According to the Washington Post about half of the Obamacare heath insurance exchanges set up by the states are real danger of financial collapse. The solutions being created range from bleeding taxpayers for more money to closing down shop and transferring their members to the federal exchange. However, consideration of moving to the federal exchanges has to wait until after next month’s Supreme Court decision about whether people who signed up to those exchanges are electable for the same subsidies dictated by the Affordable Care Act as those who live in states with their own healthcare marketplace.
The Supreme Court will decide by the end of June whether consumers in the 34 states using the federal exchange will be barred from receiving subsidies to buy insurance.
Though it clearly say in the ACA signed by the president that only states with exchanges get the subsidies (there is even a video of Jonathan Gruber saying the law was written that way as an incentive to states to set up exchanges). Obamacare supporters opine that the federal exchange was left out of the bill because of an error.
If the court strikes down subsidies in the federal exchange, the states that are struggling financially might be less likely to turn over all operations to the federal marketplace, because they will want to make sure their residents do not lose subsidies to help them buy insurance. If the court upholds subsidies for the federal exchange, some states might step up efforts to transfer operations to HealthCare.gov.
States’ exchanges are having financial difficulty because enrollment isn’t growing as fast as their projections: Sign-ups for the state marketplaces rose a disappointing 12%, to 2.8 million people, in 2014. That compared with a 61% increase for the federal exchange.
“They are literally looking at huge gaps, and they are not sure how they are going to get through the year,” said Caroline F. Pearson, a senior vice president at Avalere Health.
In Minnesota and Vermont, officials are so fed up with costly technical problems in their exchanges that they are considering handing over some or all of their functions to the state or federal governments. Lawmakers in Oregon abolished the state exchange in March, long after it was essentially turned into a gateway to HealthCare.gov.
In Rhode Island, the legislature is considering a fee on health plans that would go up or down according to the exchange’s operating costs.
The problem with that solution is that any additional fee to the insurance companies will be passed down to the consumer, something most legislators conveniently forget.
In Colorado, Connecticut, Kentucky, Maryland and the District, fees to support the exchange are imposed on plans sold on and off the marketplaces. In the District, about $25 million of the exchange’s $28 million budget comes from user fees assessed on insurance products not offered on the exchange. The exchange budget would increase to $32.5 million in the budget year beginning in September under the mayor’s proposed plan. Debra Curtis, deputy director of the exchange, said the marketplace estimates it will raise about $28 million from the assessments and “use existing federal grants for ongoing implementation.”
This solution supports one of the major goals of the law, improve the coverage of the uninsured, reduce the coverage of those already insured and create one mediocre heath insurance middle.
In Hawaii, which has one of the most problem-plagued marketplaces, the exchange needs $28 million to fund operations until 2022, when it is projected to become self-sustaining, officials say. Without the money, “it’s going to be very difficult to keep the doors open,” said Jeff M. Kissel, executive director of Hawaii Health Connector.
As a backup plan, officials are talking to the Obama administration about a possible federal takeover of the marketplace, said an administration official who spoke on the condition of anonymity because the talks are ongoing.
In Vermont, where the system’s cost is projected to balloon to almost $200 million by the end of the year, officials are eyeing a move to the federal marketplace if things don’t improve. Officials from Vermont, Rhode Island and Connecticut met recently to explore banding together in some sort of regional effort.
In Maryland, where the exchange’s technology problems were so daunting that officials turned to Connecticut for help, officials expect to have enough revenue to cover operations for the fiscal year that begins July 1. If not, the exchange would need to ask the governor for more funds.
Connecticut, however, has one of the successful exchanges. That state is not going to join up with the unsuccessful exchanges without some compensation, which will end up costing the taxpayers of any new partner states.
These failing exchanges along with the states whose citizens are in the federal exchange will have to remain “frozen in time” until the Supreme Court rules. Whichever way the court rules, taxpayers of all states will have to pay more in the near future.
Cross-posted at The Lid
