Millions in California will swiftly feel health care changes

Millions of Californians who don't have health insurance or can't afford their current coverage will feel the impact of the historic health care overhaul almost immediately.

From uninsured 20-somethings to seniors struggling to pay for prescriptions, the changes that kick in this year will touch a broad swath of people.

Small businesses that offer insurance to employees will get tax credits. Insurers no longer will be able to place lifetime dollar limits on benefits or rescind coverage, except in cases of fraud. Parents will be able to keep children on their health plans up to age 26. And people with existing health conditions can purchase coverage from a federally subsidized pool.

"This will start to open up access to people who have been shut out," said Anthony Wright, executive director of Health Access California, a health care consumer advocacy coalition.

The health care legislation, which gained final approval by the U.S. House on Sunday, promises to fundamentally transform the health care system. A companion measure that alters some of the bill's provisions also passed the House and awaits action in the Senate.

Big changes in 2014

Whatever happens next, wide-ranging changes are guaranteed. The most sweeping debut comes in 2014, when virtually everyone will be required to have insurance. It's also when individuals will be able to purchase subsidized policies in new insurance exchanges, and when states will be required to expand Medicaid.

The Golden State has perhaps the most to gain, with the largest population of uninsured residents in the nation. Last week, the UCLA Center for Health Policy Research estimated that nearly one in four Californians younger than 65 -- about 8.2 million people -- went without insurance for all or part of last year. That's up from 6.4 million in 2007.

"This is a big deal to California because of the size of our population and because our public health programs are bigger than those in other states," said Shana Alex Lavarreda, the center's director of health insurance studies.

It won't fix the problem completely. Some Californians will be ineligible for subsidies on the exchanges or for Medi-Cal because they make too much money or because they're in the country illegally.

But the majority -- 63 percent of the uninsured, according to a projection by the UCLA center -- will have a much better chance of getting health care.

Not all of the overhaul's provisions are good for consumers' pocketbooks. This year, a 10 percent tax on tanning services kicks in. Next year, the bill will limit pre-tax contributions to flexible spending accounts for medical expenses to $2,500, down from $3,050. And in 2013, people will have to spend a higher percentage of their incomes on unreimbursed medical expenses before they can claim them as itemized income tax deductions.

Among the changes Californians will notice first is creation of a national high-risk insurance pool within 90 days for people with existing medical conditions. The pool, backed by $5 billion in federal money, will offer subsidized premiums to people who have been uninsured for at least six months and have yet-to-be-defined medical problems.

At least 200,000 Californians can't get insurance because of existing conditions, said Lucien Wulsin Jr., executive director of Insure the Uninsured Project, which works to increase coverage for California's uninsured.

"We can serve a lot more people," said Lesley Cummings, executive director of the Managed Risk Medical Insurance Board, which runs California's high-risk pool.

Because of limited funding, that pool caps enrollment at 7,100 and insurance benefits at $75,000 per year. Premiums can exceed $1,000 per month.

Cummings said the federal option will be better in key ways, offering lower premiums and removing caps on annual benefits. The federal pool is to end in 2014, when insurance companies won't be allowed to deny coverage based on existing conditions.

Seniors are likely to cheer changes in Medicare prescription coverage that eventually could save them thousands of dollars a year. Medicare is federal health insurance for those 65 and older.

Seniors who participate in the Part D plan pay 25 percent of drug costs up to $2,830, after a $310 deductible. At that point, a gap in the coverage known as the "doughnut hole" kicks in.

Seniors' struggles

Once seniors cross that threshold, they're responsible for 100 percent of drug costs until they pay a total of $4,550 in out-of-pocket expenses, said Ernie Powell, senior manager of advocacy for AARP California. Medicare drug coverage then resumes.

About 1.9 million California seniors fall into the doughnut hole, said Powell. "They're making choices between food and drugs," he said.

The approved bill will reduce out-of-pocket costs by up to $375 and offer brand-drug discounts. If the companion bill passes the Senate, the doughnut hole would be phased out by 2020.

Diana Barbour, 71, of North Highlands, near Sacramento, has 10 prescriptions and swiftly falls into the doughnut hole each year. The main culprit is Enbrel, a drug that relieves the pain and inflammation of her rheumatoid arthritis and costs $1,600 per month when she pays full price, she said.

Barbour can't imagine life without her "miracle drug," as she calls Enbrel, because it keeps her mobile and active. But her only income is $1,600 in Social Security each month, plus a grant that pays about $3,000 of her out-of-pocket drug costs each year.

Even with the grant, Barbour has to pay about $1,500 in out-of-pocket expenses to get through the doughnut hole, so she's pleased with the new plan. "It will make it easier to get through each month," she said.

Uninsured young adults in California whose parents have coverage may start noticing changes in six months. A new rule will require health plans to allow parents to keep children on their plans until age 26, as long as the children aren't offered coverage through an employer.

California law doesn't require adult children to be covered by their parents' health plans unless they're disabled, said Darrel Ng, spokesman for the state Insurance Department. However, most group insurance policies cover dependents until age 26 only if they're full-time students.

Whether the newly eligible young adults will take advantage of the change depends on several factors, chief among them cost, said Wulsin of the Insure the Uninsured Project.

Marcus Dramis, 26, owner of Marvelous Tint Solutions, an auto detailing shop in Folsom, said his business has been taxed too heavily during its start-up phase for him to even consider offering insurance to his two apprentices. Dramis said the new tax credits might enable him to insure them.

Help for small business

This year, the government will offer tax credits of up to 35 percent of an employer's contributions to workers' health premiums at firms that employ no more than 25 workers.

One change is voluntary until 2014, but California probably won't participate in the early years because of its budget crisis.

Starting this year, states will be allowed to expand coverage of Medicaid to people younger than 65 who earn up to 133 percent of the federal poverty level -- $10,830 annually for an individual and $22,050 for a family of four. Medicaid provides services to low-income children and families, and people who are elderly, blind or disabled.

The expansion will include childless adults.

The California Department of Health Care Services projects 1.6 million more people will join Medi-Cal, California's Medicaid program.

But Medi-Cal is struggling, and recent budget battles have ended with major cuts to funding pots and services, with more on the horizon.

California likely will wait to expand eligibility until 2014, when there's more generous federal funding to help pay for the new participants, said agency Director David Maxwell-Jolly.

This project is the result of a partnership between The Sacramento Bee and the California HealthCare Foundation Center for Health Reporting. The center is an independent organization devoted to reporting about health care issues that concern Californians. It is based at the University of Southern California Annenberg School for Communication & Journalism and funded by the nonprofit, nonpartisan California HealthCare Foundation. Senior writer John Gonzales contributed.