Rich Pedroncelli/2013 AP file photoPeter Lee

Rich Pedroncelli/2013 AP file photoPeter Lee

Covered California prepares for budget deficit

Covered California, held up as a jewel in the nation's up-and-down health care overhaul, is setting aside nearly $200 million to fight off projected budget shortfalls as it prepares for what it says is a challenging financial future without hundreds of millions of dollars in federal aid.

Officials brimmed with confidence after the agency tallied 625,000 individual or family health care enrollments through mid-January, the most of any state. They also say its survival is not assured, in part because of the uncertainty around sign-ups that are key to the exchange's success.

The greatest vulnerabilities include the “long-term sustainability of the organization” after federal grants that have been its sole source of support, more than $1 billion so far, dry up this year, the agency's executive director, Peter Lee, wrote in December to the California Department of Finance.

Lee outlined a list of potential risks that, along with the pace of enrollments, included safeguarding personal data, staff training and turnover, and protecting the agency from fraud and waste. To be self-sustaining, he said, the agency will make changes “to reflect … revenue realities.”

That followed a state audit last summer that labeled the agency “high-risk” because of the uncertainty around enrollments. The financial test comes as Minnesota and other states contend with meager sign-ups and questions about the potential for financial bailouts unless participation begins to surge.

The exchanges being operated by 14 states and the District of Columbia are supposed to be self-sustaining by next year, according to the Affordable Care Act. A monthly surcharge on insurance policies is intended as the main money-maker for Covered California.

In its short life, Covered California has grown to oversee a $400 million budget, more than 860 employees and offices throughout the state. The agency is in the process of hiring 350 additional call-center employees, mostly in Fresno.

CaliforniaCalifornia NewsCovered Californiahealth care overhaulPeter Lee

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