Under previous rules, family members of those who had insurance with an employer were not eligible for covered California. In some cases, these employer plans cover the employee but are costly for spouses and children, leaving families with few options.
Hundreds of thousands of Californians were previously barred from California covered — the state program that offers discounted health insurance — will soon be able to participate as eligibility requirements change.
Before the new rules, people who had access to an employer health insurance plan through a family member were not eligible for covered California. Employer plans are often expensive for spouses or children, driving up the cost of coverage for these family members. Those caught up in this unaffordable “family problem” have little choice: buy the expensive plan, try to buy a simple plan separately, or go without health insurance.
In April, the Biden administration released guidelines to address the nearly decade-long issue and last month the federal government passed the settlement. Starting in January 2023, if a family’s premium costs more than 9.12% of household income, the family may be eligible for federal subsidies, or rebates, through Covered California.
According to the UC Berkeley Labor Center, the “glitch” affects about 615,000 people in California, mostly women and children from low- and middle-income families. The center estimates that about 400,000 of those people would be eligible for financial assistance through Covered California based on their income.
“For those affected, it could be worth hundreds of thousands of dollars,” said Anthony Wright, executive director of Health Access California, a consumer advocacy group. “It really impacts the health and well-being of the family and their finances.”
A state analysis by Third Way, a national think tank, found that a California family of four with an annual income of $53,000 would likely save about $4,340 a year in health insurance premiums. The report shows that low-income households would achieve the greatest savings.
The federal government foots the bill for the expansion and pays subsidies directly to health plans based on California indoor market prices. The Congressional Budget Office reported that it would cost $44 billion over the next 10 years to cover family members previously affected by the family issue.
Covered California is paying for outreach to families, including those caught up in the glitch, said Jessica Altman, executive director of Covered California. Covered California has an annual budget of $109 million for marketing and most of it is spent on open enrollment raising awareness for Californians to enroll or renew coverage.
Registration open started this week and ends January 31, 2023. Coverage can begin as early as January 1.
In San Jose, this is the change that Patricia Moran was waiting for. Moran doesn’t yet know how much she’ll save when she can finally enroll in a covered plan in California. She is confident it will be less than what she currently pays for health insurance.
Moran, 63, has been on her husband’s employer’s plan for almost eight years because she fell ill and could no longer work. The plan is expensive but she needs it to pay for the monthly injections for her aggressive rheumatoid arthritis.
“I’m stuck. I can’t get medicare or any other help,” she said.
For Moran’s husband, the plan is free. For her, it’s $1,200 a month, almost half of her husband’s salary. That’s $14,400 a year, or about 21% of the couple’s total income from her work as a janitor at a school and the childcare program Moran runs at her home.
Even with insurance, the injections cost $250 a month, said Moran, who said they gave her mobility and the ability to care for children in her childcare program.
“It’s a big relief,” Moran said of the new policy. “It will help a lot. We can have savings for our retirement. It’s been so hard because we have to pay the mortgage, we have our bills and all that.
California health advocates have been trying to address the problem at the state level for years, but it was too expensive for the state to pay the cost. The federal government had to decide to fix it and fund it.
This change should help reduce the number of uninsured people in California. The state has seen the largest drop in the number of uninsured people since the federal Affordable Care Act, also known as Obamacare, began in 2013. Since then, some 35 million people have signed up to nationwide health plans, according to the US Department of Health and Human Services.
The rate of uninsured residents in the state has fallen from 17% in 2013 to 7% in 2021. More than half of the 3 million people still uninsured in California are eligible for some kind of coverage, according at the UCLA Center for Health Policy Research and the UC Berkeley Labor Center. The rest, around 1.2 million, are undocumented immigrants who are not eligible for exchange coverage, although some can now qualify for public programs.
Any change that increases coverage for Californians, especially children, is a boon, Wright said.
“It’s a big deal to the goal of a government guarantee that everyone has access to affordable health coverage,” Wright said of the policy change. “The more we get rid of asterisks and exclusions, the better.”
The change comes as employers continue to shift insurance costs onto families. According to a Kaiser family foundation investigationpremiums for family coverage increased by 22% between 2016 and 2021.
Nationally, about 5 million people are only eligible for unaffordable employer-provided insurance. More than half of them are children. Among adults, more women than men are caught in the glitch.
“It has created an unaffordable situation for a small but significant group of people,” said Christine Eibner, senior health care economist at RAND, a nonprofit research organization that published a report on the problem in 2015. “Most of them signed up anyway and paid the higher premium. They could pay 15-20% of their income.
In California, of the estimated 615,000 who are stuck with high-priced employer insurance plans as their only option, researchers estimates that about 87,000 are uninsured, Altman said. About 35,000 people in the individual market pay full rates, and the majority pay for that expensive employer-sponsored coverage, Altman said.
“There are families that can save thousands of dollars — middle-income families, low-income families — that this is going to make a significant difference for,” Altman said. “It’s helpful to help people who have coverage connect with coverage at a lower cost.”
If people are uninsured or have expensive coverage, they are less likely to get the care they need.
Those stretching their budget to enroll in employer-based plans can take the cheapest plan with higher deductibles or catastrophic coverage, Wright said. This could result in people going to the doctor less or not using the plans they have because they would still have to pay out of pocket.
“We think it’s important to have the whole family covered,” Wright said. “There is a real result in not having cover. Uninsured people live sicker, die younger, and are an emergency away from financial ruin.
The Affordable Care Act requires employers with 50 or more employees to offer them and their dependents health insurance. Spouses are generally included but not required by law. In California, 47% of people are enrolled in an employer-provided plan. A national study published in the Health Affairs Journal found that families spend an average of 16% of household income paying employer-based premiums.
Before the latest change, the Affordable Care Act allowed employees to get insurance through discounted public programs if their employer’s health plan cost more than 9.1% of their earnings, which is considered unaffordable. Employers face penalties if their workers obtain insurance through these state programs.
Also, prior to the latest change, the law did not define affordability for family members and employers were not subject to penalties related to the cost of premiums for family members.
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