3.4 million Californians would get coverage through federal reform

January 5, 2011

By Daniel Weintraub

About 3.4 million Californians who would otherwise be without health insurance will have coverage by 2016 if the federal health reform approved last year is implemented on schedule, according to new research published in the journal Health Affairs.

The boost in coverage would mean that 96 percent of Californians under age 65 who are legal residents in the U.S. would have some form of private or public health insurance, according to the article, by Peter Long, president and chief executive officer of the Blue Shield of California Foundation, and Jonathan Gruber, a health economics expert and professor at the Massachusetts Institute of Technology.

That would cut the rate of uninsured in the state by more than 50 percent.

The change is expected to mean a major expansion of Medi-Cal, the state’s program for the poor, with 1.7 million additional people enrolling in the program, most of them paid for by the federal government. Another 4 million people are expected to get coverage through a new health exchange that the state will manage as a clearinghouse for private insurance companies offering standardized plans to individuals who can’t get coverage elsewhere.

Another big change anticipated by the authors: employers, especially small employers, will cover fewer people. The paper estimates that about 870,000 fewer people would have their coverage through an employer after the plan is fully implemented. This is the net result of several different factors, including about 1.5 million employees losing their coverage once their employers see that their workers would get a better deal using subsidies to buy insurance through the state-run exchange, while about 900,000 people who had previously turned down coverage from their workplace would now accept it, because of a federal mandate requiring nearly everyone to have insurance.

The authors’ model estimates that about 330,000 Californians who had insurance at the time the law was implemented would lose it, mostly because their employers stopped offering coverage and the individuals could not afford to buy it on their own, even with subsidies from the federal government.

Of those who remain uninsured in 2016, the largest group, about 40 percent, would be undocumented immigrants, who are not eligible for the subsidies under the new law.

Of the rest, about 60 percent would not be subject to the mandate requiring individuals to have coverage, because the costs would exceed 8 percent of their income or their income would be below the threshold triggering a penalty for failure to buy coverage.

Looking at the roll-out of the plan from a regional perspective, Long and Gruber estimated that Los Angeles County would account for about half of the reduction in the number of uninsured in the state. San Diego would see the largest decline in the percentage of its residents without insurance, and would be the only area of the state to see an increase in employer-sponsored coverage.

The authors estimate that the plan would have a $12.6 billion positive impact on California households. This includes $4.8 billion in higher wages that employers would pay instead of health premiums, $4.4 billion in subsidies to people buying coverage through the exchange, and a $3.4 billion increase in state and federal spending on public programs for the poor.

That benefit would be targeted most at low-income households, and in fact, people with very high incomes would see an increase in their costs, according to the paper.

Families with incomes below 133 percent of the federal poverty level would see a benefit averaging about $1,086, thanks to paying lower taxes as part of the law. People with incomes between 133 percent and 199 percent of the federal poverty level would see a gain of about $2,000 per year.

Most middle-income families would see little change in their costs due to the plan. Only families with incomes of 10 times the federal poverty level, or about $220,000 for a family of four, would experience an increase in costs, losing about $3,000 a year because of the higher Medicare payroll tax.

The authors note that $3,000 for a family earning 15 times the poverty level would amount to less than 1 percent of their income, while the $1,086 benefit for a family of four at the poverty level would represent an increase of 5 percent of their annual income.

Note: Access to the full article is restricted on the Health Affairs web site. A link will be provided today through the Blue Shield of California Foundation web site here.

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