As state marketplaces prepare for self-sufficiency, costs shift to payers
Beginning Jan. 1, 2015, states will lose federal funds to operate their marketplaces under an Affordable Care Act provision that mandates self-sufficiency. States will use a variety of methods to fund their services, notes a Commonwealth Fund blog post.
Although payers don't neccessarily like it, most states will rely on insurers to share the costs. Some states plan to charge a fee of anywhere from 1 percent to 3.5 percent of total premiums sold on the state-run marketplaces. Others will charge payers a per-member, per-month fee.
"In developing their financing mechanisms, states have sought to minimize excess costs for consumers while ensuring sufficient revenue for ongoing operations," the post notes. "To determine an adequate level of funding, marketplaces must weigh key factors including their overall operating budget, enrollment estimates and the projected premiums on which any assessments will be based."
Because state-run marketplaces' budgets correlate to how much that marketplace charges payers who participate in the exchange, states must decide which operational features deserve the most funding and focus on those that affect enrollment, the post notes.
For example, a Nevada financing report showed the estimated impact of increased funding for navigators, marketing and advertising--line items that directly impact enrollment--on the per-member, per-month cost of operating the marketplace.
The stakes for getting these calculations right are high: In California, for example, if enrollment is on the low end of the expected range, it could cost the state $75 million in revenue, according to the blog post.
Observers say state-run exchanges that faced significant financial difficulties last year should turn over their operations to the federal government, notes the blog post. Oregon, for example, made the switch after learning that fixing and existing their system would cost about $78 million, whereas switching to Healthcare.gov would cost between $4 million and $6 million.
- here's the Commonwealth Fund blog post
Insurers will pay 3.5% user fee to sell plans on exchanges
'Navigators' key to insurers selling plans on exchanges
Costs to enroll uninsured: State vs. federal exchanges
How will states pay to operate exchanges?
Oregon makes the switch to HealthCare.gov