California takes lead in health insurance exchange

By Janet Lavelle
Wednesday, October 20, 2010 at 10:32 a.m.

For the 2.5 million Californians who buy their own health insurance, the 6.6 million who are uninsured and the million-plus who get their insurance through their jobs at the state’s smallest businesses, finding a good health plan is a daunting task.

Just comparing plans can be confusing. Finding the right plan that’s also affordable can be even tougher.

That may be changing.

Health care exchange

What it is: One of the fundamental elements of federal health care reform. By 2014, each state will create an exchange where individuals and small businesses can buy health insurance. California is the first state to pass legislation creating its California Health Benefit Exchange. Gov. Arnold Schwarzenegger signed the legislation on Sept. 30, which gives the state three years to organize the program before it launches in January 2014.

How it works: The idea is that individuals and small businesses would join a massive pool of consumers, increasing the exchange’s ability to negotiate a lower group insurance rate for them.

Getting a tax credit: The exchange provides an immediate tax credit for low- and middle-income individuals and families. Households earning 133 percent to 400 percent of the federal poverty rate will be eligible for a credit to help offset the cost of coverage. Depending on income, qualifying households would pay no more than 2 percent to 9.5 percent of household income on health insurance.

What you get: Consumers choose between four levels of insurance — bronze, silver, gold, premium — plus catastrophic coverage available for people younger than 30.

Bronze: Lowest premium cost. Covers 60 percent of benefit costs.

Silver: Covers 70 percent of benefit costs.

Gold: Covers 80 percent of benefit costs.

Platinum: Highest premium cost. Covers 90 percent of benefit costs.

Catastrophic: High deductible and low premium cost, available in the individual market only for people younger than 30. Also pays for three primary care visits.

Note: Total out-of-pocket limits equal the Health Savings Account limit, currently $5,950 for individuals and $11,900 for families. That expense is reduced, depending on income. Households with incomes of 100-200 percent of poverty level pay out-of-pocket amounts equal to one-third of the Health Savings Account limit; households at 200-300 percent of poverty level pay half the HSA limit; households at 300-400 percent poverty level pay two-thirds the HSA limit.

Last month, California became the first state to pass legislation establishing a health insurance exchange as part of federal health care reform, which requires most Americans to have coverage by 2014 or pay a fine.

The California Health Benefit Exchange will provide a place for small businesses and people without employer-based insurance to join together to buy health insurance at lower rates, aided by federal subsidies to low- and middle-income consumers.

Every state is required by the federal law to create an exchange that will begin operating in 2014.

“This is a revolutionary change from the current health care system in California,â€