Covered California Faces $78M Deficit in FY 2015-2016 Budget

Covered California will face a $78 million deficit in fiscal year 2015-2016 when the federal government stops providing funding for the exchange through the Affordable Care Act, according to budget estimates, U-T San Diego reports.

Details of Deficit

Beginning Jan. 1, 2015, the Affordable Care Act no longer will provide federal grants to fund state health exchanges. In addition, California law prohibits using the state's general fund to pay for the exchange.

Exchange budget statements do not include a definitive plan for how Covered California will continue funding its operations, according to U-T San Diego.

Potential Revenue Sources

The exchange charges insurers an administrative fee for each policy sold on the exchange, which could boost revenue if enrollment numbers are high. The fee is $13.95 per policy in 2014 and will increase or decrease in 2015 depending on the number of individuals who purchased plans.

The California Association of Health Plans did not set a limit for how high the fee could go, but the group said it supports keeping the fee "as low as possible."

In addition, Covered California plans to save up federal grant money in order to offset the loss of federal funding in 2016 and 2017, according to a state auditor's report. However, that would require the exchange to spend less than it collects from grants and administrative fees.

In the current fiscal year, the exchange has estimated that it will be able to save about $56 million.

Reaction

Dana Howard, a spokesperson for the exchange, noted that the budget forecasts were created before open enrollment began. He said it is difficult to estimate how the exchange's operating budget will be affected until enrollment numbers are finalized. 

"We are still doing assessments and analytics of what it is that we are spending at a particular rate, but we do not have hard numbers that are completely analyzed and ready to release," Howard said.

Margarita Fernandez, a spokesperson for State Auditor Elaine Howle, said, "It seems clear that enrollment is what really affects revenue generation and it will determine the overall success" (Sisson, U-T San Diego, 12/29/13).