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California’s Health Benefits Exchange: How Will it Change Our Business? Jack Gilbertson, Esq. Anne McLeod Senior Vice President, Health Policy
California’s Health Benefits Exchange:
How Will it Change Our Business?
Jack Gilbertson, Esq. Anne McLeod
Senior Vice President, Health Policy
“Seemingly, the only thing predictable about the future
is that it lies ahead.”
The California Health Benefit Exchange is Now…
California’s Uninsured Population is Spread Throughout the State
California’s expanse, diverse geography and mix of rural and urban areas are unique and present outreach challenges.
Covered California’s Annual Enrollment Goals
• By 2015: – Enrollment of 1.4 million Californians in subsidized
coverage in Covered California or enrolling in the marketplace without subsidies
• By 2016: – Enrollment of 1.9 million Californians in subsidized
coverage in Covered California or enrolling in the marketplace without subsidies
• By 2017: – Enrollment of 2.3 million Californians in subsidized
coverage in the marketplace or enrolling in the marketplace without subsidies
Covered California’s Primary Targets • The primary target of marketing and outreach efforts of
Covered California are the more than 5.3 million California residents as of 2014: – 2.6 million who qualify for subsidies in Covered California;
and – 2.7 million who do not qualify for subsidies but now benefit
from guaranteed coverage and can enroll inside or outside of Covered California.
• Covered California’s marketing and outreach effort will reach nearly every Californian – almost 38 million residents – with a positive message on new insurance options and proactive personal health care.
• There are an additional 2.4 million Californians who will be newly eligible for Medi-Cal.
Covered California’s Target Segments By
Age
and
FPL
139 – 199% 200 – 400% 400%+ 18
- 24
Just Getting Started 275,241
9% Independent and
Connected 595,049
20%
Calculated Risk Takers 317,914
11%
25 -
34
Working Families 786,323
26%
35 -
44
Older and Denied 703,409
24%
45 -
64 At Risk and Older
313,789 10%
Major Activities 2013 - 2014 • Qualified Health Plans (QHPs). Evaluate, select, certify
and contract with QHP issuers to provide coverage through the individual and SHOP exchanges.
• Small Business Health Options Program (SHOP). Establish to serve small employers and their employees.
• Marketing, Outreach, Education. Refine and implement an aggressive marketing, outreach, and public education program leading to the first open enrollment period in 2013 and 2014, and annual open enrollment late in 2014 and 2015
• California Health Eligibility, Enrollment & Retention System (CalHEERS). Refine, test and bring online.
The Bridge Plan
139-200% FPL With prior Medi-
Cal eligibility
139-200% FPL With NO prior linkage to the
Medi-Cal Program
Medi-Cal Exchange
Medi-Cal Health Plans
Priced as the LOWEST silver
plan
Key Dates
• October 1, 2013 Pre Enrollment begins • January 1, 2014 Coverage begins • January 1, 2017 Covered California expands
Hospitals will Continue to Treat Sicker Patients That Require Specialized Care
Inpatient Case-mix Index (CMI) for the years 2001-2010
11
1.05
1.10
1.15
1.20
1.25
1.30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
CMI
Population Growth
Population growth in California is slightly below the national average, with higher observed growth concentrated in smaller counties
-4%
-2%
0%
2%
4%
6%
8%
10%
- 1,000,000 2,000,000 3,000,000
County Population
Cou
nty
Popu
latio
n G
row
th R
ate
3.0 3.1
Population Growth Rate
California US
Source: US Census American Community Survey 2007, US Census 2010, Deloitte Analysis
Trend Line
Imperial
Kern Riverside
Placer
San Diego
Orange
10,000,000
Los Angeles Plumas Calveras
Aging
Virtually all projected growth in the state will be driven by seniors (aged 55+) Population Distribution
2010-2020
29
29
4
5
4
7
0 10 20 30 40 50
2010
2020
CAGR: 0% 3% 6%
Change in Population Aged >55
Under 55 55 to 65 Over 65
Population in Millions
Year
0%
1%
2%
3%
4%
5%
6%
7%
8%
Median: 4%
Counties
Perc
enta
ge C
hang
e
Source: American Community Survey 2007, US Census 2010, Deloitte Analysis
El Dorado Amador Kings
San Mateo Santa Clara
Los Angeles
Utilization – Aging Population
Beyond coverage shifts, aging will also drive a significant increase in the utilization of inpatient services
Chronic Illness vs. Current Utilization Rates
120
140
160
180
200
220
240
260
25% 30% 35% 40% 45% 50% 55%Chronic Disease Incidence
Med
icar
e In
patie
nt U
tiliz
atio
n / 1
000
For every 1% change in the incidence of chronic
disease there is a corresponding increase
in utilization of 6%
Source: California HealthCare Foundation
Kings Colusa Stanislaus
Tehama
Glenn
Calaveras
Lake
Provider Capacity Physicians
• Nationally, nearly one quarter (24.7%) of the active physicians in the workforce are age 60 or older.
• California has the highest percentage of those over 60 years of age at 29.2%, or nearly one-third of all active physicians.
Total MDs MDs per 100K Population
Total DOs DOs per 100K Population
Active Physicians in California - 2009
89,254 242.8 3,309 9.0
Active Patient Care Physicians – 2009
77,208 210.1 2,868 7.8
Caregiver Shortage
Primary care physician supply could constrain the ability to manage the increase of chronic disease and other increases in utilization in several parts of the state
Source: AMA Physicians Master File, California Health Care Foundation
Caregiver Supply Health Status Percentage of adults with one or more chronic illnesses Number of primary care physicians per 1,000
San Francisco
San Jose
Los Angeles
28-35% 35-39% 39-43% 44-49% No data
San Francisco
San Jose
Los Angeles
1.3-2.5 1.1-1.3 0.8-1.1 0.2-0.7 No data
The combination of low caregiver supply and are
poor health status is evident
throughout California
55% of the workers in the state are employed by firms of less than 100 employees, firms most likely to push employees to the exchange
Exchange Exposure
Potential Movements to the Exchange by Firm Size
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
0-49 50-99 100-999 1000+ TotalFirm Size
Num
ber o
f Em
ploy
ees
Source: State of California, Employment Development Department, Labor Market Information Division, Deloitte Analysis Note: Conversion rates are estimates based on national conversations with employers, payers, and opinion leaders. Actual conversion rates will depend on the state of the legislation post-Supreme Court decision and existing incentives
Exchange Commercial
Up to 50% Conversion
Up to 25% Conversion
Up to 10% Conversion
Up to 5% Conversion
Up to 38% Conversion
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1Estimates
Annual ratio of hospital profit to costs by payor category1
Private payor
Medi-Cal (including DSH) Medicare
Reductions in Medicare and Medi-Cal reimbursement have required hospitals to increase charges to
private payors to maintain overall profitability
Cost Shift In CA
18
Coverage Shifts – An Illustrative Example
Illustrative Margin Assumptions
Source: Deloitte Analysis, Illustrative 2012 Margins derived from 2008 Milliman Report
Despite an increase in the total insured, the net effect of this shift will be a significant dilution of margin
2012 Margin (Pre-ACA)
2020 Margin (Post-ACA)
Commercial +20% +25%
Government -10% -30%
Uninsured -25% -45%
1
Initial Margin 2.0%
Δ Margin = +1.2%
Key Shifts
New Margin -8.3%
Δ Margin = -1.5%
3 Δ Margin = -10.0%
Wei
ghte
d Av
erag
e O
pera
ting
Mar
gin
2
Reduction in the uninsured from 20% to 12% improves margin profile (Δ = +1.2%, now 3.2%)
1
With a higher mix of ‘Government’ business, ACA reimbursement reform significantly degrades margin (Δ = -10.0%, now -8.3%)
3
Aging into Medicare and the Exchanges (SHOP / HBEX) reduce proportion of Commercially insured from 50% to 44% and dilutes margin (Δ = -1.5%, now 1.7%)
2
Margin Impact
U.S. Currently Borrowing 40 Cents of Every Dollar It Spends
20
Gross Debt as Percent of GDP
21
UNCERTAINTY EXISTS
