Exchange fee falling for insurers

Board also backs keeping agency apart from state regulator

After a recommendation by state lawmakers, the state’s health insurance exchange board voted Tuesday to lower the fee the agency charges to insurance companies, starting in 2020.

The board also approved a resolution in support of keeping the agency, known as the Arkansas Health Insurance Marketplace, apart from the rest of state government.

“We don’t want more government in this space,” board member Mike Castleberry said, describing lawmakers’ vision when they created the marketplace in 2013. “We want a businesslike, independent, very nimble organization to help us navigate this challenge.”

Rep. Deborah Ferguson, D-West Memphis, called the board’s action on the fee “too little, too late.”

Last month, a subcommittee of the Legislative Council recommended that the marketplace be folded into the state Department of Insurance, a move that Insurance Commissioner Allen Kerr said would save millions of dollars and eliminate the state’s portion of the fee.

“It’s not just about the fee, but it’s about what they’re spending the money on,” including duties that the Insurance Department also carries out, said Ferguson, a chairman of the subcommittee.

Sen. Jason Rapert, R-Bigelow, said he plans to file legislation implementing the subcommittee’s recommendation during the legislative session that started Monday.

The subcommittee “was clear and unanimous and actually very, very pointed,” Rapert said. “I hear of no one in the executive branch or in the legislative branch that has changed their position.”

Former State Rep. Nate Steel, an attorney, said Tuesday that the marketplace contacted his firm about the possibility of “doing some research for them on federal and state law” related to the legislative subcommittee’s recommendation.

He spoke with Rapert and Ferguson to learn more about the proposed shift, but ultimately declined the marketplace’s request for help, he said.

“After looking at what the issues were, I don’t feel like we would be in a position to help them either from a legal standpoint or a lobbying standpoint,” Steel said.

Marketplace Director Angela Lowther said in an email that the planned elimination of the marketplace raises “a lot of legal questions about the process of moving revenue from AHIM, which is neither state funded nor an agency, into the insurance department, which is a state-funded government agency.

“We asked, and Nate tried to see if there were legal issues from possible conflicts of state and federal law, but ultimately we did not engage counsel or a lobbyist.”

Before the legislative subcommittee made the December recommendation, some lawmakers expressed frustration that the marketplace hadn’t already acted on a fee-reduction suggestion the panel made in November.

The marketplace board’s action on Tuesday followed that recommendation.

Lowther, who supported following the subcommittee’s recommendation, said the change would mean the marketplace would collect $99,500 more than it spends next year, compared with a gain of $938,250 with the higher fee.

“We’ve proven we can make the most of any budget — that’s a fact,” Lowther said. “But what matters most is that we are still around to serve Arkansans, and we can’t do that if we get killed by the Legislature.”

The Legislature created the marketplace to set up state-run exchanges allowing individual consumers and small businesses to shop for coverage and apply for subsidies to help pay for it.

Using money from a $99.99 million federal grant, the marketplace set up the small-business exchange in 2015.

But at Gov. Asa Hutchinson’s request during his first year in office, the agency scrapped its plans to use its remaining grant money to build the exchange for individual consumers.

Instead, the marketplace took responsibility for certifying the plans sold through healthcare.gov and for helping consumers sign up for them.

Meanwhile, enrollment in the small-business exchange ended last year because Arkansas

“We want a businesslike, independent, very nimble organization to help us navigate this challenge.”

— Mike Castleberry, Arkansas Health Insurance Marketplace board member

Blue Cross and Blue Shield, the only company offering plans, dropped out.

The fee charged by the marketplace increased this month from 3 percent to 4.25 percent of the premiums for the insurance plans sold through healthcare.gov.

The marketplace’s portion of the fee is equal to 1.25 percent of the premiums, with the rest going to the federal government.

Insurance companies pass the fee along to consumers in the form of higher premiums.

Last year, the marketplace’s portion was 1 percent of the premiums, and the federal government’s was 2 percent of the premiums.

The marketplace board in September said it tentatively planned to keep the fee at 4.25 percent next year. Lawmakers wanted the board to lower the fee to 4 percent of the premiums by lowering the marketplace’s portion back down to 1 percent of the premiums.

Even at that level, the fee will still be higher than what insurance companies pay in the 34 states that don’t have their own exchanges.

In those states, insurance companies that sell plans through healthcare.gov pay the federal government a 3.5 percent fee.

Mark Meadors, the board’s vice chairman, said the board initially was conservative in setting the 2020 fee as it waited to see how many people would sign up or renewed their coverage during the annual open enrollment period, which ran from Nov. 1 to Dec. 15.

It turned out that the number was 67,438, down just slightly from the 68,642 during the previous year’s sign-up period, even though the penalty for failing to maintain coverage this year was eliminated through the federal tax overhaul legislation signed by President Donald Trump in late 2017.

Lowering the planned fee for next year is now a “no-brainer,” Meadors said.

“Hopefully our friends over in the Legislature will see this, that we’re doing what we can to continue to be good stewards of taxpayers’ money,” Meadors said.