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California the First State to Establish Health Insurance Exchange

Gov. Arnold Schwarzenegger (R) recently signed two bills that will make California the first state to establish a health insurance exchange under the federal health reform law. The exchange will be a consortium of individuals and small businesses that will pool their buying power through a state agency in order to get better health care coverage at lower prices.

California’s health insurance exchange is likely to be the largest exchange operated by a single state, with as many as 8.3 million residents expected to be eligible for coverage. The program is expected to bring as much as $10 billion in subsidies for California over a 10-year period.

The exchange will provide consumers with a marketplace of insurance plans through a website that will provide standardized, detailed information about the plans and offer a toll-free number to help consumers understand their options. Millions of Californians will be eligible for federal subsidies to join the Exchange, and millions more will be eligible for tax credits.

In accordance with federal requirements, California’s exchange will offer health plans in five categories, ranging from catastrophic coverage for young adults to high-end plans with extensive benefits. The Exchange also will provide resources to connect eligible Californians to federal subsidies for health coverage or government programs such as Medi-Cal, California’s Medicaid program.  

All Californians could be potentially interested in joining the exchange, and all Californians can enroll in it. Anyone at 133% to 400% of poverty level — which is up to about $88,000 a year in income for a family of four — are eligible for tax credits. That’s an estimated 2 to 3 million people who are not eligible for subsidies who would benefit through tax breaks. That large of an enrollment pool could produce huge breaks in premium rates.

However, do not get too excited just yet. The exchanges are not due to go into operation until 2014.

Gov. Arnold Schwarzenegger (R) recently signed two bills that will make California the first state to establish a health insurance exchange under the federal health reform law. The exchange will be a consortium of individuals and small businesses that will pool their buying power through a state agency in order to get better health care coverage at lower prices.

California’s health insurance exchange is likely to be the largest exchange operated by a single state, with as many as 8.3 million residents expected to be eligible for coverage. The program is expected to bring as much as $10 billion in subsidies for California over a 10-year period.

The exchange will provide consumers with a marketplace of insurance plans through a website that will provide standardized, detailed information about the plans and offer a toll-free number to help consumers understand their options. Millions of Californians will be eligible for federal subsidies to join the Exchange, and millions more will be eligible for tax credits.

In accordance with federal requirements, California’s exchange will offer health plans in five categories, ranging from catastrophic coverage for young adults to high-end plans with extensive benefits. The Exchange also will provide resources to connect eligible Californians to federal subsidies for health coverage or government programs such as Medi-Cal, California’s Medicaid program.  

All Californians could be potentially interested in joining the exchange, and all Californians can enroll in it. Anyone at 133% to 400% of poverty level — which is up to about $88,000 a year in income for a family of four — are eligible for tax credits. That’s an estimated 2 to 3 million people who are not eligible for subsidies who would benefit through tax breaks. That large of an enrollment pool could produce huge breaks in premium rates.

However, do not get too excited just yet. The exchanges are not due to go into operation until 2014.

Brian Schroeder
Brian Schroeder
Brian J Schroeder – Independent Broker - (925) 513-7778