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IMPORTANT: State of California Exchange
Today's issue of Health Care Reform Update contains an analysis of recent news stories about the California insurance exchange. It is a BSG internal communication written by Kevin Tripp, one of our Account Executives. We have forwarded it to you unedited so that you may have a more accurate picture of the exchange reality that seems to be emerging. 
We'll forward other relevant analysis as it becomes available. 
Early this week, the State of California (the largest state exchange) released the carriers that were going to be in the exchange and the rates. When this came out, the administration and a lot of new sources jumped over this and promoted the message that the rates were much lower than most people predicted and there is no end of the world because of this. The most quoted comment came from the head of the California exchange saying "These rates are way below the worst-case gloom and doom scenarios we have heard". BSG has had clients reach out to us asking if they should change their strategy and if exchanges may be a good option for their employees. Here is an article that was pushed out that told that side of the story.


Well as people have dug into the plans (including myself) you actually get a much different message that I think our clients should understand. First off - there are 13 carriers in the exchange. Each of these carriers did reduce their price, but they did this by significantly decreasing the network. For example UCLA hospital is only in one of the carriers networks. Cedars-Sinai which is one of the largest hospitals is not in any of the networks. Blue Shield (one of the largest carriers) is only allowed 36% of their normal network in the exchange. If you buy a plan through them outside of the exchange you still get the full network. So their first move was to reduce cost by substantially reducing the network size.


However along with the provider changes, you need to really look at the rates to get the true impact. In fact, it will increase individual market premiums in California by as much as 146%!!! How do two different sources tell a completely different story using the same rates?


Well its actually pretty easy - The news release stated "The rates submitted to Covered California for the 2014 individual market," the state said in a press release, "ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California's most populous regions." Except that Lee was making a misleading comparison. He was comparing apples-the plans that Californians buy today for themselves in a robust individual market-and oranges-the highly regulated plans that small employers purchase for their workers as a group. The difference is critical.


Here are a few examples that Forbes has written on.

If you're a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare's exchanges is the catastrophic plan, which costs an average of $184 a month. (That's the median monthly premium across California's 19 insurance rating regions.)

The next cheapest plan, the "bronze" comprehensive plan, costs $205 a month. But in 2013, on eHealthInsurance.com (NASDAQ:EHTH), the average cost of the five cheapest plans was only $92.

In other words, for the average 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.


Under Obamacare, only people under the age of 30 can participate in the slightly cheaper catastrophic plan. So if you're 40, your cheapest option is the bronze plan. In California, the median price of a bronze plan for a 40-year-old male non-smoker will be $261. But on eHealthInsurance, the average cost of the five cheapest plans was $121. That is, Obamacare will increase individual-market premiums by an average of 116 percent.

But at the end of the day - a picture can tell the story really well. Click here to look at San Francisco area.


So after people started questioning the administration - they have come out and now said you can't compare because the Exchanges cover so much more than the old policies and more people have access - but at the end of the day members are going to be paying almost double if they go on the exchange.


Many of these articles have been added to BSG communication pieces but I thought this was too important because readers may read some articles and get the completely wrong impression. 



Kevin A. Tripp

Account Executive

The Benefit Services Group, Inc.

The preceding is not intended to be and is not offered as legal advice. We are prohibited from the practice of law. Compliance is the responsibility of the employer or Plan sponsor and affected employees who should seek their own legal counsel regarding questions about information presented in this news alert. Copyright© 2013
The Benefit Services Group, Inc.
BSG® is  a registered trademark of The Benefit Services Group, Inc.