SACRAMENTO -- It's all systems go for the federal health care law in California after the state on Thursday spurned President Barack Obama's directive allowing millions of Americans to extend their current health insurance policies through 2014.
In a stunning move that reverberated across the nation, the five-member board of Covered California, the state's health insurance exchange, voted unanimously to stay the course and continue building on the exchange's momentum of successfully enrolling tens of thousands of people in new health care plans.
Extending the deadline to 900,000 individual policyholders may create confusion about accessing affordable health care coverage through Covered California, the board agreed.
"Delaying the transition will ... just make it more difficult and confusing,'' said board member Susan Kennedy. "Delaying will only make a bad situation worse.''
But the decision infuriated many Californians, including affected policyholders and consumer advocates who had lobbied for the extension on their behalf.
State Assembly Republicans quickly announced plans to introduce legislation before year's end that would allow consumers to keep their coverage for an additional year.
"Shame on them,'' said Jamie Court, president of Santa Monica-based Consumer Watchdog.
"It's outrageous that this board would acknowledge that half of canceled policyholders will have rate hikes, then block them from continuing their coverage for another year,'' he said. "Covered California showed they represent the insurance companies, not the policyholders, by standing in the way of President Obama's call for action.'
Insurance Commissioner Dave Jones, a Democrat, was also frustrated by the board's move. For weeks, he has pushed the board and insurers to give the policyholders a break. Already this month, his office has managed to extend the policies of nearly 200,000 customers of Anthem Blue Cross and Blue Shield to either the end of February or March.
"Covered California's decision is a disservice to California consumers," Jones said. "They're losing their doctors and hospitals, and in some cases they're being steered to policies with lower benefits. This is a definite rebuke to the president."
But it relieved many state legislators and others who had supported Obama's signature legislation.
Assembly Speaker John Perez called it "the right thing to do.'' He said the vote "sends a powerful signal to the rest of the nation since California is leading in the implementation of the Affordable Care Act.''
Senate President Pro Tem Darrell Steinberg also called it an appropriate decision. "To its credit, California is well ahead of the rest of the country in implementing the Affordable Care Act, with several competitive plans and a working website that's enrolling more than 10,000 people every day,'' he said.
And the four major insurance companies participating on the California exchange got a huge boost. Those firms, which stood to lose millions if they had been forced to extend the 2013 plans at the same rates, are now assured that those individual plans will end on Dec. 31.
The insurers also worried that following the president's directive would mean that hundreds of thousands of younger and healthier people would be taken out of the state insurance exchange's "risk pool," which would drive up insurers' costs.
Some political observers said the board's decision not to follow the president's directive will create an unwanted political hurdle for Democrats in California and across the nation heading into next year's congressional elections.
"Republicans next year can say large numbers of Americans were not able to keep their coverage despite problems with the rollout," said Dan Schnur, who directs USC's Unruh Institute of Politics. "The exchange board clearly didn't act with these political ramifications in mind, but that's not their job."
The board on Thursday heard from a string of nonprofits and community groups who are working to sign up enrollees, many of whom are already confused by health insurance and the exchange.
How would they now explain an extension?
"This is one hot mess,'' said Darcel Lee, president of the California Black Health Network. "We are going to be so challenged to explain this to our communities.''
The optimal course, board member Robert Ross concluded, was to "keep calm and carry on.''
The board was presented with three options Thursday: allow no extensions; allow an extension until March 31 to give consumers more time to get educated about the exchange and help them select a new plan; or go with Obama's directive that would allow policies to be extended through 2014.
But the exchange could not compel the insurers to go along with the extensions.
The board was told that about 900,000 Californians have individual policies that would be affected because they do not comply with the requirements under the new law, which includes 10 essential benefits such as prescription drugs and maternity care.
Covered California believes about one third of those 900,000 are eligible for subsidies on the exchange.
"What we're focused on is the about 590,000'' who are not eligible for subsidies, Leesa Tori, Covered California's interim plan manager, told the board. "The bottom line is it's a bitter pill for some of our folks to swallow.''
That pill is being administered to about 5 million Americans, many of whom for several weeks now have expressed outrage over the cancellations of their policies, which also are often cheaper than the plans they are confronting on their state exchanges or the federal health insurance exchange.
In an effort to douse the firestorm, Obama issued a directive allowing insurers to renew those individual policies in 2014. But the announcement included a few caveats: state insurance commissioners must give their blessing to the directive, and the insurance companies also have to agree to continue providing health coverage through 2014.
The vote follows decisions by several other states, including Washington and Vermont, to not follow Obama's directive.
Meanwhile, Commissioner Jones, who called the decision a "rebuke to the president,'' also rebuffed arguments made by health care experts that allowing policy extensions would somehow hurt the state's exchange, calling that claim "disingenuous."
He added that Covered California could have honored Obama's request without causing damage to the implementation of the Affordable Care Act or the exchange.
But that line of reasoning had proved unconvincing to the board, which before its decision Thursday was presented with the first demographic data related to the enrollment of 30,830 people who signed up for a health care plan under the state exchange through Oct. 31.
And the data shows that 18-34 year olds -- often dubbed the "young invincibles" -- are applying in direct proportion to California's population.
Because California is considered a bellwhether for the success of the new health law, the announcement by Peter Lee, the exchange's executive director, was the first encouraging news for the law's supporters in weeks after the disastrous launch of the federal website and revelations that insurers are canceling the policies of millions of people across the U.S. who have health plans that don't conform to the new law.
"The good news is that young people 18 to 34 are enrolling for coverage at the same rate as the population,'' said Lee.
That's because the success of the exchange over the long term is about having a large number of young, healthy people to subsidize the older, sicker people.
Of the 30,830 individuals who enrolled during October, 22.5 percent, or about 6,900 people, were between 18 and 34 years old. This group makes up about 21 percent of the state's population.
Covered California's enrollment rate during the first week of October showed that about 700 people a day selected a health plan. Now, about 10,000 per day complete applications.
In October, Los Angeles County had the largest number of enrollments, totaling 6,978. San Diego County and Orange County followed closely. In Santa Clara County, the total was 1,472, or 4.8 percent of the total.
English was by far the predominant language of those who enrolled during October.
Covered California said it anticipates a more diverse language mix in the coming months with greater in-person enrollment as "language specific" outreach and marketing rolls out later this month and December.
Lee noted that by Nov. 16, the total enrollment figure jumped to 79,800.
The board on Thursday also agreed to extend the deadline for enrollment for coverage that would take effect on Jan. 1 from Dec. 15 to Dec. 23. It also extended the deadline for first premium payments from Dec. 26 to Jan. 5.
Contact Tracy Seipel at 408-920-5343. Follow her at Twitter.com/taseipel.