Many in California may drop coverage from state exchange

The state and federal health insurance exchanges have largely been hailed as successful in the last few weeks, as the Obama administration announced it reached and then easily surpassed its initial enrollment goal of 7 million. However, it now seems as though about half of the total number of people who signed up for health coverage through the marketplace in California in particular might end up dropping those plans at some point this year.

In all, Covered California saw some 1.4 million people sign up for health insurance on its exchanges before the enrollment deadline, but research from the University of California at Berkeley's Labor Center finds that as many as half those residents are likely to discontinue that coverage sometime during 2014, according to a report from Employee Benefits Advisor. The reasons they will likely do so, however, vary widely.

For example, about 20 percent of enrollees believe they will be able to find a job that will provide them health insurance in the remaining months of the year. This will allow them to drop the coverage they purchased through the exchange for which they are currently paying the entire premium, even if they receive federal subsidies to help cover those some of those costs, the report said. About the same number will likely see their income drop by a large enough amount that they will become eligible for the Medi-Cal program, California's Medicaid program for low-income consumers and families. Finally, between 2 percent and 8 percent of enrolled residents are likely to simply drop coverage and become uninsured at some point during the year.

It is important to note that many experts predicted such “churn” between health insurance programs and that it could potentially be a major issue for enrollees in these programs, the report said. This is because those living close to the income level which would allow them to qualify for Medicaid, often see their income fluctuate widely enough that what program they are eligible for, Medicaid or a federally subsidized Exchange Plan, will change throughout the year. The potential issue is how difficult it will be for these consumers to switch between programs as their eligibility changes.

The other side of churning of enrollees in the exchanges is the special enrollment period.  This allows people to enroll in an exchange plan when a certain life event occurs including a birth of a child, marriage, divorce or job loss at times throughout the year, even though the open enrollment has ended. The addition of these enrollees will counteract the loss of some of the enrollees that are anticipated to occur throughout the year for the reasons listed above.