State ACA Exchanges Financially Sustainable, Directors Say

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By Sara Hansard

Sept. 29 — Directors of six state-run Affordable Care Act health insurance marketplaces told Congress Sept. 29 that their exchanges are on a path to operate in a financially sustainable way and that the health-care law has made major advances in reducing the number of uninsured in their states.

But Rep. Tim Murphy (R-Pa.), chairman of the House Energy and Commerce Subcommittee on Oversight and Investigations, was critical of the state marketplace development process, saying there was no oversight through the appropriations process of the more than $5.5 billion in federal grants awarded to establish the exchanges. “Despite this enormous taxpayer investment, state exchanges are still struggling” with technology problems, lower-than-expected enrollment numbers and growing maintenance costs, he said.

Two of the states, Oregon and Hawaii, had major technical problems in trying to get their exchanges operating and have elected to use the federal HealthCare.gov system while state officials conduct other exchange functions. In 2015, 13 states and the District of Columbia are operating state-based marketplaces.

Reports Warned of Problems

Murphy pointed to a Government Accountability Office report released Sept. 16 that said the Centers for Medicare & Medicaid Services needed to conduct more oversight of the state-run marketplaces. Murphy also cited an April report from the Department of Health and Human Services Office of Inspector General that said state exchanges may be using federal establishment grant funds for operating expenses, which is prohibited by the law.

Oregon received about $305 million in federal grant dollars to build its exchange, the third largest amount after California and New York, Rep. Greg Walden (R-Ore.) said. “The exchange was launched with much fanfare,” he said. “The problem was when the lights came on and the curtain went up on Cover Oregon, it failed to sign up a single person online in one sitting.”

Questions About Federal Payments

Walden asked whether the CMS tried to recoup any of the funds. “In spite of repeated assurances the Oregon exchange is financially self-sustaining, I think there are still questions over how the state will pay the federal government for using HealthCare.gov when it's required to do so in 2017,” he said.

Patrick Allen, director of the Oregon Department of Consumer and Business Services, which has assumed responsibility for the state's marketplace, said the exchange is “healthy, competitive and sustainable.” For 2016, 11 companies will offer 120 individual plans at various coverage levels, he said.

Oregon's individual market is one of the lowest-priced in the nation in 2015, but the state is “in the process of rebalancing that market to ensure its long-term sustainability,” Allen said. “While the percentage increases in rates have been significant, the resulting rates are very comparable to those available in neighboring markets in California and Washington and remain very affordable.”

‘Miserable Track Record' in Hawaii 

Jeff Kissel, chief executive officer of the Hawaii Health Connector, said the exchange “had a miserable track record” with “virtually nonexistent” project management tracking tools when he joined the operation in October 2014. “It didn't really define what the end game and goals were,” he said.

The ACA marketplaces first opened for business Oct. 1, 2013. Hawaii's governor announced this past June that the state marketplace would be shut down because it didn't generate sufficient revenue to sustain operations after being awarded $205 million, Murphy said.

Tight timelines to set up the exchanges were a major challenge, the marketplace directors agreed. Access Health CT (Connecticut), one of the more successful of the state marketplaces, had to defer functions that were initially planned until later months, Chief Executive Officer James Wadleigh said.

Peter Lee, executive director of Covered California, the nation's largest ACA marketplace, said “consumer misinformation” has also been a problem since many potential enrollees are unaware that financial assistance is available to help pay for insurance premiums.

California received over $1 billion in federal grant dollars to establish its exchange and enrolled 1.4 million people in 2015, 300,000 short of expectations, Murphy said.

Stronger Governance Processes

Both Massachusetts Health Connector Executive Director Louis Gutierrez and Minnesota Health Insurance Exchange Interim Chief Executive Officer Allison O'Toole said their marketplaces put stronger governance processes in place. Those marketplaces were put directly under state agencies to help resolve problems they had experienced in getting their exchanges operating, they said.

Massachusetts accepted $234 million for its marketplace but enrolled only 13 percent of its goal the first year, temporarily placed individuals in Medicaid because it couldn't determine eligibility and spent an estimated $1 billion in additional state funds, Murphy said.

Massachusetts has now completed the process of transferring individuals from temporary coverage in 2014 to appropriate placement in either marketplace qualified health plans or Medicaid, and the marketplace “is now better situated to service the needs of residents of Massachusetts,” Gutierrez said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com