Let’s assume that President Obama’s health care reform bill – signed into law a year ago – is implemented as written. What will the health insurance market look 10 years from now? Where will Southern Californians get their health insurance?

The short answer: No one knows. The bill is very complex, but there are three provisions in particular that have the potential to revolutionize the U.S. health insurance market: mandates that require businesses and individuals to purchase insurance (or pay a penalty), coverage requirements that prohibit insurers from denying coverage or using price discrimination to target those with preexisting conditions, and the establishment of government-sponsored health plans.

It is very difficult to predict how these provisions will interact and how they will affect the behavior of consumers, employers, regulators and insurers. Indeed, the impact on the health insurance market may differ quite a bit state by state, since conditions vary across the country.

In some ways, California looks very similar to the United States as a whole. Our premiums, for example, are just a tad higher than average ($349 per month in the small group market), according to the Association of Health Insurance Plans. And the majority of our residents under 64 get their insurance through their employer or through Medi-Cal.

However, there are several ways in which Southern California is different from the national norm. According to UCLA, 29 percent of Los Angeles County residents go uninsured for all or part of the year, almost 50 percent higher than the national average. In addition, many of California’s uninsured, 22 percent, are illegal immigrants, whose insurance status will not be changed by the law.

It’s also worth noting that the private health insurance industry is highly concentrated in California, with 77 percent of the market served by the top five insurers, according to the American Medical Association.

The base-case scenario for reform – published by the Congressional Budget Office – assumes that the law will reduce the number of uninsured by almost 60 percent mainly by pressuring employers to offer coverage, providing subsidies to help individuals purchase coverage and opening up the eligibility for Medicaid.

Given the demographics of California (young and growing), this CBO base case would contribute to a huge 43 percent increase in the number of lives covered in the individual and small group insurance markets. The size of this market could increase by more than $11 billion in 2010 dollars, even assuming that health premiums only rise with inflation.


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