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California health insurance  -   Health Reform in California  -  health insurance in California fortune telling

Playing fortune teller with California health insurance

Trying to predict the future resulting from complex interactions between our health system and the equally complicated Health Reform bill is fraught with danger. That being said, here we go...right over the cliff (to use a worn-out term).

Barring key changes to the bill itself (which we'll also forecast for reason soon made clear), there are key development that practically built right into the bill itself.

Let's look at major one.

California health insurance rates will go up

The word "Affordable" in the name of the bill is really a misnomer unless you make under 200% of the federal poverty level.

All signals point to much higher costs. Granted, subsidies are available to most Californians who make under 400% of the federal poverty level, the subsidies go down as you get closer to 400% and at best, a 50% subsidy on a premium that increases 50% leaves us at about the same place we started...unaffordable.

There are many reasons for this prediction of increasing costs..some a function of just how Americans view healthcare and more importantly, health while others are entirely new due to the reform bill. The bill mandates richer benefits...much richer than what's currently purchased..especially on the individual family market. The penalty for not buying health insurance (think healthy) is too small to offset the growing premium for most currently uninsured Californians.

The doctors will get squeezed on re-imbursement (we'll discuss later) which will result in more expensive treatments to compensate. We're not accusing...just being realists. There are other causes but we'll leave it that. The industry expects the rates to go up 30-50% right away when the Exchange plans are in effect.

More people will have coverage

More people will definitely get coverage although not nearly the number that legislators plan on.

As we mentioned above, the mandate is relatively weak even with the planned open enrollment window.

Think about it. If a 45 year old uninsured male (employed and earning $45K annually) is willing to go without health insurance now, why would he purchase it at about $5K annually while taking a penalty of $450 (1% of income).

We also have to consider that California has a large number of undocumented workers which will not partake in the Health Exchange but will undoubtedly partake in the health care system (status quo).

This might not matter in North Dakota but in California, it's millions of people not in the system. That being said, more people will have coverage than now.

Political pressure and doctor network reduction

Californian's are going to flip out.

The already are but their anger will be taken quite differently from California legislators and the DOI. The State will likely pass a bill to govern rate increases which does not nothing to address the underlying cost.

Keep in mind that the carriers already have an 85% MLR rule which dictates that 85 cents of every dollar goes directly to health care. The increases are occurring in spite of this. If the law mandates rich benefits levels and the political pressure mandates lower rates, the carriers will turn to the providers and cut their reimbursements.

Doctors have two options...leave the networks or take the haircut. Expect the doctor networks to narrow significantly and more doctors to become cash-only practices (think concierge). Ultimately, we expect most doctors to start working for hospitals. This is a subject for an entire article on the future of the California doctor after health reform.

In the meantime, we can expect richer benefits, higher premiums, smaller doctor networks, and a whole lot of flux! We'll be here to help you navigate the changes.

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