).
Marketing, Outreach, and Education and the Assister Program for the "California Coverage.” May 16, 2012.
Outreach and Education Grant Program Application, released January 25, 2013.
Covered California, “Grant Funding Announcement Report,” May 23, 2013.
Covered California press release, “Medical Associations Awarded $3.1 in Grants to Educate Providers about Health Insurance Marketplace,” August 29, 2013.
Phase I and II Statewide Assisters Program Design Options, Recommendations and Final Work Plan for the California Health Benefits Marketplace. June 26, 2012. RHA.
Assisters Program for the California Helath Benefits Marketplace. Exchange Board Meeting. May 22, 2012.
Covered California, “Navigator Program Stakeholder Webinar,” October 28, 2103.
Covered California, “In-Person Assistance Program,” September 6, 2013.
Covered California, Marketing, Outreach, and Enrollment Assistance Advisory Group Meeting presentation slides, September 12, 2013.
HBEX 11- Administration of the Small Business Health Options Program (SHOP) Solicitation. October 12, 2012.
Bridge Plan: A Strategy to Promote Continuity of Care & Affordability through Contracts with Medi-Cal Managed Care Plans, Board Recommendation Brief, March 2013.
Letter from Peter Lee to Gary Cohen at CCIIO requesting approval of the Bridge Plan, March 11, 2013
Exchange Planning Grant and Exchange Establishment Grant. Presented at California Health Benefit Exchange Board meeting on April 20, 2011.
Level 1 Establishment Grant Application.
HealthCare.gov. “California Affordable Insurance Exchange Grants Award List.”
HHS letter to Governor Brown, January 3, 2013.
also of interest
- California’s Previously Uninsured After The ACA’s Second Open Enrollment Period
- Access to Care for the Insured and Remaining Uninsured: A Look at California During Year One of ACA Implementation
- Coverage Expansions and the Remaining Uninsured: A Look at California During Year One of ACA Implementation
- Analysis of 2015 Premium Changes in the Affordable Care Act's Health Insurance Marketplaces