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California Is Outspending The U.S. Government To Market Obamacare

December 4, 2017 / 7:11 AM PST / CBS Sacramento

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(CNN Money) -- The marketing blitz is on.

Californians are getting barraged with online pop-up ads, radio spots and television commercials, all aimed at persuading them to sign up for Affordable Care Act health plans during this year's open enrollment season.

Covered California, the state's Obamacare exchange, is wielding a monster marketing budget that devotes $45 million to ads, including $18 million for TV and $8 million for radio. The agency is so flush with marketing dollars that it also spent $100,000 for a dozen freshly painted murals across the state, most of which have nothing directly to do with health insurance enrollment.

Covered California's marketing riches contrast starkly with the advertising budget for the federal health insurance exchange, healthcare.gov. The feds have slashed ad dollars to $10 million, down from $100 million last year.

The huge discrepancy reflects conflicting attitudes toward the ACA, commonly known as Obamacare, said Gerald Kominski, director at the University of California-Los Angeles Center for Health Policy Research.

"A $10 million advertising budget for healthcare.gov, which supports exchanges in 30-something states, is ... in keeping with the goal of this administration to destroy the ACA," he said. "California's budget reflects a different approach to the ACA, which is that it is an important source of insurance."

Other health care experts say marketing is not the best use of money now that the exchanges are a known commodity, especially in California. They suggest the dollars could be better spent on things like reducing premiums.

"All of this money being used on murals and bus tours and TV ads, etc., it's not going to change the number of enrollees that much," said Sally Pipes, the president and CEO of the Pacific Research Institute in San Francisco, which advocates for free-market policies. "It would be better to save money and reduce taxes so that people have lower tax burden."

California is one of 11 states, plus the District of Columbia, that operate their own exchanges. The remaining 39 states use the federal healthcare.gov site.

Altogether, Covered California plans to spend $111.5 million on marketing in 2017-18, which includes support for enrollment helpers called navigators, ads, staff salaries and more.

Covered California leaders and consumer health advocates say the agency's sizable marketing budget is necessary because of recent federal moves to undercut the ACA. The Trump administration shortened the enrollment period to 45 days in most states and stopped paying insurers to provide a subsidy that helps many low-income consumers with out-of-pocket medical costs.

"It sounds like a lot ... but it's a very legitimate expenditure," said Betsy Imholz, director of special projects for Consumers Union.

The federal government's $10 million advertising investment is "ridiculously inadequate" by comparison, she said. Covered California will spend that amount on online ads alone.

Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation, said the feds' advertising cuts reflect the needed transition from promoting the exchange as a new option to maintaining it as an established program.

"Growing awareness is not going to magically get desired people to enroll," he said.

The U.S. Department of Health and Human Services (HHS), which runs the federal exchange, explained that it cut advertising in part because it did not seem to be boosting first-time enrollment. For 2017 plans, first-time enrollment declined by 42% and total enrollment fell by 500,000 people to 12.2 million. Covered California has about 1.4 million enrollees.

HHS plans to use its smaller budget on digital media promotion like YouTube videos and targeted ads on search engines. It will also focus on emailing and calling healthcare.gov consumers directly to remind them of the Dec. 15 enrollment deadline.

Californians who purchase their insurance through Covered California or on the open market will continue to have three months, until Jan. 31, to enroll in plans for next year.

Peter Lee, Covered California's executive director, said he believes that spreading the word about open enrollment creates a risk pool that includes both healthy and sick people.

"Yes, marketing costs money, but marketing means more people sign up, and the people that sign up are healthier and help lower premiums," he said.

Advertising likely helped lower premiums by 6% to 8% in 2015 and 2016 by creating a more balanced risk pool, according to a recent marketing report from Covered California.

This year, as in some previous years, Lee paraded across the state in a colorful charter bus promoting the start of open enrollment. He touted the 12 new murals, and echoed the primary message of Covered California's ads: Life can change in an instant due to unexpected injuries, such as falling off a ladder.

One mural painted outside an AltaMed clinic in East Los Angeles features people dancing and exercising around a doctor. A mural painted outside La Familia Counseling Center in Sacramento shows a woman holding a bowl above her head, out of which flow children riding bikes and a basketball player.

How much the murals, the tour bus or the ads will help cut through the confusion, let alone increase enrollment, is unclear.

"I don't know if marketing will be able to address how complex this open enrollment will be," said Kevin Knauss, an insurance agent in the Sacramento area.

Kaiser Health News senior correspondent Anna Gorman contributed to this report.

Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.