Costs Have Hit State Health Markets Hard
Washington — State-run health insurance markets that offer coverage under President Obama’s health law are struggling with high costs and disappointing enrollment. These challenges could lead more of them to turn over operations to the federal government or join forces with other states.
Hawaii’s marketplace, the latest cautionary tale, was awarded $205 million in federal startup grants. It has spent about $139 million and enrolled 8,200 customers for individual coverage in 2015. Unable to sustain itself, the state marketplace is turning over sign-ups to the federal HealthCare.gov for 2016.
Twelve states, including Vermont and the District of Columbia. fully control their markets. Experts estimate about half face financial difficulties. Federal taxpayers invested nearly $5 billion in startup grants to the states, expecting that state markets would become self-sustaining. Most of the federal money has been spent, and states have to face the consequences.
“The viability of state health insurance exchanges has been a challenge across the country, particularly in small states, due to insufficient numbers of uninsured residents,” said a statement from the office of Hawaii Democratic Gov. David Ige, announcing last month that his state’s sign-ups were being turned over to the federal government.
Now that the Supreme Court has ruled the Obama administration can keep subsidizing premiums in all 50 states through HealthCare.gov, no longer is there a downside for states turning to Washington. If the decision had gone the opposite way, state exchanges would have been a leaky lifeboat for preserving a major expansion of taxpayer-subsidized coverage under the law.
With the pressure gone, “I think you are going to see much more of a hybrid across the nation,” said Peter Lee, who heads California’s state-run marketplace. Covered California fell short of its sign-up projections this year by nearly 20 percent, but Lee says it remains “a solid business proposition.”
States are “talking a lot about shared services,” Lee said. “It’s how you get economies of scale.”
States could pool resources on functions such as labor-intensive call centers or use HealthCare.gov’s technology for online enrollment. They generally want to keep control over marketing, consumer education and oversight of insurance plans.
Sustainability is the focus of the administration’s annual meeting with state exchange directors, scheduled for the end of the month in the Washington area. The two-day meeting is closed to the media.
“Each state has a different set of circumstances that informs their approach, and we will continue to support their efforts,” said Mayra Alvarez, the federal liaison to state marketplaces.
The pendulum probably will swing toward a greater federal role in the next couple of years, said Jim Wadleigh, director of Connecticut’s Access Health. Eventually, more states will want to take the lead, he said, because it gives them greater control over health care, particularly modernizing Medicaid programs for low-income people. In New England, there’s talk of a regional exchange. The insurance industry would welcome consolidation.
“Our biggest concern is that you may see many states looking to enact taxes and fees, and that makes health care less affordable,” said Justine Handelman, policy chief at the Blue Cross Blue Shield Association.
Hawaii is the third state exchange going to the federal sign-up system, following Nevada and Oregon, which made the switch last year.