Hidden within every health plan sold through Covered California is a fee to fund their operation. This per member per month (pmpm) fee applies to both individual and family plans, small group plans sold through the exchange and adult dental plans if they are ever offered. These fees, paid by the health plans and insurance companies, are never disclosed to the consumers even though they add to the cost of the monthly premium. The hidden Covered California exchange fee also increases the monthly premium for health insurance NOT sold through Covered California.
Hidden Covered California fees fund operations
The Affordable Care Act mandated that the health insurance exchanges, either state or federal, must be self-sustaining starting in 2015; there would be no more federal grants to maintain their operations. To achieve this self-sufficiency the exchanges can charge participating health insurance companies and health plans a monthly amount of either a flat rate fee or a percentage of gross premium amount. Covered California chose to charge a monthly per member per month flat fee. The 2016 Covered California exchange fee will remain unchanged from 2015.
2016 Per Member Per Month Fees
- $13.95 per enrolled member per month on individual and family plans.
- $18.60 per enrolled member per month on small group plans.
- $0.83 per enrolled member per month in family dental coverage.
No consumer disclosure
These fees are remitted by the carriers (health plan and insurance companies) to Covered California. But the carriers don’t have to disclose to the consumer that their monthly premium is increased by a fee that offers no health insurance benefits. (Typically the health insurance invoices will list three of the fees or taxes that are being charged to the consumers which are a percentage of the premium). Of course, the sole purpose of Covered California is to qualify individuals and families to receive the Advance Premium Tax Credit to lower the monthly health insurance premium. The pervading logic and rational at Covered California is that this hidden exchange fee is a moot point because households receive the premium tax credit subsidy so the increased cost doesn’t affect the consumer.
Off-exchange families pay artificially inflated premiums
Unfortunately, there are thousands of individuals and families who do bear the costs of artificially inflated health insurance premiums. Everyone who buys health insurance directly from a carrier (also known as off-exchange plans) who also offers health insurance through Covered California pays a premium that reflects $13.95 for nothing. Why? Because Covered California mandated that the health insurance premiums must be the same whether the health plan is offered either on or off the exchange.
Covered California model contract for carriers
3.04 Offerings Outside of Exchange.
(a) Contractor acknowledges and agrees that QHPs [Qualified Health Plans] and substantially similar plans offered by Contractor outside the Exchange must be offered at the same rate whether offered inside the Exchange or whether the plan is offered outside the Exchange directly from the issuer or through an agent as required under applicable laws, rules and regulations, including those required under 45 C.F.R. § 156.255(b), 42 U.S.C. § 18021, 42 U.S.C. § 18032. – Covered California Model Contract
Covered California is a sales organization
Why would a state agency embed market collusion into a contract? Because Covered California is a sales organization. Their web address is www.coveredca.COM , COM for commercial. Covered California needs to make sales to survive and pay the bills. Each sale of a health plan yields them a minimum of $13.95 per person per month. So a family of four equates to $669.60 annually for Covered California and $892.80 annually if the coverage is through a small employer group.
Health insurance companies reap millions of dollars with their cooperation
The carriers won’t say anything because they benefit from the artificially inflated premium rates for their off-exchange sales. If a family of four purchases health insurance directly from a carrier, the health insurance company picks up an additional $669.60 because they don’t pay that fee to Covered California. The off-exchange consumers are really getting screwed because they don’t even get the benefit of tax credit subsidies to lower the monthly health insurance premium.
Hidden fees support the Covered California budget
The hidden exchange fee makes up the revenue that will run the smooth operation of Covered California for the years to come. Even after a modest enrollment growth between 2014 and 2015, Covered California is bullish about future sales. In the Covered California 2015-2016 budget they forecast enrollment growth of between 8% and 11% for the next three years.
Covered California four year revenue forecast with $13.95 per person hidden fee.
Covered California IFP enrollment forecast to be 8% – 11% every year until 2019.
Covered California looks for enrollment explosion in small group market
White hot optimism for big enrollment gains is forecasted by Covered California in the small group market as well. The budget forecast is to triple enrollment from 16,855 (April 2015) to over 60,000 individuals covered in three years. It is possible Covered California has a few tricks up their sleeve that will help boost small employer group sales such as when they mandated the carriers to cancel grandfathered plans in the Covered California contract.
(b) Contractor agrees that, to the extent not already required to do so by law, effective no later than December 31, 2013, it shall terminate or arrange for the termination of all of its non-grandfathered individual health insurance plan contracts or policies which are not compliant with the applicable provisions of the Affordable Care Act. Contractor agrees to promote ways to offer, market and sell or otherwise transition its current members into plans or policies which meet the applicable Affordable Care Act requirements. – Covered California Model Contract
Similar to mandating equivalent premiums for off-exchange plans, forcing carriers to cancel certain grandfathered plans was another form of collusion to drive sales to Covered California. Truly, this was a slimy pre-meditated tactic typical of an organization more concerned about sales than consumers.
Covered California’s white hot optimistic small group enrollment triples in three years.
Covered California’s expenses magically never increase
The wonderful and magical spin put out by Covered California is that they will achieve record breaking enrollment numbers while reducing their expenditures. It sounds rather preposterous to forecast that Covered California’s expenditures will actually decrease and never increase for the next three years. This is just magical thinking for a government agency.
Covered California multi-year forecast with expenditures declining every year.
Covered California duplicating the work of other agencies
Covered California is trying to do some good things beyond just doling out tax credits to consumers. They are working to develop a solid health plan quality rating system, reduce health care disparities in different immigrant populations, and create health plan benefit designs that don’t bankrupt families. While all of this is part of their mission, as Covered California sees it, there are other state agencies working on many of the same issues. So it’s possible that Covered California will drop expenditures for work that is duplicative of another state agency to save money in the future.
Disclose the hidden fees to consumers
Covered California has done a lot of good. All I and others ask is that they make health insurance more transparent. They need to be more of a consumer advocate and less of a sales organization. They can start by telling the carriers to report on the member’s monthly health insurance premium invoice that the rate includes a fee that pays for Covered California’s operation. Of course, I don’t really know how the carriers will explain to their off-exchange members that their premiums have been artificially inflated at the direction of Covered California.
Covered California Awards Executive Pay Hikes, PR Contracts
CaliforniaHealthLine Tuesday, June 23, 2015
The Covered California board of directors has approved pay hikes for two of the exchange’s top executives, in recognition of their work on the insurance marketplace and their commitment to remain in their jobs, the Sacramento Business Journal reports (Robertson, Sacramento Business Journal, 6/22).
Details of Salaries
Last week, the exchange board approved a 2.5% salary increase for Covered California Executive Director Peter Lee, bringing his annual pay to $333,120. He also was awarded a separate $65,000 bonus.
The raise approved last week comes on top of a 24% raise that Lee was granted by the board in February (Terhune, Los Angeles Times, 6/19).
The board also approved an 11.3% salary increase for Deputy Director Yolanda Richardson, bringing her annual pay to $265,668.
Both pay hikes take effect on July 1, according to the Business Journal (Sacramento Business Journal, 6/22).
Meanwhile, the board last month posted the monthly salaries of its 15 top-paid executives, including Lee and Richardson. As of May 21:
- Lee earned $27,083 per month;
- Lance Lang, CMO of the exchange, earned $23,750 per month;
- Richardson earned $19,635 per month;
- Sue Johnsrud, chief deputy executive director of operations, earned $16,201 per month;
- Anne Price, director of plan management, earned $15,000 per month;
- Kathleen Keeshen, general counsel, earned $14,280 per month;
- Kirk Whelan, director of individual and small business sales, earned $14,166 per month;
- David Panush, director of government relations, earned $14,008 per month;
- Karen Ruiz, CTO, earned $13,495 per month;
- Jim Lombard, CFO, earned $13,374 per month;
- Amy Palmer, director of communications and public relations, earned $13,333 per month;
- LaVonne Coen, deputy COO, earned $12,495 per month;
- Lizelda Lopez, deputy director of communications and public relations, earned $10,833 per month;
- Colleen Stevens, director of marketing, earned $10,416 per month; and
- Brandon Ross, assistant general counsel, earned $8,930 per month (California Health Benefit Exchange release, 5/21).
Covered Calif. Awards Marketing Contracts
In related news, Covered California last week awarded three- to five-year marketing and public relations contracts to two firms, the Sacramento Business Journal reports.
Los Angeles-based Campbell Ewald was awarded a contract worth up to $52.2 million annually, with about 80% of that funding intended for digital, outdoor print, radio and television advertisements.
Ogilvy Public Relations, which provides media support and event organization services, was awarded a contract worth up to $2 million annually (Robertson, Sacramento Business Journal, 6/19).
http://www.californiahealthline.org/articles/2015/6/23/covered-california-awards–executive-pay-hikes-pr-contracts
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Files for download
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April 2015 Covered California Board meeting materials
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May 2015 Covered California Board meeting materials
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