What California Can Teach the Nation About Obamacare

Source: Covered California.

Regardless of whether you're a fan of the Affordable Care Act, the sweeping healthcare reform law better known as Obamacare, or a critic of it, the fact remains that fewer people are uninsured today than were uninsured one year ago because of its existence.

According to the official figures, more than 8.1 million people signed up on either state or federally run Obamacare health exchanges during the previous enrollment period. Combined with consumers that obtained insurance privately or signed up for Medicaid, research firms Gallup and Healthways determined that the U.S. uninsured rate in the second-quarter dropped to 13.4% from 15.6% in the sequential first quarter and 17.1% in the second quarter last year. It also marked a low point since Gallup-Healthways began keeping records on the U.S. uninsured rate in 2008.

California is leading the charge
The state that's arguably the most paramount to these figures dropping is California. I say "paramount" because state officials in April proclaimed that 3.3 million Californians had enrolled in either private plans or the state's version of Medicaid, known as Medi-Cal. The official breakdown, per officials, was just shy of 1.4 million Covered California enrollees and approximately 1.9 million Medi-Cal enrollees. In other words, California was responsible for 17% of all Obamacare exchange enrollment.

Source:Covered California.

Considering California's diverse population, and the fact that it supplied a good chunk of enrollments last year, it's the perfect state to examine to get a bead on the successes and shortcomings of the Affordable Care Act.

As a recent survey by the Kaiser Family Foundation released in late July notes, the expansion of California's Medicaid platform – California was one of 26 states that chose to take federal funds and expand Medicaid to include persons earnings up to 138% of the federal poverty level – coupled with its marketplace enrollees, ultimately reduced its statewide uninsured rate by 58%!

Obamacare's next major challenge
However, its survey also uncovered perhaps the next big challenge for the Affordable Care Act: getting the remaining uninsured enrolled.

For those who obtained health insurance in California the process went smoothly. A majority (73%) felt they received a good value for the plan they purchased, and 80% responded that finding information was easy.

But, a number of challenges still remain for the 42% which are still uninsured. Kaiser's survey points out that 37% of those who remain uninsured have never had health insurance. Perhaps more worrisome, 34% of still uninsured respondents said that "cost remains a barrier to getting coverage" despite 71% exclaiming that health insurance is something they need. 

How will officials tackle this problem?
This leaves regulators with a tough problem. In essence, the easier enrollees have already signed up, but the remaining uninsured are going to be a difficult crowd to reel in given a number of factors, including the disassociation between what insurance is expected to cost and what the remaining uninsured are actually having to pay (sometimes even with subsidies), and in some cases even a consumers' citizenship status.

How will California tackle this dilemma?

As noted by the Washington Times and the AP, with The Washington Post, Covered California spokesman James Scullary noted that it'll be ramping up spending and implementing a range of initiatives in order to educate those who remain uninsured.

Source: Covered California.

The state's plan, according to Scullary, is to spend $168 million over the first three months of 2015's open enrollment period, which begins shortly after mid-term elections on Nov. 15. In context, California spent less than that during the six-month open enrollment period for 2014.

What's unique about California's approach is that it's decisively low-tech. It'll be focusing on refining its direct-mailing message, sending out more enrollment counselors, and hiring more bilingual call center workers. Having call center workers who speak other languages should also make the enrollment easier for California's diverse population.

This would be an extension of what California tried during the latter-half of last year's enrollment period, whereby Covered California officials set up in-store enrollment events at communities throughout the state and began the process of hiring more bilingual enrollment counselors.

An interesting takeaway
The initial takeaway here, based on California's grassroots approach, is that technology may not be the answer for a majority of the uninsured. Although young adults who feel they're healthy enough not to need health insurance would likely respond better to social media-based advertising, the majority of California's uninsured, and perhaps the case with a number of other states in the country, would do best with making the enrollment process more personal.

This is precisely what we saw when we looked at the J.D. Power Health Insurance Marketplace Shopper Survey, released last month. We often think of technology making our lives easier, but respondents in J.D. Power's study showed a clear favoritism toward enrolling in person, with a score of 719 on a scale of 1 to 1,000, compared to enrolling online, which came in with a score of just 597. It's possible the early glitches in the federally run or a few select state-run exchanges contributed to this 122-point gap, but it's also quite possible that people prefer human-to-human interaction when making potentially critical decisions like choosing a healthcare provider. 

What might this mean for insurers?
With the initial year of enrollments in the books, it means health insurers are certainly going to have to work harder than last year to bring in additional members. But, that doesn't mean insurers can't consider implementing similar low-tech approaches to reach uninsured consumers.

If you recall, in July of last year WellPoint (NYSE: ANTM  ) and Walgreen (NASDAQ: WBA  ) formed a joint venture that resulted in the creation of, a portal that explained the nuances of the Affordable Care Act to consumers in a way they could understand. But, buried within their joint-venture was the act that Walgreen also had a majority of its 8,000 stores stocked with informational brochures. Though there aren't any specific figures that analyzed how much these brochures cost or what the direct effect on enrollment was for WellPoint based on its joint venture, WellPoint's sector-leading enrollment last year would imply that it's obviously doing something right.

But, that wasn't all. WellPoint also partnered with Univision to deliver radio and TV ads that featured full-length media broadcasts, as well as 70 town hall meetings meant to raise awareness of the health reform law.

Molina Healthcare (NYSE: MOH  ) , a primarily Medicaid-based insurer, has taken a similar approach with its efforts to improve the personalization of its advertising to a variety of populations in California, as well as New Mexico, Washington state, and Wisconsin. Specifically, Molina has been placing ads in stores that are frequently shopped by cost-conscious consumers, such as Kmart and Family Dollar, and offering public presentations in English as a second language classes.  

This upcoming enrollment period is really shaping up to be defining year for insurers in terms of whether or not they can create a more personal connection with the remaining uninsured consumers. If they can, as Molina and WellPoint have shown, the rewards could be bountiful. If, however, insurers fail to understand the objections of the remaining uninsured and meet their objections on a comfortable and level playing field, it could mean tough times ahead for new member enrollment.

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Read/Post Comments (11) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 23, 2014, at 10:52 AM, msbav8r wrote:

    Give ME the authority to use the government's monopoly on the initiation of force to confiscate people's wealth and labor under threat of violence and/or incarceration, and allow me to use that force to make people buy insurance, I bet I could reduce the number of uninsured people, too.

  • Report this Comment On August 23, 2014, at 11:23 AM, mark636 wrote:

    California has a massive population where something like this can work. Most of the rest of America is screwed but the liberal press will not allow that information to be communicated to your brain.

  • Report this Comment On August 23, 2014, at 11:54 AM, Jim8 wrote:

    I am now uninsured thanks to Obamacare. Always had great health insurance, but now insurance is something I used to have.

    Lost my great retiree plan to the exchanges, and now everything that's available is more expensive and has that horrible $5,000 deductible. The total cost and terms of that deductible make it worthless.

    Prices are far less in cash, so I'd never pay one cent towards the deductible, so why pay $5,400 in premiums?

    I'm now risking my retirement savings, but the odds are with me.

    The only criteria for price in California is age, because older = more health care, right?

    Then why don't those who actually do use more pay more? Those with pre existing conditions do, alcoholics, drug users, the obese, those who have self imposed high blood pressure, diabetes, smokers, all promise to be more expensive that someone who treats their health seriously. Even those who sunbathe run a risk of elevated skin cancer.

    I am healthy and promise to use very little heath care, unlike everyone above who pays the minimum.

    So far my expenses for the year? $0

    Either health should count or we all should pay the same. Doing it the way California and most states are doing it is just wrong, to charge those who MIGHT be more expensive and not those who actually ARE more expensive.

    I'm exempt from the mandate because there's no plan available that meets the guidelines of the "Affordable" Care Act.

    If California is an example that should be followed, it must be really bad in other states.

  • Report this Comment On August 23, 2014, at 11:58 AM, Jim8 wrote:

    Today's "Affordable" health care is useless. Just about all of us won't use anywhere near $5,000 in health care in a year, every year, so we are now paying cash for everything.

    You can buy all of the preventative you will get form obamacare for less than two months of premiums.

    If you are subsidized you are forgiven for disagreeing, you don't know what it costs and you don't care.

  • Report this Comment On August 23, 2014, at 12:00 PM, Jim8 wrote:

    Today's health insurance isn't worth purchasing for the vast majority of us because of the total of the costs is far higher than any benefits.

    Being insured is actually a negative if you are paying for it.

  • Report this Comment On August 23, 2014, at 12:20 PM, Mathman6577 wrote:

    The statement "Regardless of whether you're a fan of the Affordable Care Act, the sweeping healthcare reform law better known as Obamacare, or a critic of it, the fact remains that fewer people are uninsured today than were uninsured one year ago because of its existence." needs to be confirmed and is not necessarily true (*)

    (*) There is some (nongovernment) data that indicates that less people are actually insured and those that are have less coverage and have to pay more for insurance and services (i.e. higher deductibles).

    The "official" figures (which I am assuming is from the White House) from needs to be fully vetted. It is not necessarily true just because it was said by some "official". Just this past week the White House was (again) proven wrong regarding information it provided about the legality of the exchange of the ex-POW soldier for Taliban prisoners. Plain wrong !!!!

    I, for one, have had enough of this blatant cheering like this article does for a law that will mess up US health insurance, healthcare, and economy for years to come.

    I am like Jim8. I'm retired, have to pay a premium that is double what it was, and the policy has a $5,000 deductible (5x the previous deductible). That is progress? I could care less what California is doing to "improve" the system and the impact on insurers.

  • Report this Comment On August 23, 2014, at 12:50 PM, Jim8 wrote:

    >>I, for one, have had enough of this blatant cheering like this article does for a law that will mess up US health insurance, healthcare, and economy for years to come.

    And I'm tired of the baseless complaining the critics do, since there are REAL problems they could be complaining about.

    I suspect they aren't complaining about those because those were their ideas (the high deductibles and the mandate) so they think those are the good ideas.

    Why can't someone write an honest article about this subject?

  • Report this Comment On August 23, 2014, at 1:17 PM, DRayZ wrote:

    Interestingly enough, I just had an e-mail exchange with a friend in San Diego. She receives just enough SSI benefits that she doesn't qualify for MedicAid and can in NO WAY afford the least expensive ACA plan. Even Medicare with the part B is not in the cards. She is now needing surgery but has had to tough it out for lack of coverage.

    ACA is NOT affordable for way TOO MANY!

  • Report this Comment On August 23, 2014, at 3:08 PM, TyroneT wrote:

    ...more people are insured?

    California can lead the way as we have one of the the most, if not the most, "entitlement" driven citizenry. California's idiot politicians never think about how something can actually be realized or financed, they just blaze along into bankruptcy as if money grew on trees. They also do this with natural resources, such as water, energy, etc......welcoming in millions of ILLEGALS on taxpayers backs, while we have neither the WATER to share, nor the energy....but let the stupid taxpayers foot the bill and live without for their own families.....same thing with jobs.

    So it is with Obamacare......let the idiot taxpayers water down their own healthcare coverage and then pay double to also support deadbeats. No problem there, as the politicians have their own coverage, or the money (most of which is obtained via corruption...ever wonder why Pelosi has a different last name then her crooked husband and media rarely reports on the rampant nepotism within the clan?).

    The state already had medical coverage in place for deadbeats and ILLEGALS (who shouldn't be getting anything in the first place). Obamacare is nothing but a redistribution of wealth....even the Supreme Court in upholding this garbage noted that it was nothing more then a "TAX"...funny how Obama and his administration fought to keep it under the same argument, while telling idiot voters it wasn't. How much corruption are the Democrat supporters willing to stomach before turning?,,,Republicans being only a little about a third part that actually rules to the benefit of the citizens and interests of the US??

  • Report this Comment On August 23, 2014, at 3:22 PM, spud1 wrote:

    I live in CA. my rates went down by 1.4 percent. I say it is working here. For those of you posting here, do you pay for your insurance? If so, do you care that your costs go up due to the uninsured? And illegals can not get ACA coverage.

  • Report this Comment On August 23, 2014, at 5:01 PM, rodgerolsen wrote:

    I live in California and I can assure you that the only thing the state can teach others is how to screw up a system horribly. It took us 5 tries over three months to get insured. When we did get insured, we got to pay 30% higher premiums for insurance that was absolutely worthless due to the high deductibles.

    However, the good news was that in exchange for our higher premiums and worthless policies, we got the privilege of providing free, high quality, no-deductible insurance for every welfare mother and illegal in the state.

    The state said that illegals could not get medical, but they also reminded the illegals that they have to take their word for legal residence - so all my illegal neighbors get free medical care on my dime.

    It's a total disaster.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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