By Dana Olsen Tuesday, October 16th, 2012

With 7 million uninsured people in California, the implementation of President Obama’s Affordable Care Act is sure to be a wild ride for hospitals, health systems and insurance companies across the state — but those organizations are up to the challenge.

That was the view of California Insurance Commissioner Dave Jones, who led a discussion Oct. 15 at Santa Barbara’s Antioch University on the health care act, signed into law by President Obama in 2010 and upheld by the U.S. Supreme Court in June. Jones led a panel of top health care providers in Santa Barbara County as they discussed how the region and state are navigating the gradual implementation of the new universal health care law, which is set to be fully in place by 2020.

California is home to one-seventh of the uninsured people in the country. As such, the state is in for a huge demand for administrative and clinical resources as it puts the federal health care law into place over the next decade. That means a fundamental change in the way hospitals and doctor’s offices work, Jones said.

“We are hard at work implementing the Affordable Care Act …We’ve taken on the role of being the leading state, and happily so,” Jones told the audience of about 300 health industry workers and community members. “There’s a lot of misapprehension, confusion and downright misinformation going on about what’s in the act. First, it’s not socialism. It’s actually a market-based reform.”

Jones went on to explain some of the economics behind the cost of health care and how insurance companies operate. He said one of the overarching goals of the act is to simplify the relationship between insurers and medical providers and ensure that a larger percentage of insurance money goes to pay for actual care.

“What you and I call medical care, treatment and reimbursement, the health insurers and HMOs [health maintenance organizations] have another term for. They call that a ‘medical loss,’” Jones said, adding that before he took office in 2010, Anthem Blue Cross in California had a 60 percent medical loss rate, meaning the insurance company paid 60 percent of insurance payments to health care providers and kept the other 40 percent for itself. “One of the most important elements of the act is that now, that requirement has been changed dramatically … up to 85 cents on the dollar … has to go to actual health care.”

That’s one of the immediate benefits of Obamacare, Jones said, and one that the insurance commissioner’s office has already begun working to implement. One of the next big projects for the state agency and health care providers is the implementation of a health insurance exchange, a set of state-regulated, standardized health care plans for consumers to choose from. The Affordable Care Act says those exchanges must be up and running in each state by Jan. 1, 2014. With the help of the exchanges, Jones said, California’s goal is to reduce the number of uninsured people from 7 million to 2 million to 3 million.

Ron Werft, the CEO of Cottage Health System in Santa Barbara County and former president of the California Hospital Association, previously worked with Jones on a piece of legislation that resulted in $7 billion in funding for hospitals in the state to be more adequately reimbursed by MediCal. As a “safety net” hospital and the only public hospital in the county, Cottage sees a high number of MediCal patients and a fair amount of uninsured patients. “The way our system has been held together for many years is the cost shift. The cost shift that takes place is one of paying for that uncompensated emergency patient by shifting it over to paying patients,” Werft said during the forum.

Jones said one intended benefit of the act is to reduce cost-shifting by raising the number of people who have insurance. The number of people who will be eligible for MediCare is set to increase by about 1.9 million, which Jones said should provide “partial relief, but not complete relief,” for the cost-shifting problems hospitals face.

Another cog in the county’s health care machine is Sansum Clinic, a nonprofit health organization that operates a system of doctor’s offices and centers in the region. Kurt Ransohoff, Sansum’s CEO and a practicing physician, asked Jones during the forum whether the act regulates the overall cost of health care.

According to Jones, the U.S. Department of Labor looked at actual medical costs and determined that they have been rising by 2 to 3 percent each year. In addition, health insurers and HMOs drive up costs by charging high insurance premiums. Anthem made a 26 percent return on its equity in 2010, which Jones said is a “huge, huge return, and not unique [to Anthem].” One way to control the cost of care, he said, is to start at the hospital-doctor’s office level. By doing things like using electronic health records and coordinating care across providers, the price of health care will naturally be pushed down, he said.

The implementation of the Affordable Care Act in Santa Barbara County — at Cottage, Sansum and other providers — is a microcosm for its implementation throughout the state. “What happens in California is critical … California was the first state to implement this, and its health benefits exchange is regarded as the most advanced in the business,” Nancy Leffert, the president of Antioch’s Santa Barbara campus, said at the forum. “The eyes of the nation are on California.”