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Obamacare was thriving in California. Then Trump happened.

In California, Obamacare is stubbornly refusing to implode.

The Golden State is home to more Obamacare enrollees than any other, 5 million people who get coverage through the law — and of those, 1.5 million through the marketplace.

At least 20 percent of Americans covered through the marketplaces and Medicaid expansion live in California, even though the state is only home to 12 percent of the country’s population.

Even with all the tumult in Washington, those who oversee Obamacare in California think next year will go fine. They would certainly prefer a more stable environment, where they knew key subsidies would be paid and the individual mandate enforced.

And they are expecting premiums to be slightly (3 percent) higher in 2018 due to the uncertainty. But all told, they don’t expect implosion. They foresee a normal, albeit slightly more expensive, year for the Affordable Care Act in California.

“To say the individual market is imploding flies in the face of the data,” says Peter Lee, executive director of the state’s insurance marketplace, Covered California. “We have sought to do everything possible to knit together a functional system. And we believe we’ll succeed.”

California has built one of the country’s most successful health law marketplaces. This year, the state has spent significant time Trump-proofing that work, writing contingency plans to account for how the president may manage his first year of running the health law.

If Trump follows through on his plans to end cost-sharing reduction subsidies (a threat he makes on Twitter regularly), California will add a surcharge onto certain plans to cover the cost — and educate customers on how to avoid it.

If Trump does something totally unexpected, the state will have a program that allows insurers to recoup 2018 losses due to “national policy uncertainties.”

And if Trump doesn’t advertise Obamacare’s open enrollment period, they’re ready to spend extra money on outreach this fall.

Not all states are feeling so confident. Nevada, for example, is scrambling to recruit health insurers to cover 14 counties that currently have zero plans signed up to sell in 2018. In New Hampshire, legislators are desperate to prevent a 40 percent rate increase that they worry could collapse the marketplace.

But California suggests that through careful planning, at least some of the large states would be able to weather Trump’s threats. The president’s powers to break a marketplace with robust competition, where insurers want to stick around, are actually quite weak. California has built a market stable enough that it might even be Trump-proof.

It is also a reminder that for all the focus on the nation’s most troubled health law marketplaces, there are vast swaths of the country where Obamacare is popular and working well, and where the biggest problem is the uncertainty Trump has introduced into the program’s future.

“We feel proud of where we are, but we also don’t think we’re a rare exception to the rule,” Lee says. “I’m on these calls with the 14 state-based marketplace directors, and for most of them, things are working pretty darn well.”

California has long embraced the Affordable Care Act

California has, for years now, enthusiastically committed massive resources to making Obamacare work.

It was the first state to commit to building a state-based insurance marketplace, a decision supported by the Democrat-controlled legislature and Republican governor (Arnold Schwarzenegger).

It was also the first state to expand Medicaid, spending its own money to begin the program in November 2010 — more than three years before Medicaid expansion came into effect. It signed up a quarter-million low-income Californians by March 2012, two years before the national expansion began.

California has been boosted, in part, by the state’s strong commitment to the Affordable Care Act. There has never been much squabbling about how which parts to adopt or whether to participate. From the start, California’s state-level institutions went all in.

“There is a broad policy and political consensus in California, and a commitment across the board to make it work,” says Paul Markovich, the chief executive of California Blue Shield, which sells on the marketplace. “Elected officials, the Covered California board, physicians, hospitals — they were all committed to making this work.”

Of course, other states that have been equally committed to Obamacare’s success have still struggled with the law’s implementation. Connecticut, for example, also built a marketplace and expanded Medicaid — but hasn’t seen robust competition. Oregon and Hawaii both built their own health insurance exchange but had to default to after too many technical difficulties.

California was helped by its geography — a vast state with big, urban areas that are an alluring prospect for health plans. But it was also an aggressive regulator. It requires health insurers to bid against one another to join the marketplace and, if they are picked, to offer a very standardized set of benefits (California has stricter standards than federal law requires).

In California, for example, the state regulates how much plans can charge for anything from an emergency room visit to a lab test. In the rest of the country, insurance plans are free to pick and choose these amounts.

The premiums in California have been about average. In 2017, a midlevel plan in the state cost, on average, $337, although this number would vary depending on where people live.

And the state has been especially successful in signing people up for coverage. Before the health law started, California had an uninsured rate of 17.2 percent, well above the national average.

Now the state’s uninsured rate has fallen to 7.1 percent, below the current national uninsured rate of 9 percent.

This is the reality of Obamacare in California: It’s working, it’s popular, and the threat doesn’t come from insurers dropping out but from the federal government pushing them out.

Trump-proofing an Obamacare plan: surcharges and contingency plans

California has successfully implemented a federal law — but officials this year say much of their energy has gone into figuring out how to manage a successful marketplace while working with a federal government that has not only predicted but worked to hasten its implosion.

The state started on pretty solid footing, with one of the more competitive marketplaces in the country. It expects that 83 percent of health law enrollees will live in areas with three or more insurance options to choose from.

But it has also had to counter challenges. California announced this week that premiums will rise, on average, 12.5 percent, one of the biggest Obamacare hikes the state has experienced. Three-quarters of that is due to rising medical prices and a new tax on health insurers that will take effect in 2018. The other quarter, however, is an uncertainty surcharge — health plans trying to prepare for a world where the individual mandate isn’t enforced or outreach is minimal.

The state has focused much of its contingency planning on the cost-sharing reduction subsidies, an $8 billion fund that covers copayments and deductibles for low-income enrollees. The Trump administration has repeatedly threatened to cut off these payments, which could cause premiums to spike as insurance plans look to fill a big new budget hole.

California came up with a plan: If the Trump administration doesn’t commit to making these payments by the end of August, it will add a 12.5 percent surcharge onto all of its midlevel “silver” health plans. It will also run an aggressive marketing campaign to let Californians know about the surcharge, and that other options could be much cheaper.

By concentrating all the surcharge in one type of plan, it will, researchers expect, make other plans cheaper for the 84 percent of Obamacare enrollees in California who purchase coverage with premium subsidies. This is because the size of the tax credit is tethered to the price of the “silver” plan in the local area. If the price of the silver plan goes up, subsidized shoppers could take their bigger tax credit and possibly get a less comprehensive bronze-level plan for free — or go up to a more robust gold plan at little cost. (Read more about this idea, which actuaries from the firm Oliver Wyman have explored in detail, here.)

California is also working on a plan to let health insurers recoup their losses in future years, should there be unexpected policy changes that cause them to have a rough financial year in 2018.

This program is still being finalized, but Lee described it as allowing insurers to charge higher premiums for the next few years specifically to recoup the losses due to unexpected policy change.

“They recognized that we were facing a lot of uncertainty, and this was a smart way to address this,” says Markovich of Blue Shield.

And California is still weighing the possibility of an especially aggressive marketing campaign in 2018, especially if it sees little outreach or advertising from Washington.

Right now, Covered California is planning to spend $106 million on 2018 outreach, which would be comparable to the 2017 budget. But that number, Lee says, could always go up.

“We’re ready to spend more,” he says. “We have $300 million in reserves right now.”

Lee is in an odd position right now: He’s successfully implemented a federal program, and now spends both time and money preparing to defend that program from a federal attack.

The reality of Obamacare sabotage is that it won’t just hit the troubled markets, places like Nevada and Indiana, which still have areas with zero plans signed up to sell 2018 coverage. It takes untroubled markets with happy customers and punishes them — by not letting them know when it’s the open enrollment period, or with higher premiums than they would have otherwise experienced.

If Obamacare doesn’t work next year, polling finds that most voters will blame President Trump, not President Obama. This is his health care law now. And the decisions he makes to run a less functional Obamacare marketplace could come back to haunt him.

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