With enrollment in Healthplanfinder insurance plans lower than expected, the exchange faces shortfalls that could cause serious financial problems and even pose questions about its survival.
Financial challenges are threatening the survival of Washington’s Healthplanfinder insurance exchange.
First, the marketplace is facing a state budget proposal that would provide roughly two-thirds of the money that exchange officials say they need.
Then this week, U.S. officials warned that exchange spending plans include what could be the illegal use of federal grant dollars.
The Senate’s budget plan “threatens the viability” of the exchange, Ron Sims, chairman of the board overseeing the exchange, said in a recent statement.
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If there’s any comfort for officials with the Washington Health Benefit Exchange, which operates Healthplanfinder, it might be this: they’re not alone. Most of the 17 state-run exchanges are struggling to figure out how to make their marketplaces pay for themselves, a requirement of the Affordable Care Act. And the government acknowledges that there’s confusion among some of the states about how to legally spend their federal grants.
When it comes to exchange sustainability, “it’s too early to declare failure,” said Dan Schuyler, senior director of exchange technology at Leavitt Partners, a national health consultancy. States are developing and implementing plans to cover their costs, but they’re not there yet.
“There are always startup costs,” he said. “Most businesses aren’t profitable the first or second year.”
Washington’s Healthplanfinder, launched in 2013, has sold individual health plans during two rounds of open enrollment, the most recent ending in April. It sells insurance on a sliding price scale based on a person’s income, thanks to federal tax breaks that cover part of the cost.
Officials with Healthplanfinder sought $127 million for its two-year budget starting in 2015, plus $20 million in federal grants it already has received. The Democrat-led state House of Representatives included $124 million for the exchange in its proposal while the Senate, under GOP leadership, earmarked $85.9 million over two years.
State-run exchanges nationwide got up and running under the ACA with the help of billions of dollars in federal grants that helped them develop the technology, build their websites and train workers who assist people in signing up. But that money was intended to get the programs started, not keep them running.
It hasn’t exactly worked that way. This week Daniel Levinson, inspector general for the U.S. Department of Health and Human Services, sent a letter to the head of the Centers for Medicare and Medicaid Services (CMS), which issued the grants. It cautioned that some states were struggling with their exchange budgets and illegally allocating federal dollars to pay for operational costs.
It singled out Washington, saying the state “might use $10 million in establishment grant funds to support operations” in part to pay for printing and bank fees in the latter half of 2015. Levinson urged CMS to clarify what the grants can and can’t be used for to prevent their illegal use.
Michael Marchand, spokesman for Healthplanfinder, said CMS approved the grant and the exchange can use the money as planned.
“It doesn’t change anything. CMS believes the expenditures are allowable and appropriate,” Marchand said. The exchange, he said, is stuck in a disagreement between the federal offices. “We’re the monkey in the middle.”
Washington has a plan to pay for its exchange through three revenue streams. First, all health-insurance premiums in Washington include a 2 percent state tax, and the revenue collected on exchange plans goes back to Healthplanfinder. Second, because Healthplanfinder is now also the portal for people to sign up for Medicaid, the exchange is reimbursed for those services with state and federal Medicaid dollars. And finally, the exchange charges insurance companies a per-month, per-person fee for everyone receiving insurance through the state’s website.
But the equation depends on selling a certain number of plans. For insurance coverage in 2015, the exchange expected to clear 213,000 plans. By mid-April and the end of open enrollment for most residents, more than 170,000 people bought insurance through the marketplace.
With the lower enrollment, the three sources come to roughly $101 million, leaving the exchange short $26 million, which would need to be made up, perhaps with a higher assessment or with money provided from the state general fund.
And the Senate’s $85.9 million proposal creates an additional budgetary wrinkle. The plan eliminates the state’s portion of the Medicaid reimbursement and keeps the 2 percent premium tax in the general fund. That makes the assessment fee the primary funding source, which could increase from its current $4.19 per health plan to $13.66.
“We’re really concerned about that,” said Sydney Smith Zvara, executive director of the Association of Washington Healthcare Plans, a trade organization.
The increase means higher monthly premiums for consumers and “even with (tax) subsidies, it’s still a stretch for some families,” she said. If the premiums rise too high, people could drop out of the exchange, opting to be uninsured or buying unsubsidized insurance elsewhere.
“It could create a downwards spiral,” Smith Zvara said. “It’s a really serious thing looking at the viability of the exchange.”
Despite repeated attempts, no Republican members with the Senate’s budget or health-care committees were available for comment.
“Washington is in a very tight spot,” said Austin Bordelon, senior associate with Leavitt Partners. “No matter whose budget wins out, they’re going to be coming from behind.”