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California Opens Door to Health Insurance for Undocumented Immigrants

By Marissa Evans, CQ Roll Call

June 24, 2016 -- California became the first state to allow undocumented immigrants to buy insurance on a state health insurance exchange website under a bill Democratic Gov. Jerry Brown signed this month.

The new law, if it passes federal scrutiny, would allow approximately 390,000 immigrants who are in the country illegally to receive coverage through Covered California, the state's health exchange website. It was part of a series of bills that state Sen. Ricardo Lara, a Democrat, has pushed to allow more undocumented immigrants access to health care. 

"The current policy disallowing immigrants from purchasing care with their own money is both discriminatory and outdated," Lara said in a statement. "I thank Gov. Brown for advancing justice today."

Golden State legislators have been moving bills to open up coverage for undocumented immigrants. On May 16, a new law went into effect making 170,000 undocumented low-income children and teenagers eligible for Medi-Cal, California's version of the Medicaid program for the poor.

Allowing undocumented adults to sign up for private coverage, even with no financial help, has been a long-standing political minefield for state legislatures and Congress since the debate over the 2010 federal health care overhaul. Many Republicans argue that undocumented immigrants should not be allowed access to coverage or tax credits to help them pay for health insurance, while Democrats say they should.

Roughly 12 million immigrants are undocumented, and about 40 percent of undocumented immigrants are uninsured, according to a nonpartisan Kaiser Family Foundation report released in January. The study also found that about 21 percent of the 32 million people who are uninsured are either legal or illegal immigrants.

The federal health law prohibits undocumented immigrants from purchasing their own insurance, even without subsidies, through the federal website or state exchanges created by the law.

California's plan, if approved through a waiver by the federal government, could potentially curb rising costs for hospitals when patients cannot pay their bills, something state governments are trying to temper. Because undocumented immigrants often do not have health insurance, many use emergency rooms for basic care, which strains finances of medical providers and state governments.

Other legislatures with a large undocumented population may not follow California's example, says Trish Riley, executive director of the National Academy for State Health Policy. Riley says opponents may argue that since state exchanges received some federal money, undocumented immigrants should still be banned from buying coverage through the site. But if California decreases its uncompensated care costs with this policy as fewer uninsured immigrants use emergency rooms, more states may become intrigued with the idea.

One hurdle California officials will have to overcome is fear among undocumented people that they could be deported if they sign up for health insurance and reveal they are not legal residents. Health officials have said the information would be confidential but immigrants may be wary.

"Will people in the country illegally come forward?" Riley asks. "There's such fear in this political environment."

The state would pursue the change by applying for a new waiver allowed under the health care law. Under a state innovation waiver, or 1332 waiver, the coverage would still have to be on par with federal standards.

Federal 1332 waivers allow states to sidestep requirements affecting covered benefits, subsidies, insurance marketplaces and individual and employer mandates, as long as a state can achieve the goals of the health care law in other ways. States can propose alternatives to the federal approach but must demonstrate to the Treasury Department and the Department of Health and Human Services that coverage will remain accessible, comprehensive, affordable and not affect the federal deficit.

The California waiver, if approved, would go into effect Jan. 1, 2017. The Obama administration has been mum on details about the waiver process and with only a matter of months left in office, it is unclear how many innovation waivers officials will have time to approve.

Besides California's soon-to-be-pending application, Hawaii is also close to finishing its waiver application requesting that state employers be allowed to bypass requirements for offering coverage. Hawaii already has a long-standing law requiring employers to cover many workers. Meanwhile, lawmakers in Alaska, Minnesota, Ohio and Oklahoma also have authorized their states to apply for waivers. Vermont, the only state that has submitted a 1332 waiver application, is seeking to rework its small business health insurance exchange.

Even with legislative approval and interest, states considering such waivers are entering unchartered territory, says Heather Howard, director of Princeton University's State Health Reform Assistance Network. While HHS and Treasury are not inundated with 1332 waiver applications, the negotiation process could take months, and states are facing time constraints as the Obama administration winds down.

Howard says states are already looking to the next stage of overhauling health care. "They're saying 'we've implemented the ACA. Where can we make improvements?' " Howard says, using the acronym for the health care law.

"In California, obviously, we know one population left behind was undocumented immigrants," Howard says. "It's also destigmatizing the ACA and it might have the result of getting more enrollment."

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