By Steve Eggleston
After the high-profile failures of Oregon’s and Massachusetts’ state-run health-care exchanges, and the near-failures of several other state-run exchanges this time last year, the proponents of ObamaCare were hoping that the blood-letting of the remaining state-run exchanges was at an end. Indeed, there hadn’t been any further failures. According to an editorial in The Orange County Register, that’s about to change, with the biggest domino, Covered California, poised to fail.
Up until this year, Covered California had been using $1.1 billion in federal grant money as its major source of money to finance its operations. There will be no more federal money going into Covered California, or any other state-run exchange, as that spigot was shut off on January 1. Meanwhile, in accordance with ObamaCare dictates that the exchanges be “self-sufficient”, California’s legislature has prohibited the use of general state funds on Covered California.
According to The Register, Covered California currently says it expects to lose $78 million in Fiscal Year 2016 (July 1, 2015-June 30, 2016). It seems people haven’t been signing up as expected. As of the original deadline for 2015 coverage, February 15, Covered California was 300,000 short of its planned goal. Two extensions of that deadline, to April 30, have not, at least so far, appeared to come close to closing that gap. According to a study by Alavare Health, Covered California had the 3rd-worst enrollment growth, at 1%, and the 4th-worst re-enrollment rate, 65%.
After looking over the presentation given to the Covered California board at its March meeting, I’d say that $78 million projected loss looks to be a bit “optimistic”. Under what it termed the “medium” scenario, the expected FY2016 loss is $104 million, which would bring the cash reserves down to $184 million. Supposedly expenditures will drop and revenues increase, but given the combination of the First Rule of Government Expenditures (spending never actually decreases) and the overly-optimistic nature of revenue projections, Covered California isn’t long for this world.
Of course, the Congressional “Republicans” have the “fix” – explicitly allow the federal exchange to offer subsidies if the Supreme Court strikes down the executive-based version. They claim it would be “temporary” and would come with the repeal of the individual and employer mandates regarding health insurance, but given their other hard turns to the left (including approving Loretta Lynch as Attorney General), it will neither be “temporary” nor come with the repeal of any mandates.