Effectuation Rate Reflects Actual Coverage

Nearly 1.4 million Californians signed up for health plans through Covered California, the state’s insurance marketplace, during the first open enrollment period from October 1, 2013, through March 31, 2014. Nearly 500,000 more signed up during the second regular open enrollment period from November 15, 2014, through February 22, 2015.

However this enrollment figure does not represent the number of people who actually had coverage take effect. The percentage of people who sign up for a plan, pay a monthly premium, and gain health insurance coverage is reported through the “effectuation rate.”

In 2014, the effectuation rate was 81%, which means that among the 1,395,929 Californians who signed up, more than 1,130,000 paid their first month’s premium and had coverage take effect. This rate is similar to the national effectuation rate of 83%.

Chart displaying Covered California Enrollment, Effectuation Rate

Since Covered California is funded primarily through administrative fees charged to the health insurers for each plan effectuated on the marketplace, maintaining a high rate will be vital to the overall sustainability of the marketplace.

Understanding why some people follow through and gain coverage while others do not will be critical to addressing lingering barriers in the marketplace. For example, some people may not follow through after signing up because they have gained coverage through other avenues, such as finding a job that offers health insurance or being determined eligible for Medi-Cal. Others may be unable to afford the monthly premium or may find themselves stymied by payment processing errors or other administrative glitches. More information on the differences between the people who actually gain coverage, versus those who don’t, will help policymakers reduce obstacles to enrollment.

The effectuation rate will be an important indicator to watch because it reveals how many people are actually getting insurance through Covered California — not merely signing up for health plans. And it has implications for the sustainability of Covered California in the years ahead.

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