Rule change makes 400,000 in state eligible for covered California health insurance

Patricia Moran
Patricia Moran, who runs an at-home day care business in San Jose, is eligible under the new Covered California rules. Photo by Laure Andrillon for CalMatters

Hundreds of thousands of Californians previously excluded from Covered California — 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-based health insurance plan through a family member were not eligible for Covered California. Employer plans are often expensive for spouses or children, driving up insurance costs for those family members. Those affected by this priceless “family breakdown” have few choices: buy the expensive plan, try buying a bare-bones plan separately, or forgo health insurance.

In April, the Biden administration issued guidelines to fix the nearly decades-old problem, and last month the federal government passed the regulation. As of January 2023, if a family’s premium costs more than 9.12% of household income, the family could be eligible for a state subsidy or rebate through Covered California.

According to the UC Berkeley Labor Center, the “glitch” affects an estimated 615,000 people in California, mostly women and children from low- and middle-income families. The center estimates that approximately 400,000 of these people would be eligible for Covered California financial assistance based on their income.

“It could be worth hundreds of thousands of dollars to the people affected,” said Anthony Wright, executive director of Health Access California, a consumer rights group. “It’s really having an impact on 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 on 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 see the biggest savings.

The federal government foots the bill for expansion and pays subsidies directly to health plans based on Covered California market rates. 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 breakdown.

Covered California pays to reach out to families, including those who broke down, said Jessica Altman, Covered California executive director. Covered California has an annual marketing budget of $109 million, and the majority is spent during open registration to reach Californians to sign up or renew coverage.

Open registration started this week and will run until January 31, 2023. Coverage can begin as early as January 1.

In San Jose, this is the change Patricia Moran has been waiting for. Moran doesn’t yet know how much she’ll save when she finally enrolls in a Covered California plan. She’s confident it will be less than what she pays for health insurance now.

Moran, 63, has been on her husband’s employer-provided plan for almost eight years because she became ill and could no longer work outside the home. The plan is expensive, but she needs it to pay for 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 her husband’s salary. That’s $14,400 a year, or about 21 percent of the couple’s total income from his work as a janitor at a school and from the child care business that Moran runs at her home.

Even with insurance, the injections cost $250 a month, said Moran, who said they give her mobility and the ability to care for the children in her child care program.

“It’s a huge relief,” Moran said of the new policy. “It will help a lot. We can save something for our retirement. It was so hard because we have to pay the mortgage, we have our bills and all that stuff.”

California health advocates have been trying to resolve the glitch at the state level for years, but it has been too costly for the state to foot the bill. 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 sharpest decline in the number of uninsured people since the introduction of the federal Affordable Care Act, also known as Obamacare, in 2013 Human Services.

The state’s uninsured resident rate has fallen from 17% in 2013 to 7% in 2021. More than half of California’s 3 million uninsured residents are eligible for some type of insurance coverage, according to the UCLA Center for Health Policy Research and the UC Berkeley Labor Center. The remainder, about 1.2 million, are undocumented immigrants who are not eligible for coverage through the exchange, although some may now qualify for public schemes.

Any change that increases coverage for Californians, especially children, is a boon, Wright said.

“This is a big deal for the goal of a federal guarantee that everyone has access to affordable health insurance,” Wright said of the policy change. “The more we remove stars and exclusions, the better.”

The change comes as employers continue to shift insurance costs onto families. According to a survey by the Kaiser Family Foundation, family insurance premiums increased by 22% between 2016 and 2021.

Nationwide, 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 affected by the breakdown.

“It has created an unaffordable situation for a small but significant group of people,” said Christine Eibner, a senior health care economist at RAND, a nonprofit research organization that published a 2015 report on the subject. “Most of them signed up anyway and paid the higher premium. They could pay 15% to 20% of their income.”

In California, researchers estimate that of the estimated 615,000 stuck with expensive employer insurance as their only option, about 87,000 are uninsured, Altman said. About 35,000 pay full tariff in the individual market, and the majority pay for this expensive, employer-sponsored coverage, Altman said.

“There are families who can save thousands of dollars — middle-income families, low-income families — for whom it’s going to be a significant shift,” Altman said. “There is value in helping people with insurance connect to lower-cost insurance.”

When people are uninsured or have expensive coverage, they are less likely to get the care they need.

Those who stretch their budget to enroll in employer-based plans can choose the cheapest plan with higher deductibles or disaster relief, Wright said. That could result in people visiting the doctor less or not using their plans because they would still have to pay out of pocket.

“We believe it’s important to protect the whole family,” Wright said. “There’s a real result when you don’t have cover. Those who are uninsured live sicker, die younger and are just one emergency away from financial ruin.”

The Affordable Care Act requires employers with 50 or more employees to provide health insurance for them and their dependents. Spouses are usually 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 on paying employer bonuses.

Before the last amendment, the Affordable Care Act allowed workers to insure themselves through discounted state programs if their employer’s health insurance cost more than 9.1% of their income, which is considered prohibitive. Employers face penalties if their employees purchase insurance through these government programs.

Also, prior to the last amendment, the law did not define affordability for family members and employers did not face penalties related to the cost of premiums for family members.

CalMatters is a nonprofit journalism company that explains how the California State Capitol works and why it matters.