The most populous state in the country not surprisingly manages one of the largest health care systems. Covered California, the state-run Affordable Care Act (ACA) marketplace, is one of the largest and most successful in the nation. Medi-Cal, the state’s Medicaid program, was one of the first to embrace Medicaid expansion under the ACA and covers approximately 12 million people.
The ACA has had a dramatic effect on the insured rate in California. Between 2013 and 2018 the number of uninsured Californians under age 65 dropped almost by half, from 15.5% to 8.1%, according to UCLA Center for Health Policy Research.1 Even when the national uninsured rate increased in 2018 after the individual mandate was dropped, California maintained its high rate of insured citizens.
Besides size, California is known for its progressive approach to public health. As a result, the California legislature has passed several health insurance regulations in recent years that set it apart from other state and federal laws governing health insurance.
Here are some of the most important California rules to remember.
California is one of a handful of states that have adopted a state mandate in the wake of Congress removing the federal tax penalties in 2017 for people who go without insurance. Under the new rule, starting January 1, 2020, California residents must have qualified health insurance or pay a state tax penalty.
Generally, residents without insurance in 2020 face a $695 penalty when they file their 2021 state income-tax return.2 The penalty for a dependent child is half that of an adult, so an uninsured family of four would likely owe about $2,000 in state tax penalties.
The new law allows for several exemptions from the penalty, including when health insurance is deemed unaffordable or when a resident has a coverage gap of three consecutive months or less. California also offers financial assistance, in addition to federal subsidies for low-income residents purchasing insurance through the Covered California exchange.
California has a different schedule for open enrollment than the federal government. Here’s the dates you need to know.
Open enrollment for federally-run ACA exchanges: November 1 through December 15.
Open enrollment for Covered California: October 15 to January 30. (Note: sign-ups were re-opened until April 30 for residents unaware of the new state law on subsidies and penalties for not having individual insurance.)
If you enroll between October 15 and December 15, your coverage starts on the first of January. If you enroll between December 16 and January 15, it starts on the first of February.3
Under California regulations, all qualified insurance policies must cover consumers with pre-existing conditions for the same costs as consumers without existing health issues. There are three exemptions: short-term insurance, fixed indemnity products and critical illness policies.
Short-term insurance offers limited and often non-ACA compliant coverage for short periods of time, usually a year or less. In 2018, the Trump administration loosened rules on short-term insurance policies. That led to an increase in the availability of these policies, which in most cases, can use a patient’s previous health history to deny or charge higher premiums for coverage. But a new California rule banned the sale or renewal of short-term policies starting in 2019.
Fixed indemnity products covers certain costs such as hospitalization for a defined period of time.Critical illness policies cover only costs associated with serious illnesses such as cancer. Both are still allowed and may take pre-existing conditions into account.
No matter where you live, finding the best health insurance depends on your individual situation. Here are more details on how to navigate California’s health insurance system to find a plan that best fits your needs.
If you’re under 65, unemployed or employed, but not covered by employer-sponsored insurance
Your first stop is Covered California, the state-run exchange under the Affordable Care Act. California is one of 16 states that manage an exchange and it currently covers approximately 1.5 million people.
More than 80% of Covered California members receive a federal subsidy to help pay premium costs. In addition, the state offers subsidy assistance even if you may not qualify for federal aid. For instance, individuals with an adjusted gross income of $50,000 to $75,000 may not get an Obamacare subsidy but would qualify for a California one.
Eleven insurers offer plans through Covered California although the availability of plans may vary depending on where you live. Like all exchanges, Covered California offers four tier levels of coverage: bronze, silver, gold, and platinum. Benefits and costs range by tier. Bronze plans, for instance, often charge the lowest premiums for high deductible policies. Platinum plans often charge the highest premiums for the lowest out-of-pocket costs and widest range of providers.
For more information and help finding the plan that’s right for you go to Covered California’s website.
Off-exchange individual policies
Many insurers in California also sell individual coverage off of the state exchange. These policies are ACA compliant. That means they cover individuals with pre-existing conditions and provide the ten essential benefits required by the ACA, including maternity benefits and preventive care. Individuals who don’t qualify for a federal or state subsidy may want to explore these policies to find the most affordable option. You can learn more about these options through an insurance broker or from insurance company websites.
If you are unemployed or in between jobs
Most consumers leaving a job for whatever reason have a handful of options to consider. Here’s a quick look at each.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), employees can retain their health coverage after they leave their job. This usually applies to employers with 20 or more employees. COBRA coverage can be expensive because the employer no longer has to pay toward an employee’s monthly premium. The individual is now responsible for the full cost of coverage along with administrative fees.
For people who can’t afford or are not eligible for COBRA coverage, Covered California may provide a workable alternative. (Link here to the description of Covered California above.)
You don’t have to wait for the next open enrollment period to sign up. The exchange allows consumers to sign up within 60 days before and after they’ve been subject to a life-changing event. This includes losing a job, moving or otherwise becoming newly uninsured.
Enrollees who enter the system outside of the open enrollment period can also receive federal or state subsidies if they meet income requirements. Those who miss the 60 day before and after period will have to wait for the next open enrollment period to obtain coverage.
Worried about the state tax penalty? There is a grace period. If your coverage gap is three months or less, you will not have to pay the penalty.
Other individual insurance
Newly unemployed persons can also sign up for individual insurance outside the exchange or join a spouse’s employer-sponsored plan if dependent coverage is offered.
If you are self-employed or own a small business
If you are a sole proprietor, you will likely be eligible for individual coverage from Covered California (Link to description above or repeat here) or another off-exchange individual plan.
Small business owners with one to 100 eligible employees can find insurance from Covered California for Small Business.4 On it, employers can decide the level of coverage and how they will contribute toward employees’ premium costs. HMO and PPO plans from five insurers are available for 2020. In addition, insurance brokers can often help small businesses find off-exchange alternatives for small business employee coverage.
Independent contractors should keep in mind a new freelancing rule took effect in January 2020. Assembly Bill 5 requires some businesses to reclassify certain independent contractors as employees.5 These newly classified employees will be eligible for various benefits not extended to independent contractors, including employer-sponsored health insurance.
If you are applying for Medicare
Medicare is the government-sponsored insurance system that covers health care for citizens 65 and older and persons with disabilities. Consumers can choose between Original Medicare and Medicare Advantage plans, which are managed by private insurers but adhere to government Medicare requirements.
Residents of all states should pay attention to Medicare sign up deadlines carefully. If you miss your enrollment deadline you may face penalties. If you are a California resident with a Covered California plan, your health insurer will not automatically discontinue your coverage when you sign up for Medicare. This could cause some additional costs.
For more information concerning signing up for Medicare and choosing a plan, go to Medicare.gov.
If you are a student
Depending on their age, where they attend college and their tax dependency status, students have several health insurance options.
College-sponsored student health plans
Colleges and universities often provide special health care coverage for students. These plans are often ACA compliant, covering the essential health benefits and exempting students from the state mandate penalty. That said, coverage does vary so students and parents should check to determine what is covered for what price.
Students can also purchase coverage through Covered California. (Link to description above or repeat here.) Depending on income, students may receive tax credits to help pay for a private health plan through the exchange. Covered California also offers minimum coverage plans for students under age 30. These plans offer very limited coverage for low premiums.
Students who are not dependents of their parents should also check to see if they qualify for low or no-cost coverage through Medi-Cal, California’s expanded Medicaid system.
Students whose parents declare them as tax dependents may stay on their parent’s health insurance plan until age 26. Students who attend school far from home should check this option carefully. Often insurance networks may not cover all health care out of state or even in different regions of the same state. In many cases, only emergency services are covered.
If you qualify for low-income status
California has embraced Medicaid expansion through its Medi-Cal service. Medi-Cal provides no or low-cost health benefits to families and individuals who qualify based on income. If you are 19 to 64 years old and your family’s income is at or below 138% of the federal poverty level ($17,236 for an individual; $35,535 for a family of four) you are eligible.
California transitioned children who received coverage under California’s Children’s Health Insurance Program (CHIP) into the Medi-Cal system in 2013. Low and mid-income parents who cannot afford health insurance for their children can apply for it through the Medi-Cal system. Children 18 or younger with family income at or below 266% of the Federal Poverty Level ($68,495 per year for a family of four) qualify for coverage. To find out more about Medi-Cal for children click here.6
If you are a veteran
If you are eligible for or already enrolled in a Veterans Affairs (VA) program, you likely receive the most comprehensive insurance for the best price. All VA benefits are ACA compliant, so you will not face the California state mandate penalty.
If you do not qualify for VA health benefits, both Covered California and Medi-Cal are available.