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With looming financial problems, state-run exchanges get creative

Connecticut to share strategy with struggling states; Vermont may turn IT functions over to federal government

Struggling state-run health insurance marketplaces are getting creative when it comes to financing their operations. Some state officials are toying with raising fees on insurers, possibly sharing costs with other states or turning their whole system over to Healthcare.gov, reported the Washington Post.

For the most part, exchanges have operating budgets of $28 million to $32 million, according to the article. An exchange dishes out most money for its call center because it needs operators to assist with the lengthy enrollment period. Another huge cost includes IT work that identifies and fixes software problems that affect consumers calculating federal subsidies.

Because most states are independent or quasi-independent entities, the main source of income comes from insurer fees, which are then passed on to consumers. The fees are based on enrollment numbers--the larger the enrollee pool, the lower the individual costs. In other words, a strong enrollment is key to an exchange's financial success.

States are now weighing their options to determine how to best financially manage their systems. Rhode Island, for instance, is considering a fee on health plans that would either increase or decrease depending on the exchange's operating costs, noted the article. For a price, Connecticut's exchange will share its call-center strategy with other states that use the same contractor. Vermont is debating turning over all IT functions to the federal government while still maintaining general operations of its exchange

The latest financial issues come at a crucial time. With the Supreme Court's decision regarding the legality of federal subsidies in King v. Burwell to come by the end of June, states operating less-than-successful exchanges are in limbo.

If the Court strikes down subsidies, struggling states may be less inclined to turn their system over to the federal exchange, fearing that if they do, their residents will lose tax credits to purchase coverage. However, if the Court upholds subsidies on the federal exchange, states may use this as leverage to transfer to Healthcare.gov, noted the Post.

For more:
- here's the Washington Post piece

Related Articles:
King v. Burwell Supreme Court case: What you need to know [Special Report]
State exchanges still plagued by financial challenges
OIG: CMS needs clearer funding guidelines for state-run marketplaces