Covered California Restricts Networks to Cuts Costs

Irfan Khan/Los Angeles Times via Getty Images

With the U.S. General Accounting Office reporting massive fraud in Obamacare potentially bankrupting most state exchanges, Covered California just announced it will restrict access to doctors and hospitals to slash costs.

Breitbart News reported in late 2014 that Covered California, the Obamacare insurance exchange for the “Golden State,” was involved in a major scandal for restricting the number of eligible doctors and hospitals in its healthcare provider networks.

Referred to in the insurance business as creating a “narrow network” to limit the number of patients that can find an appointment to see a provider, the money-saving action is illegal under Obamacare.

Despite being rated with only one star on Yelp, Covered California announced in March that 1,274,073 million “consumers” had signed up. About 495,000 enrollees supposedly pay some amount of monthly cash premium payments,  and 779,000 are completely subsidized through an expansion of Medi-Cal. But no one knows yet how many of the enrollees are eligible for subsidies or Medi-Cal because of rampant Obamacare fraud.

According to the U.S. Center for Medicare and Medicaid Services, there were 11.7 million persons signed up for Obamacare in January 2015. About 84 percent of them were receiving some amount of subsidy, known as “advance payment of the premium tax credit” (APTC), through their healthcare exchanges. The average APTC subsidy per enrollee for 2015 was $272 per month, or $3,264 for the year.

The APTC is called an “advance,” because if an enrollee’s income is too high by the end of the year to qualify for the subsidy received, or the person is an illegal alien, the U.S. government has the right to “claw-back” the cash advanced from enrollees.

But 2.9 million, or 25 percent, of enrollees dropped out at some time before the end of the year. It is believed that many of the drop-outs were not eligible for the subsidies.

The U.S. General Accounting Office (GAO) released the results of an audit on February 23 that found 431,000 applications from the 2014 enrollment period, involving $1.7 billion in associated subsidies, still had unresolved inconsistencies as of April 2015 — several months after close of the coverage year.

The GAO audit also revealed 35,000 “Social Security number inconsistencies,” with about $154 million in associated subsidies, and 22,000 of “incarceration inconsistencies,” with about $68 million in associated subsidies.

During the GAO’s undercover sample testing, the federal Obamacare Exchange approved subsidized coverage for 11 of 12 fictitious GAO phone or online applicants for 2014. The GAO fictitious applicants obtained a total of about $30,000 in annual advance premium tax credits and maintained subsidized coverage throughout 2014, even though the GAO sent fabricated documents, or no documents, to resolve inconsistencies.

Although Covered California could have received about $1,357,171,200 in APTC subsidies for 2015, that would assume all Covered California enrollees were legitimately eligible for Obamacare subsidies. But if 25 percent of the enrollees dropped out because they were not qualified or decided not to pay their healthcare premiums, Covered California could be shorted by as much as $339,292,800 from the federal government.

The GAO was appalled that 87.5 percent of its sample fraudulent applications were approved and remained in force for the entire year.

Given that states that operate their own Obamacare exchanges are at risk to pay back the federal government hundreds of millions of dollars, it should not be surprising that Peter Lee as executive director for Covered California, just announced, “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality.”

“The first few years were about getting people in the door for coverage,” said Lee, quoted by National Public Radio. “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality. We don’t want to throw anyone out, but we don’t want to pay for bad quality care either.”

Lee added that it is time for the exchange to move beyond enrollment, and to flex its market power on behalf of its 1.5 million members. He said insurers haven’t been tough enough on hospitals and doctors.

The trustees of Covered California are scheduled to vote next month on a plan to start identifying hospital “outliers” on cost and quality by 2018. Doctors would be subject to the same rating system shortly thereafter. Covered California would then start expelling so called “poor performers” from the exchange in 2019.

Doctors and hospitals that have endured Obamacare’s low fees and administrative mess are furious at the latest Covered California move, claiming the action is just a “bait and switch” move back to narrow networks.


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