Oregon has opted to abandon its troubled exchange and adopt the federal HealthCare.gov website for the 2015 open enrollment period. Hawaii, Maryland, Massachusetts and Nevada are all scrambling to determine exactly how they will proceed for the sign-up period that begins Nov. 15.
But even for states that had successful open enrollment periods this year, significant questions remain about the financial viability of the online marketplaces once the federal dollars disappear. California expects to spend $488 million on exchange operations during the fiscal year that closes at the end of June. That's $88 million more than originally anticipated, a 22% increase.
As of April, Covered California still had $363 million in federal grant dollars, and its budget for the 2014-15 fiscal year is expected to shrink to $378 million. To pay for exchange operations in the long run, California has authorized an assessment of $13.95 per member a month for plans purchased on the exchanges.
Last week, the board of directors for Minnesota's exchange, which has struggled with technical problems, approved a 3.5% tax on premiums for 2015 plans purchased through the exchange. That's up from 1.5% this year and is the maximum allowed under the state law authorizing the exchange.
Earlier this month, Washington's city council unanimously passed a tax of up to 1% on all health insurance premiums paid by city residents. The fee sparked controversy, including opposition from the trade industry group America's Health Insurance Plans, because it applies even to insurers that aren't selling products on the exchange.
In Colorado, the exchange's budget is expected to drop from $70 million this year down to $26 million by 2017. But that's still more than the $21.4 million that's expected to be generated by a 3% fee on premiums payments on plans purchased through the exchange.
Timothy Jost, a healthcare expert at Washington and Lee University School of Law, points out that insurers pay commissions to brokers of as much as 10% for business that they bring in. So he doesn't think that assessments in the range of 3.5% are unreasonable. He also points out that administrative overhead for health plans and the state-based exchanges should decline significantly in future years as technological problems get fixed and burdensome manual processes are eliminated.
“Plans ought to be saving money on marketing; they ought to be saving money on underwriting,” said Jost, a supporter of the federal healthcare law. “It just seems to me that it's a business model that should work for the long term.”
