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Lawmaker Sues California Health Care Exchange

LOS ANGELES (CN) - One million Californians lost their health insurance under the Affordable Care Act, and the state wasted millions of dollars promoting Covered California, the state health care exchange, a Republican state senator claims in court.

Edward "Ted" Gaines and his business, Gaines Insurance Agency, asked the Superior Court to prevent the state from canceling individual and employer plans that do not meet standards required by Obamacare, by issuing an injunction against the California Health Benefit Exchange and its executive director Peter Lee.

The politician claims the alleged millions spent on advertising and outreach for the state exchange are a "waste and abuse of taxpayer resources" because more people have lost plans than have signed up for new policies under the new law.

Gaines, who represents California's 1st District - a large, sparsely populated swath of land in extreme northeast California - recently called for an audit of Covered California's finances, after it projected a $78 million deficit for the 2015 fiscal year. Gaines claims Californians should be allowed to stay on plans they "wish to keep, but which do not meet the mandates of federal law."

In November 2013, President Obama said he would leave it up to individual states to decide whether to extend a grace period to people whose plans do not comply with the new law. Gaines, though, says Covered California refused to let people stay on their old policies.

Covered California has had a rocky time of late. In February, the exchange announced that 14,500 people expecting insurance coverage would need to redo their online applications because of a software glitch.

So far, Covered California has enrolled 828,638 people into new plans. It has confirmed that 1 million Californians may have to switch plans to comply with the new law, according to the San Jose Mercury News.

Obama's signature law suffered a disastrous rollout, when the Healthcare.gov website crashed repeatedly after opening for business on Oct. 1, 2013.

But the president announced in February that 4 million people had enrolled in the state and federal insurance exchanges.

Covered California has set a March 31 deadline for new enrollees. Those who do not comply with the law will face a $95 fine per family member or a penalty based on 1 percent of household income, whichever is more. Enrollment reopens in the fall. Gaines claims that 5 million Americans have lost their insurance because of Obamacare. He predicts that 60 million more will lose their plans.

Other Republican politicians have made similar claims.

The nonpartisan Congressional Budget Office has said to expect a decline of 7 million in employer-based insurance plans by 2019, Factcheck.org reported. Millions of plans would be modified or eliminated with or without Obamacare, the CBO projected. Employer-based plans may lose grandfathered status if they do not provide the minimum benefits required under the law.

The employer mandate, requiring employers with more than 50 workers to provide health care coverage to their employees, has been delayed until Jan. 1, 2016.

"(S)everal million Californians currently covered by employer policies will likewise have their insurance canceled this year or next, based on the pending employer mandate," Gaines says in his lawsuit.

He claims the state will force Californians to accept inferior coverage.

"(F)or Californians who have lost coverage, or will lose coverage this year, the loss of their existing health plan coverage may result in higher premiums, higher co-pays and/or deductibles, and restricted access to their healthcare providers in the available products offered on the exchange," the complaint states.

Gaines claims more Californians have been kicked off their plans than the exchange has enrolled. Citing "national data," Gaines says that many people who signed up have not paid for their insurance and remain uninsured.

An "overwhelming number" of people who signed up did not have insurance before, the complaint states.

"Accordingly, petitioners allege that Covered California's acts and expenditures as alleged herein, were for purposes in excess of the intent of the ACA [Affordable Care Act] and the enabling legislation," the lawsuit states.

Gaines says California has wasted millions of dollars promoting the new law. Among other things, the state spent $1.4 million on a commercial starring fitness personality Richard Simmons, and paid $10 million to a public relations firm, he claims.

Gaines claims that despite spending $102.6 million of a $399.7 million budget for the state's "outreach," the efforts "failed to sign up more Californians than were canceled."

He is represented by Michael McClelland of Rocklin.

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