The number of people purchasing health insurance on the individual market surged in 2014, according to enrollment figures released recently by the two state health insurance regulators. The impressive gains in the individual market were fueled by implementation of the Affordable Care Act (ACA) in California, the availability of premium assistance for low-income individuals, guaranteed availability of coverage even for individuals with pre-existing conditions, the federal requirement for individuals to maintain health coverage, and an extensive outreach effort aimed at boosting enrollment. The enrollment data also point to areas where other information will be needed to understand how California’s insurance markets have changed since the implementation of health reform.
The new California data emerged as a result of AB 1083, enacted in September 2012, which requires the California Department of Insurance (CDI) and the state Department of Managed Health Care (DMHC) to publicly report year-end enrollment figures for all the health plans and insurers they regulate.
The reported data show that 2.2 million Californians obtained health coverage through the individual market in 2014. This is an impressive one-year increase of 47% — nearly 700,000 additional enrollees. About half of those with individual coverage in 2014 bought plans through Covered California, where 9 in 10 received a tax credit toward their premium costs. The other half of individual policyholders bought coverage directly from insurance companies without premium assistance. Following the 2014 expansion, California’s individual market is now larger than the small group market.
Group Coverage Wanes
Group coverage — small- and large-employer groups combined — continues to be the main channel for obtaining commercial health insurance. About 11.8 million Californians had group coverage at the end of 2014. Overall, the group market contracted by more than a half-million people, a 5% decrease. The most pronounced shift was in the small-group market, which shrank by 11% in 2014.
Because employers may self-insure instead of buying coverage from an insurer, the group enrollment figures provide only a partial picture of employer-sponsored insurance. The regulators reported 6.4 million people covered by Administrative Services Only (ASO) arrangements for self-insured employers, in which the employer bears the direct financial risk of paying all claims but relies on an insurer or health plan to administer the coverage. The combined total of group coverage and ASO-administered enrollment represents much but not all of self-insured enrollment. ASO figures, for example, do not capture people insured through third-party administrators or multiple employer welfare arrangements (MEWAs). Self-insured plans (including ASOs) are authorized and regulated by federal not state law.
Knowing what happened in the self-insurance market will be important for getting a full picture of the post-ACA market for employer-sponsored coverage. Some of this may also be clearer when other figures on the overall number of people with employer-sponsored coverage are available, such as data from the California Health Interview Survey (CHIS) and the US Census.
Shifting Regulatory Landscape
Data also show that as of 2014, DMHC now regulates the largest portion of enrollment in all three commercial markets, with 82% of the individual market, 77% of the small-group market, and 91% of the large-group market. In prior years, CDI was the predominant regulator of the California individual health insurance business.
Readers who have seen other reporting on these figures may wonder why our growth numbers are different. CHCF figures adjust the 2013 baseline, keeping it consistent with 2014 DMHC reporting improvements. The adjustments reclassify deductible HMO products as commercial enrollment, making CHCF’s 2013 baseline somewhat higher. For this reason, the magnitude of the changes in 2014 — and even the direction of the change in the case of the large-group market — may look different than reported elsewhere.
Finally, when thinking about health coverage broadly, remember that these data don’t reflect the 12 million Californians enrolled in Medi-Cal by the end of 2014.
In California, coverage in the individual market expanded in historic proportions in the first year of the ACA. Group coverage shrank, but the overall size of the employer-sponsored health insurance market remains to be seen.
Katherine Wilson is an independent consultant specializing in health insurance markets and health care costs. She is the author of numerous publications and reports, including CHCF’s series of reports on California health insurers.