The exchange — named Covered California — primarily will serve individuals and small businesses.
Supporters hope the exchange will function similarly to websites like Amazon and Expedia so that users will be able to choose among various health plans through an easily navigable online store.
The exchange is expected to open for registration in October, and an estimated five million people will purchase plans through the exchange in 2014.
Last month, California officials announced a premium rate structure for health plans offered through the exchange, saying that prices are lower than what some observers were expecting.
Details of Premium Structure
Exchange officials said that premiums submitted for next year's individual market ranged from 2% higher to 29% lower than the current average premium for small business plans in the state's largest metropolitan areas.
The officials said that to help keep premium rates low, participating health plans reduced their profit margins to about 2% or 3% and negotiated lower reimbursements for hospitals and physicians.
Covered California officials provided an example of the cost of a monthly premium for an individual health plan in a southern Los Angeles County region, saying that a 40-year-old person purchasing a Silver plan would pay:
- $325 for a Kaiser Permanente policy;
- $287 for a Blue Shield policy; and
- $242 for a Health Net policy.
In 2009, the Congressional Budget Office projected that the average annual rate of exchange plans would be about $5,200. Rates provided by Covered California officials averaged about $3,600 per year, before subsidies (California Healthline, 5/24).
Concerns From Consumer Advocate
Jamie Court, president of Consumer Watchdog, said, "In many cases, the networks are too limited and the prices are too high in the exchange." Court added, "Covered California doesn't take the place of a government agency that has the power to force justification of the rates or deny them."
Consumer Watchdog is campaigning for a November 2014 ballot initiative that would give the state Department of Insurance the power to approve or deny premium rate increases (Terhune , Los Angeles Times, 6/12).
Observers Scrutinize Kaiser Rates
In related news, Kaiser Permanente has the highest premium rates for health plans offered through the exchange in Southern California and other parts of the state, the Los Angeles Times reports.
According to the Times, the rates have prompted debate about Kaiser's motives, with some observers saying that the company intentionally bid high to avoid drawing too many enrollees who are sick or might be costlier to treat.
Others argue that Kaiser was concerned that lower rates would lead to the enrollment of more individuals than the insurer's network of providers could handle.
Kaiser has denied allegations that it is trying to avoid certain customers (Terhune , Los Angeles Times, 6/12).