State health exchanges face financial struggles
WASHINGTON — Nearly half of the 17 insurance marketplaces set up by states and Washington, D.C., under President Barack Obama’s health law are struggling financially, presenting state officials with an unexpected challenge five years after the passage of the landmark Affordable Care Act.
Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer-call centers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov.
The latest challenges come at a crucial time. With two enrollment periods completed, the law has sharply reduced the number of uninsured and is starting to force change in the nation’s health care system. But the law remains controversial and faces another threat: 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.
If the court strikes down subsidies in the federal exchange, the states that are struggling financially probably would abandon efforts to join the federal marketplace because their residents would no longer be able to get subsidies to help them buy insurance. If the court upholds subsidies for the federal exchange, some states may step up efforts to transfer operations to HealthCare.gov.
“Everyone is looking at all the options,” said Jim Wadleigh, executive director of Connecticut’s exchange, considered one of the most successful of the state marketplaces.
States have received nearly $5 billion in grants to establish the online marketplaces. The federal funding ended at the beginning of the year, and exchanges now are required to cover their operating costs.
Most exchanges are independent or quasi-independent entities. For most of them, the main source of income is fees imposed on insurers, which typically are passed on to consumers. Because those fees are based on how many people have signed up, strong enrollment is key to an exchange’s fiscal success.
For the recently completed enrollment period, signups for state marketplaces rose a disappointing 12 percent, to 2.8 million. That compared with a 61 percent increase for the federal exchange, to 8.8 million people, according to Avalere Health, a consulting firm.
Most exchanges have operating budgets of $28 million to $32 million.